Stunted Growth?

Lower birth rates have meant declining retail sales for baby food, but other opportunities exist.

In 2007, the Centers for Disease Control reported the highest birth rate in U.S. history, and supermarkets enjoyed robust sales of baby food products.

A year later, the recession hit, throwing baby food sales into a three-year downslide. But despite the hit, traditional supermarkets remain the seller of choice for more than 80 percent of U.S. shoppers.

The overall baby food category posted dollar sales of $2.8 billion for the year ending Nov. 27,2010, at traditional grocery stores with at least $2 million in sales (excluding superstores), according to Schaumburg, Ill-based Nielsen. That's 6.3 percent lower than the same period a year earlier.

Taking the biggest hit was the baby juices segment, which fell 27.5 percent in dollar sales for the period. The only segment to show growth in this period was strained baby food, which saw dollar sales rise 14.4 percent after a three-year decline, according to Nielsen data.

"It is not surprising that there would be a drop-off coinciding with lower subsequent birth rates," reports Chicago-based market research firm Mintel. "The recession impacted the birth rate in 2008, dropping by 2 percent, with would-be parents putting off having children as concerns about job security and the economy in general took center stage. Fluctuations in dollar sales are an indication of the influence that national birth patterns have on the category."

Parents toting babies on grocery shopping trips are less inclined to shop multiple outlets. As a result, Mintel notes, supermarkets have been able to essentially maintain their share of the baby food and drink category at 81.1 percent.

As such, some grocery chains have added baby foods to their private brand lines, while others have taken it upon themselves to become a better resource of nutrition information for parents. For example, Safeway provides articles on its consumer website about nutrition for babies and older children. This complements the Pleasanton, Calif-based grocer's own baby food products, including those that are part of its O Organics line, which includes formula, graduated solid foods, and toddler snacks like crackers and cereal bars.

Likewise, Kroger's website includes an extensive archive of nutritional articles and information for all children's life stages, from pre-natal development through the teenage years. And H-E-B offers an online resource for baby and toddler care, including feeding, health and other information.

Private label is active in the various baby food segments, but Mintel notes that it doesn't generate much of a share in any of them. In 2009, private label had a 3.5 percent share of the baby food and drink category for 2009. Consequently, national brand pricing is less sensitive to private label, which has kept dollar sales from dropping even further than they have. But shoppers still consider private label an option in terms of quality, as 70 percent of mothers that were part of Mintel's exclusive consumer survey say they feel store brands are at least as good as name brands.

Of course, leading brands might take issue with that. In fact, some would argue that a strong baby food brand can help drive sales storewide from new parents altering their purchasing behavior due to a significant life change.

"When a baby arrives, the family budget increases significantly. Attracting new parents promotes growth into every aisle. That's why a dynamic infant care aisle is so vital. It's a destination category like no other," says Evan Eckman, chief marketing officer at Amsterdam, N.Y.-based Hero North America, parent company of Beech-Nut Nutrition Corp. "Not all moms have the same wants or needs. As with every infant care product category, to promote growth and innovation, brand choice is essential for the consumer and retailer. Beech-Nut, now as the strong No. 2 national brand in the category, provides the competitive dynamic that's so important to keep a category strong."

Despite the overall decline of the baby food category as reported by Nielsen and Mintel, Eckman trumpets good health for the Beech-Nut brand.

"Last year, Beech-Nut achieved about 20 percent growth at retail. Our growth has in turn driven category growth to an all-time high," he says. "We've achieved this through an unwavering commitment to invest in Beech-Nut's three core principles: providing better access to good nutrition, generating category growth through innovation and being a responsible steward of the environment."

Further, the baby food category should expect to benefit from changes to the federal Women, Infants and Children (WIC) program. While Mintel expects that the baby formula market (which still represents the lion's share of total category sales) will continue to decline due to WIC incentives for breastfeeding, the baby food/snacks market is expected to benefit; in fact, the market research firm notes that it rebounded in 2010.

Writing the Book on Babies

Recognizing parents' passion for purity when it comes to raising their babies, the Earth's Best brand is asking parents, grandparents and caregivers to help write the book on "Nurturing Baby the Purest Way."

Each tip and memorable milestone submitted to the online Earth's Best Generation Pure Baby Book, located at www.earthsbest.com, results in a $1 donation to Vitamin Angels, a Santa Barbara, Calif.-based charitable organization providing nutrients to infants and children in need around the world.

"Some of the best advice for'Nurturing Baby the Purest Way' comes from Earth's Best parents, and with the online Earth's Best Generation Pure Baby Book, we're providing a forum for sharing this valuable guidance," said Kim Bremer, senior marketing director for The Hain Celestial Group's Earth's Best brand. "As parents help us write the book on raising a generation of Earth's Best children, they'll also help nurture future generations by way of the contribution by the Earth's Best brand to Vitamin Angels."

