The global baby food market for feeding babies is anything but child’s play. In the UK the market is worth over £350 million, while in the US the market for baby food is worth US$3.93 billion. Then there are the baby milks and infant formulae, which make up comparably large figures. Worldwide, the baby food market was estimated to be worth £9 billion in 1997 (about US$14 billion), and growing. The chart below illustrates the baby food markets worldwide, by value.

The worldwide baby food market, by country

Source: various/author

Baby food markets around the world are dominated by a handful of European, US and Asian food and pharmaceutical trans-national corporations (TNCs). Most markets are typified by a small number of well known players who dominate the market, for example Heinz, which claims to hold around 85% market share in the Canadian, Italian and Australian markets, while also holing an 11% share of the US and Chinese markets. The table below outlines the main European and US TNCs in the baby food market, while the Asian companies will be detailed further on.

As well as selling their own brands across the baby food markets, many of the TNCs also have stakes in local baby food companies. For example Nutrica owns 50% of the Czech baby food maker Deva, which not only supplies the Czech market but also exports nearly half of its produce to France, Poland, Bulgaria, Russia and the Ukraine – and is also planning to enter the Egyptian market in 2000. Another example is Heinz, which owns 51% of Remedia, an Israeli company involved in infant nutrition.

As well as owning stakes in local companies, the baby food producers also see regular consolidation of the market, with brands being bought or merged. For example, Gerber was a family run business until it was bought by pharmaceutical manufacturer Sandoz in 1994, which went on to merge with Ciba Geigy (another pharmaceuticals group) in 1996 to form Novartis. Currently the US authorities are considering a proposed merger between Heinz and Beech-Nut, which would change the market from a three player market to a two player arena, as the chart below illustrates.

The US baby food market

However, there are some markets that the well known US and European brands can’t quite crack. Heinz announced its withdrawal from the Spanish market at the end of 1999, having only entered the market four years earlier. With a 4% market share during that time, Heinz is believed to have withdrawn due to fierce price competition.

Trends
Baby food markets around the world have been growing, despite the fact that in many countries the birth rate has been falling consistently for some years. Generally, in these countries growth has come from increased value sales, spurred by the fact that as couples are having fewer children they are spending more per child on baby food and other baby items – i.e. parents trading up to more premium priced products.

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Growth has also been achieved through the increased perception by parents that ‘natural’ products will be better for their babies. As such the increased popularity of organic food, in the wider food markets, has filtered through into the baby food sector. There are now organic ranges from smaller independent companies, such as Hipp and Baby Organix, as well as from the larger players. For example, Gerber has a separate organic range under the Tender Harvest brand name. In the UK, up to 20% of the baby food market is thought to be made up of sales of organic products.

The recent debates surrounding GM foods has impacted on the baby food market too. For example, earlier this year Gerber announced it was to stop using genetically engineered grains in its baby food. The company claims the decision is not connected to the Greenpeace report (FDA Approved: Genetically Engineered Soy and Corn in Baby Food and Nutritional Supplements) which found a Gerber baby food product tested positive for DNA from transgenic insect resistant “Bt” corn and herbicide tolerant “Roundup Ready” (RR) soybeans. Greenpeace does not claim that GM foods are dangerous to humans or the environment, but raising the issue in baby foods seems to have caused a ‘better to be safe than sorry’ attitude amongst parents. Other baby food manufacturers have also stopped using GM ingredients, using this as an added selling point by flashing ‘No GM Ingredients’ on product labels.

Another development which has been spurred on by parents’ perceptions is the increased popularity of jarred baby food. Generally there are three formats to baby foods: dried, canned and jarred. Over the last few years, many countries have seen increases in sales of jarred foods. This increased popularity is attributed to the fact that parents can see what is inside jars, and thus feel more comfortable buying the products – as they more closely resemble home made baby food.

More recently some markets, the UK for example, have seen a further extension of this – with some brands producing fresh baby food, which is sold chilled. This is the type of innovation that is likely to gain in strength as such products reinforce the perception of ‘natural’ as ‘good’ – and as they are sold at a slightly higher price point, they tap into the added value trend too.

As well as parents seeking more ‘natural’ foods for their baby, they generally look for a well-known and trusted brand. This has been one of the key elements to the success of the TNCs, since many also operate in other baby areas, such as milks/formulae and baby care items, thus increasing brand familiarity among parents. A study carried out for the American Baby Group illustrates this point quite graphically. The table below outlines the five most important factors influencing parents’ purchasing of baby food. While the study may have been conducted among US parents, the results echo parental concerns worldwide.

Factors which influence the purchase of baby food

The study also highlights the importance of ‘taste‘ to parents. The baby food offering has been evolving towards meal-based foods, which have more complex flavours and more closely resemble foods eaten by parents. Also mimicking adult foods, desserts have been introduced to the market, such as Heinz’ recent UK launch of two favourite adult desserts as part of its infant jarred wet food range. Banoffee Pie and Lemon Meringue Pie have been formulated for babies from four months, following the success of Strawberry Cheesecake since its introduction in summer 1999.

Japan
Another market where Heinz was unsuccessful, as was Beech-Nut, is Japan. In the early 1990s both companies entered the market, but could not persuade mothers to buy their baby foods in sufficient volume to give either of them any kind of significant market share. Gerber also entered the market, as early as 1962, since when the company has managed to amass a 7% share of the market – and is the only non-Japanese player.

This could all change soon as Nestlé announced earlier this week that it is in talks concerning a cooperation with local dairy giant Snow Brand – for more information Click Here

One of the key differences between the Japanese market and others that Heinz and Beech-Nut successfully operate in, is the national diet. Gerber tried to introduce a turkey-based baby food to the Japanese market, one of its most popular dishes in the US market – but it didn’t sell. Gerber’s main distributor in Japan attributed the failure to the fact that few mothers were willing to feed their babies a meat which many Japanese have never tasted. Current Gerber favourites in Japan are ‘rice with chopped burdock root’ and ‘sardines ground up in a white radish sauce’, though Gerber does not sell a single fish-based product in the US.

The Japanese baby food market has been growing at a phenomenal rate, especially considering that a decade ago baby food was considered a novelty. Sales have tripled in the last 10 years to make the country one of the world’s largest baby food markets. Even with Japan’s recent economic difficulties, it is the second largest economy in the world. Other than Gerber, the market is dominated by four Japanese companies, the largest of which – Wakodo – controls about 30% of the market. All four companies also dominate the baby milk/formula sector, making Japan a very difficult market to make headway in.

Other than the differences in tastes, sales of baby food come under the same influences as they do in other markets. Women are having fewer children, having them later in life, and more are returning to work – thus creating similar climates to those in the West, which have driven value sales. Another factor identified with in Japanese market is the ‘cute’ factor – products must appeal to mothers as ‘cute’ to encourage sales. That said, industry sources claim that the main reason the Japanese market has been difficult for international operators to infiltrate is a protectionist attitude to the market.

China
China has been a less difficult market for US and European brands to move into. The chart below illustrates how brands from both continents have managed to amass significant market share.

Source: Access Asia

The Chinese market has been subject to similar conditions faced in Western markets, such as falling birth rates and rising expenditure per baby. With the largest population in the world, China is a huge market, and growth in the market has been dramatic over the last few years, as the table below illustrates.

By Jasmin Rashid, a food market analyst

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