The Right Formula

In the ongoing battle to capture parents' dollars, private label products are increasingly vying with familiar branded items in the infant formula category

Times are tough for the baby formula category, which means that attracting and maintaining sales have become more important than ever. One key component in the battle to capture new parents' dollars is to offer the choice of a private label brand. Although private label baby formulas are nothing new, in response to the current state of affairs, grocery retailers are raising the profile of such products — and stressing their value proposition — more aggressively than before.

According to Nielsen figures for food, drug and mass merchandiser stores, including Walmart, infant formula sales dollars fell 6.7 percent for the 52 weeks ended April 17, 2010, while sales dollars for private label products in the category during the same time period plunged 7.1 percent.

A still-sluggish economy has no doubt played a key role in this decline, as it encourages price-hunting parents to go elsewhere to purchase from anonymous sellers items that may be stolen, but other factors are at work as well. Earlier this year, Steve Delello, category manager-health and wellness at Tyler, Texas-based Brookshire Grocery Co., offered his observations: "During the last six months, formula sales are down and baby food sales are up. The largest contributor to this dynamic is due to changes in the WIC ‘Women Infants and Children' program. In October, the WIC allotment of formula was reduced by 10 percent, affecting more than half of the customers buying formula. A decline in birth rates also influences sales in baby formula."

The Private View

Given such unfavorable conditions, grocers are eagerly pushing their own brands of formula as a viable alternative for cash-strapped consumers. Noted Jimmy Faller, category manager for pet and baby at Salisbury, N.C.-based Food Lion, LLC, a division of Belgian retail conglomerate Delhaize Group: "At this time, we carry three private-brand baby formula items at a considerably lower retail than the national brands. This allows us the opportunity to provide a quality nutritional item at a greater value to our consumers."

Minneapolis-based Supervalu offers four private label formulas under its Baby Basics brand, among them a soy-based item and a Gentle variety, the latter of which is "easy to digest and contains one-fourth the amount of lactose of standard milk-based formulas," according to Kristin Parsons, Supervalu Baby Basics brand manager.

Parsons stresses that the product line is comparable to any of the trusted national brands on the market. "Our exclusive private label brands, which include Baby Basics, are designed to meet consumer needs for quality and value, leading [shoppers] to seek out our stores for our private brands," she explains. "The FDA sets strict nutritional guidelines that all U.S. infant formula companies must follow. Every infant formula brand on the shelf — whether national or private label — must be nutritionally equivalent and made to the same high-quality standards."

Target, also based in Minneapolis, last year relaunched its private label baby items, including six varieties of formula, under the up & up brand. "Our focus is to have the right assortment of products and brands for our guests, be they national or owned brands, including baby formula," noted company spokeswoman Erin Madsen.

To judge from comments from moms on Target's Web site, the retailer has succeeded with many bargain-hunting shoppers in terms of low cost and high quality. "I get twice as much formula for almost half the price, and my baby is still getting the same amount of nutrition and … loves the taste," gushes Sarah C. "Please check it out and see for yourself; it is saving my family so much money, and we're getting a product that compares side by side with name brands. The price, savings and comparable quality/taste will all speak for themselves."

As a way of encouraging trial of its Member's Mark private label formula line, Sam's Club, the warehouse club division of Bentonville, Ark.-based Wal-Mart Stores, Inc., offered on its Web site free samples of either its Milk-Based or Gentle formulas, along with the chance to receive special offers and announcements from Member's Mark and Sam's Club. Sister chain Walmart has a similar online offer for its own Parent's Choice formula, with an opportunity for parents to provide constructive feedback on the product through an e-mailed questionnaire.

Not content merely to allude to savings without going into specifics, Sam's Club points out on its site that new parents who opt for Member's Mark formula could save an estimated $850 during their babies' first year. The site additionally provides a chart so that parents can make the comparison for themselves.

Brand Sensitive

Meanwhile, national brands are remaining in play by offering the inventive solutions they say parents crave.

"Abbott is showing its continued leadership in the infant formula category by making it easier for parents to provide their newborns with excellent nutrition," notes Rhonda Hoffman, division VP, pediatric nutrition marketing at Abbott Park, Ill.-based Abbott Laboratories, maker of Similac, the No. 1 brand in the U.S. baby formula market since 2009.

