Kudos, a sustainable diaper brand, is challenging industry leaders with a successful Target rollout.

• Kudos, a sustainable diapers brand, is set to launch in 375 Target stores nationwide, aiming to disrupt the legacy consumer products industry.
• Diapers made by Kudos, founded by "Shark Tank" alum Amrita Saigal, are 100% lined with cotton and made with other degradable materials like sugarcane and trees.
• According to Diaper Testing International, independent testing shows that the diapers are more absorbent than Pampers Pure Protection, Huggies Special Delivery, and Honest diapers.

Historically, parents have had limited options for disposable diapers, with plastic being the only practical choice.

Single-use products, often made from fossil fuels like petroleum, can take hundreds of years to decompose and are the third-largest consumer item in U.S. landfills, as per the Environmental Protection Agency.

Diaper rashes may be more common with materials that are not as breathable.

Kudos founder and CEO Amrita Saigal aims to challenge the dominance of plastic diapers from brands like Pampers and Huggies.

A Massachusetts Institute of Technology graduate, mechanical engineer, and "Shark Tank" alum created a sustainable diaper that uses some plastic but is 100% lined with cotton and includes other degradable materials like sugarcane and trees, she explains to CNBC.

In approximately 375 retail stores nationwide, the first diaper of its kind will be available for purchase later this month.

"Saigal expressed excitement about partnering with Target to launch the first 100% cotton-lined disposable diaper in retail stores. He noted that this was a significant achievement, particularly because Target does not typically carry many brands."

Since its launch three years ago, Kudos has secured more than $6 million in funding. The company recently raised $3 million in a funding round led by Precursor Ventures, Xfund, and Oversubscribed Ventures.

In the past year, the company has sold over 20 million diapers and experienced a 100% increase in sales.

Disruption through innovation

Saigal has spent her career studying consumer packaged goods and finding ways to improve everyday products, such as sanitary pads and diapers, in an attempt to disrupt the industry, which has been dominated by corporate giants for a long time.

Her aim is to decrease the world's dependence on fossil fuels by establishing new supply chains and creating sustainable products that are as effective – or even more so – than existing ones.

Saigal stated that he would not launch a product that did not meet or exceed the quality of Pampers.

"While there are eco-friendly alternatives, they don't perform as well as traditional diapers. When it comes to a diaper, performance is crucial, and parents cannot compromise on that. One blowout or leak can leave them sleep-deprived, so they need products that work effectively. They are not willing to sacrifice performance for eco-friendliness."

Independent testing by Diaper Testing International revealed that Saigal's diaper can absorb significantly more fluid than competitors like Pampers Pure Protection, Huggies Special Delivery, and other diapers, after three years of research and development.

Pampers didn't return a request for comment. Honest declined comment.

A spokesperson for Kimberly-Clark, the owner of Huggies, stated that they cannot provide a comment because they have not yet viewed the research conducted by Diaper Testing International.

Saigal's "DoubleDry" technology has two layers that wick away moisture from the diaper.

"If you were to replace the plastic in your diaper with cotton, your baby would fail miserably because the urine and poop would pool, leaving your baby's butt wet. To quickly wick away the urine and poop and evenly disperse it, our innovation is what we have done."

Despite being smaller than its competitors, Kudos' size has allowed it to establish unique cotton supply chains and support the growth of suppliers.

To reconfigure their equipment to use natural materials in their current process, P&G would require hundreds of millions of dollars, making it challenging with their existing supply chains, according to Saigal, who worked for P&G as a design and manufacturing engineer after graduating from MIT.

Saigal stated that even if larger companies were to source natural materials instead of plastics, it would be challenging due to their scale. Suppliers like cotton farmers typically have buyers and partners locked in before growing the requested materials, and since there isn't yet a significant demand for cotton from diaper makers, those supply chains don't exist at scale yet.

Saigal hopes that big brands will adopt natural materials over plastic more widely, which could reduce the price of those materials and make plastics more expensive.

"Natural materials become cheaper than plastic when mass adoption occurs," she stated.

Diaper economics

Kudos faces a daunting landscape of scale.

Brands that initially sell directly to consumers and later enter retail may encounter challenges due to the high cost of inventory and unfavorable payment terms.

In October, Kristen Bell and Dax Shepard's hypoallergenic, sustainable diaper brand, Hello Bello, filed for bankruptcy due to difficulties in developing its supply chain after being sold in retailers like Target.

In recent years, several consumer product companies and direct-to-consumer brands have experienced similar financial difficulties due to a funding environment that prioritized growth over profitability.

During the peak of DTC, the mindset was, "Don't worry about profitability now, just focus on growth," with the belief that once revenue reached $100 million or $200 million, profitability would be addressed. Saigal, who founded her company in 2021 and received funding from "Shark Tank" host Mark Cuban and guest Shark Gwyneth Paltrow in 2023, shared this perspective.

"I believe that the model is no longer effective, as it requires a slow growth rate but immediate profitability. I think the successful brands of today must have a strict control over their financials and unit economics from the outset."

Saigal's top priority for her business in the upcoming year is to achieve profitability. To accomplish this, she is maintaining a lean team and being strategic with her use of capital to pay for inventory before launching into Target. However, she must also be careful with pricing, as her products are more expensive to produce than her competitors', and if the price is too high, she risks losing potential buyers.

The cost of Kudos diapers ranges from 41 cents to 70 cents per size, while a box of Pampers Pure Protection costs between 34 cents and 75 cents per diaper, according to Target.com.

"Although our raw materials are more expensive, we have kept our prices as low as possible while maintaining a premium quality," said Saigal. "My goal is to provide a premium product that is accessible to everyone, regardless of their budget. I believe that everyone deserves access to cleaner materials, and I am committed to making that happen."

Mark Cuban is a panelist on "Shark Tank," which CNBC owns the exclusive off-network cable rights to.