Baby Food - Milking the market

Source: Middle East Grocer

Nowadays, the average mother is over 27 years old, married, and is part of a family with a better than average salary but comprising only 2.4 people, thanks to 13 years of declining birth rates.
With global birth rates now on the rise again, the prospects look good for baby food retailers. Use of commercially-made baby meals is common the world over and, in the UK, for example, almost 81% of British households with children aged under one are known to have bought a commercial baby food over the past year. As such, retail market experts believe that there are gains to be made on the 5% growth rates seen in the value of the market between 2003-04. However, older, bettereducated women, who have postponed starting families in order to develop a career, tend to be more knowledgeable regarding child rearing and nutrition and will want to see information and quality products from the shops they use. The question is: are you up for the
challenge?

What’s doing well?

According to international market analyst Mintel, organic baby food has become a key sales line for grocers. In the UK, sales in this sector totalled around £68 million in 2004, which represents nearly 22% of the total market value for baby food and drink. Importantly, this represents growth of 150% since 1999.
In volume terms, meals now account for around 70% of sales, with milks taking a further 20%. The rest is made up of finger foods and drinks. In the meals sector, wet baby meals account for well over three quarters of value sales and are increasing their share. However, the most dynamic growth by far has been in the markets for finger foods and milks. With their much higher average unit cost, milks account for a much higher share of the market by value than they do by volume. They remain, as they have for the past five years, the number one money earner in the baby foods market, adding £150m to the market value. Ready-to-feed milks, or RTFs, have been particularly popular.
However, in terms of growth, even RTFs have been overtaken by finger foods, which for the past three years have overtaken drinks in terms of both volume and value gains, according to Mintel. Rusks remain the largest segment in finger foods, but their dominance is being challenged by newcomers such as savoury biscuits, rice cakes and fruit snacks (baby cereal bars). Fuelled by the promise of the big sales gains to be had, manufacturers have been keen to innovate in this sector, driving prices and sales up.

Ripe sales in grocery

More than 70% of sales of baby food and drinks are made in grocery, Mintel reports, revealing a high degree of customer confidence in this market. Supply in this market is dominated by multinationals including HJ Heinz, Wyeth and Nutricia, which between them account for more than 90% of the total market. This gives grocers very little leeway in terms of stocking competitor brands or fighting off aggressive, manufacturer-led price promotions that undermine precious retail margins. This has already been evident in markets such as the UK, where in 2003, the average unit price of commercially prepared baby food and milk fell to 2% lower than the value in 1999.
Stocking less well-known or private label brands is something of a dangerous game in baby care, where brand loyalty is high. A study from Scotland shows that the combination of the perceived risk of poor quality and the presence of major, well-financed competitors was enough to give the brand the ‘edge’ in consumers’ eyes. As one consumer said: "I would buy myself a cheaper product to save money before buying a cheaper baby toiletry product."
Interestingly, the research also flags up another customer concern; where the product is sold. Unanimously, all consumers said they preferred to shop for their baby goods in a pharmacy, rather than in a supermarket because of he staff knowledge and assistance that could be given. As one respondent stated, "I associate a chemist with the continuation of health care. Trained staff is on hand to assist." Another said, "Experienced staff talk to young children, and they make you feel human - I feel comfortable to discuss a problem or concern."
The research, published by the Institute of Retail Studies, concludes that consumers need to feel confident that the baby care product they are buying will offer reliability and performance. "The more distinctive a brand positioning is, the less likelihood that the consumer will accept a substitute or own brands," it says.

Overcoming consumer resistance

For grocers keen to maximize both share of trade and profit margins, baby foods certainly present a challenge - yet, it is a market that demographics and social trends suggest is on the up.
Certainly, pharmacies are a key provider of health and well-being advice but they are neither experts in nutrition nor parentcraft. Importantly, they do not position themselves as a one-stop shop, whereas grocers do. As an adult customer shops with you for their food lines, you can improve the experience of shopping the baby care fixture by adding added information at the point of sale. For the bigger retailer, the possibility is there to ‘buy in’ expert advice on nutrition or parentcraft, just as the customer-focused pharmacist would do. Making your shop baby-friendly, for example, by making aisles wide enough for a pushchair, will also help improve most parents’ shopping experience and could be enough to encourage shoppers to add not just baby food, but higher margin linked items, such as wipes and other baby sundries to their shop. Placing ‘me-time’ items - such as luxury foods or pampering/beauty items - near the baby food fixture is also a good way to encourage shopping parents to impulse shop for themselves at the same time.
As for the baby food fixture, there are a number of ways retailers can improve its sales yield. These include:

• Clearly define each segment within the fixture for ease of navigation. Milks are generally the entry point into baby foods. This category should be merchandised first in the customer flow, followed by wet baby foods


• Allocate space according to the contribution each category makes to your overall baby food sales. Milks should represent around 25% of the baby food fixture. Brand loyalty is extremely high in the milks segment, and research shows that mums will shop elsewhere if their preferred brand is unavailable. Ready to Feed formats should be stocked where possible


• On current figures, wet baby food should be given 40-45% of the total baby food space. Within this, organic meals should be allocated 22% of the space


• Do not underestimate the power of brand loyalty in baby foods. Wet baby food, like other baby categories, should therefore be merchandised by brand and within that, by age of baby and, where possible, by meal type (e.g. breakfast, savoury, dessert)


• Dry foods are typically used as a first weaning food, particularly baby rice. As a guide, they should be given around 12% of the space allocated to baby food and be located above wet baby food


• Juices are often bought on impulse and therefore should be merchandised at eye level to encourage purchase. They should be allocated around 10% of space and merchandised above wet baby food.