For instance, according to Hoffman: "The new color-coded Similac infant formula labels have been redesigned to clearly showcase the various formula categories — Similac Advance, Similac Sensitive, Similac Expert Care and Similac Go & Grow — helping parents pinpoint which formula best suits their baby's needs."

Among the product innovations the brand has rolled out in response to consumer requests is the addition of EasyShield, featuring nucleotides, prebiotics, carotenoids, DHA (omega-3) and ARA (omega-6) to support a baby's developing immune system, brain, eyes and bones, to the Similac Sensitive and Similac Sensitive Isomil Soy formulas. The items hit store shelves last month. Similac Advance, which bowed in 2008, also contains EasyShield, and Hoffman adds that Abbott is currently evaluating whether other formulas in the product line will feature the cutting-edge ingredient.

While many formulas offer special nutrients to help infants thrive, EasyShield is unique, the company maintains. "Similac is the only formula brand that has added a unique combination of carotenoids (lutein, lycopene and beta carotene)," says Hoffman. "Carotenoids are special nutrients naturally found in breast milk that have been shown to protect against cell damage to help keep eyes healthy. Lutein is known to accumulate in, and help protect, the eye. In addition, Similac is supporting strong bone development by being the only leading brand with a palm olein-free oil blend to promote calcium absorption."

The brand's forward thinking extends to its recent packaging introductions as well. "Since 1959, when the Similac brand introduced its first powder formula, most U.S. infant formulas have been packaged in cans," observes Hoffman. "In 2009, Abbott was the first company to replace the can with Similac SimplePac …. The Similac team at Abbott conducted extensive research with more than 1,600 moms to understand how to make formula preparation easier. With the moms' feedback, we redesigned the standard infant formula can into an innovative, easy-to-use package. With the one-hand grip, hinged lid and scoop in the lid, Similac SimplePac makes bottle preparation less messy and allows for cleaner formula, since parents don't need to dig through the powder with their fingers to find the scoop."

As a way to enhance its already strong relationship with new mothers, Abbott has launched a "Feeding Expert" service, a free, 24/7 feeding and nutrition information resource that aims to help smooth the transition from hospital to home for moms and babies. Consumers can also visit the brand's interactive online community, StrongMoms.com, for such freebies as samples, coupons and expert advice.

Rather than resting on its laurels, however, the company works hard to promote its latest offerings at retail. "To support the redesign of new color-coded Similac infant formula labels … we developed at-shelf communication for consumers: ShelfTalk and ‘coming soon' stickers that highlighted the change," notes Hoffman. "We also created materials to help the stocker: posters to hang in the back room, case stickers that highlight the change, a video to educate store personnel and a sales aid."

Abbott also understands the needs of its retailers. "Retail shelves can hold up to 33 percent more of the rectangular Similac SimplePac containers compared to cans, whose round shape results in unused and inefficient shelf space," explains Hoffman. "In addition, the containers are easy to stack and more visually appealing to consumers."

Categories in Transition: Baby Food

THE POWER OF WIC

New Growth: Game Changer for Baby Food Unit Sales +13%* from Food Package changes

In October 2009, the USDA implemented significant changes to the WIC (Women, Infants, and Children) Program. These changes affected all WIC Food Package groups, and have created opportunities for retailers in key categories. With these changes, the Baby Food category has experienced significant growth.

Stage 2 Jars Drive Growth

The segment that is generating most of this growth is 4.0 oz glass jars (Stage 2). Now part of the WIC program, Stage 2 jar Unit Sales, according to IRI Data, are up +45.6%* vs. year ago (chart 1).

How Retailers Can Benefit

• 4 oz size: Specific varieties and packaging formats vary slightly by region, but 4.0 oz packaging is the primary WIC authorized format.
• Glass jars: As a result of the predominant WIC package size authorization being 4.0 oz, glass jars have significantly increased their position vs. plastic (chart 2).
• Organic's Downturn: With the recent WIC changes, and the economic downturn, organic baby food sales have dropped -33.4%* and may have more shelf space than demand requires.

(*) Source: IRI Data, Unit Sales, 12 weeks ending April 2010

Presented by Beech-Nut Nutrition Corporation

More ONLINE

To get additional information on baby formula, visit www.progressivegrocer.com/babyformula.