Parents are asked to submit tips or milestones coinciding with the following chapters: Nurturing While Nursing, Better for Baby, Tending to Toddler, Wholesome Household and Purely Memorable Moments. Contributors will have the ability to share their submissions via Facebook and receive $5 in coupons by mail while being entered for a chance to win an Earth's Best product package valued at up to $500.

Earth's Best provides wholesome, natural products, from organic infant formula, jarred foods, infant cereals and toddler snacks to chlorine-free diapers and wipes. Melville, N.Y.-based Hain Celestial is a leading natural and organic products company in North America and Europe.

"To provide access to good nutrition, we stay committed to our natural foods philosophy as well as our support of the newly expanded WIC program, which now includes jarred baby food for the first time," Eckman says. "To drive category growth through innovation, in recent months, Beech-Nut has introduced over 20 new value-added products across the meals, snacks and juice categories."

From the Jar and Beyond

Among baby food launches, Beech-Nut is introducing some innovative products as well as key co-branding partnerships with marquee names.

Leading the pack are all-natural Stage-4 Steamies toddler meals. "They're authentic Latin-style recipes that use our breakthrough steam-cooked technology to lock in their delicious taste and essential nutrients. They're truly innovative," Eckman explains. "Our Stage-4 toddler meals, starting from about 12 months, are a transition to table foods, with more flavor and textures."

This product targets an important yet overlooked demographic — about 25 percent of children born in the United States are Hispanic, Eckman notes. "It's a segment of the category that has been missed. Beech-Nut is dedicated to be first with such an offering," he says.

The 10 varieties of 6-ounce meals for toddlers are convenient to use for a busy parent at home or for a day care lunchbox item. Packaged in microwave-safe, BPA-free plastic tubs, the twin-packs retail for about $2.50.

"We're also launching a new platform of Stage-4 fruit side dishes for toddlers called Fruities," Eckman says. Packaged and priced like Steamies, they're 100 percent fruit with no added sugar, preservatives or artificial ingredients. Rounding out the Beech-Nut Stage-4 launches are Goodies, a whole grain cinnamon graham toddler snackfeaturing Disney's Winnie the Pooh characters on each biscuit. The Disney characters will also be featured on an expanded line of toddler meals, snacks and juices.

Finally, a new line of Beech-Nut purees is co-branded with General Mills' Green Giant brand. "Green Giant shares our lasting commitment to childhood nutrition, superior quality standards and delicious-tasting foods," Eckman says. "Moms and retailers agree — this is another great value-building innovation."

Among the other legacy baby food brands, Gerber, a division of Swiss food giant Nestlé, continues to offer new products for parents' and little ones' evolving needs.

Awarded the Parent Tested Parent Approved Seal of Approval for excellence in family products, shelf-stable Gerber Graduates Yogurt Blends Snacks are made with low-fat yogurt and real fruit, contain omega-3 fatty acids and seven vitamins and minerals for healthy growth and development, and are a good source of vitamins A and E for natural immune support. The convenient on-the-go snack option comes in three flavor combinations: Strawberry Banana, Mixed Berry and Banana Vanilla.

Meanwhile, upstart brand HappyBaby has added two gluten-free varieties to its line of organic melt-in-the-mouth snack puffs, used to help babies hone tactility and learn self-feeding. Available in supermarkets since late last summer, the puffs are rich in vitamin D, added vitamin B and calcium; contain half the sugar of other similar products; and are free of artificial coloring, artificial flavors and GMOs. Gluten-Free Sweet Potato and Gluten-Free Strawberry join Apple, Banana, and Greens (featuring spinach, collard greens and kale) varieties.

Established less than five years ago, New York-based HappyBaby also offers a complete line of functional foods and optimal nutrition for all stages of infancy and toddlerhood. Its Easy Organic Baby Food pouches are gluten-free, nutrient-rich products featuring resealable, BPA-free pouches with easy-pour spouts. The two stages for older children — Chunky Combos with Grains and Meats and HappyTot — are purported to be the first and only baby foods fortified with the super-grain salba. Available since spring 2010, the Easy Organic Baby Food line is carried by Kroger, Stop & Shop and Whole Foods, as well as Amazon.com.

According to Mintel's exclusive consumer survey, only 13 percent of moms go through the time and effort to make their own baby food from scratch. "[This] means that time-strapped and sleep-deprived parents are only too happy to buy store-bought baby food," Mintel asserts. "In doing so, convenience and good value are primary considerations to 69 percent and 66 percent of moms, respectively."

However, Mintel cautions, baby food manufacturers "must continue to deliver on these attributes by providing products that are easy to use and priced right."

Grocers would be wise to work closely with their baby food suppliers to ensure parents are finding exactly what they need on supermarket shelves. Products could be cross-promoted through pharmacy departments to position grocers as a key source of products and health information for new parents seeking answers to their nutrition questions.

With products available through online retailers at the click of a mouse, traditional grocers need to ensure their relevance to maintain their share during the downturn and benefit from the next baby boom.