Value, product innovation and social media outreach are driving sales in the competitive baby care category.
By Nora Caley
Companies in the baby care category have every right to throw a tantrum. The birth rate in the U.S. is down slightly and retail sales in most baby-related categories are down. However, industry experts are not whining. Instead, they are spurring a rebirth of the category by providing value, focusing on product innovation and reaching parents through social media.
According to the most recent National Vital Statistics Report from the Centers for Disease Control and Prevention and the National Center for Health Statistics (CDC/NCHS), there were 4,251,095 births in the U.S. in 2008, down 2% compared to 2007. Also in 2008 the general fertility rate was 68.7 per 1,000, down from 69.5 births per 1,000 in 2007.
Fewer babies mean fewer sales. According to New York-based The Nielsen Co., in U.S. food, drug, and mass merchandise stores, including Wal-Mart, sales of baby care items totaled $1.63 billion for the 52 weeks ended April 17, down 8.9% compared to the same period the previous year.
Disposable diapers were down 4.8%, to $3.809 billion. Unit sales were down only 2.1%, to 293.5 million units, so consumers were not only buying fewer diapers, but also buying them at a lower cost.
“The category is down overall,” says Chris Ferdock, vice president of marketing for Associated Hygienic Products (AHP), based in Duluth, Ga. “There is a real feeling that the economy is having a significant impact on overall baby diaper sales.” AHP manufactures private label disposable diapers.
Longer between changes
Ferdock says consumers are still using disposable diapers, but there is a substantial drop in the buying rate due to product enhancements that allow for extended wear. “Mothers are getting wise and extending the life in diaper use, so there are fewer purchases,” he explains.
Private label items in many grocery categories enjoyed a sales boost as consumers sought lower-priced but comparable products, but diapers do not follow that trend, according to industry experts. “In diapers that is a little bit of a myth,” Ferdock says. “We do a lot of research and we find a difference in national brand and private label users. That’s why we don’t see a spike [in private label] when the economy sours.”
According to Nielsen data, for the 52 weeks ended April 17, sales of private label baby care products in food, drug and mass merchandiser stores, including Wal-Mart, were up 0.5%, to $144.9 million. Sales of private label disposable diapers totaled $680.7 million, down 9.8% compared to the same period the previous year. Private label made up 17.9% of the disposable diaper segment, and 8.9% of the baby care category.
Ferdock adds that national brands are more able to offer lower prices through coupons than store brands. The result, he says, is that people who are loyal to certain brands of diapers are likely to stick with that brand if they can find discounts online or in Sunday newspaper inserts.
While diaper sales are down, other segments of the baby care category are also facing challenges in the supermarket.
According to Nielsen data, sales of pre-moistened towelettes were up 2.6%, to $1.298 billion in food, drug and mass merchandise channels. In supermarkets with sales of $2 million or more, however, sales of these wipes were flat at $380.1 million, an increase of only 0.9%.
“The baby wipes category in the grocery channel is not growing,” says Rahul Mehrotra, vice president of marketing for retailer brands for Nice-Pak Products, Inc. “Consumers, nervous due to the recession, are experimenting with other channels.”
The Orangeburg, N.Y.-based company manufacturers private label wet wipes, a subcategory that Mehrotra says is a bright spot in baby care. “Retailer brands are leading the growth and compensating for the decline in national brands. In order to set themselves up to succeed in this evolving economic environment, retailers are putting a lot of focus behind establishing their brands to generate ongoing repeat business.”
He says consumers are still searching for certain product features. “Mom is searching for value, but still wants high quality. She will cut down on other expenses but not on her baby needs,” he says.
Shervin Zade, CEO of U.S. Nonwovens Corp., based in in Hauppauge, N.Y., says shoppers want wipes that are stronger, have a softer texture, and don’t cost more. “What I’m seeing is the consumer is demanding higher quality and better value,” he says. “The key driver today at grocery is more stringent attention to innovation at a more efficient price.”
Sales of baby bath soap were up 2.9%, to $133.4 million. John Ciotola, senior vice president of sales for Grand Rapids, Mich.-based Grand Brands, says there is opportunity in the baby health and beauty care section. “There is a significant gap in the baby HBC section in the grocery channel. It’s a bit stagnant. The market leader is dominant and there are numerous ‘me-too’s’ but what is missing is a strong, branded, value alternative slightly higher priced than store brand that meets Mom’s needs for baby.”
He adds that consumers are also looking for natural products. “The trend towards natural products is real, however, for grocery the price points are high and these products generally struggle to meet the volume requirements necessary to occupy the space,” he says.
Parents seeking value
Ciotola says Grand Brands’ Lander Brand of bath soap, shampoo, and other baby products fills this niche of offering branded baby HBC products at a value price. He says retailers can benefit by offering a three-tiered pricing system, with Lander being the middle tier. “The baby care HBC section has seen considerable disruption over the last several years with multiple brands coming and going,” he says. “Increasing sales can be achieved with consistency in branded selection beyond the market leader, a three-tiered pricing strategy to meet all consumer needs and a minimal presence of natural products.”
Mehrotra says private label can also help fill consumers’ needs. Retailers and private label manufacturers such as Nice-Pak can work together to better understand the consumer. “Mom is in a hurry, she has a restless child in her shopping cart, she needs to be home before the school bus, and she does not have all day to make her baby category purchase,” he says.
He suggests retailers keep the aisle clean and easy to shop, and work with manufacturers such as Nice-Pak to set up programs to drive traffic. “Retailers need to partner with suppliers who have real expertise in brand creation and management. The right supplier can ensure a win and drive loyalty not just to the product, but to the brand and to the retailer.”
Ferdock says AHP focuses on innovation. “In private label there is an age-old approach that you blindly follow national label products or packaging,” he says. “That doesn’t work with today’s Generation Y mothers, who get their information through social media, not traditional advertising. “What we’re finding is that retailers put a more branded approach to product design. You don’t duplicate any more. You innovate.”
Innovation is especially important with diapers, he says, because the product is visible for a long time. While a wipe is used and then thrown into the trash within seconds, a diaper stays on the baby for hours, and the mother and other people can see it. “That product is on stage for a period of time,” he says. “It’s always being measured and evaluated.”
AHP’s new products include Comforts disposable diapers sold at Kroger stores and Fisher Price-branded disposable diapers, available at Target and other stores.
Zade of U.S. Nonwovens says the company upgraded its manufacturing last year. “By adding some elements into the machinery during production we are able to make better quality baby wipes without adding ingredients,” he says. “It’s how you weave it, how you tuft it.”
Grand Brands’ Lander Brands’ new products include a 1-liter bubble bath, 12-ounce hand sanitizer and 25-ounce bubble bath. Hand sanitizer is one category that is doing extremely well, industry experts note. According to Nielsen, sales of hand cleaners and hand sanitizers rose to $273.2 million, an increase of 55.4%. Unit sales were up 54.4% to 136.8 million.
Ferdock says AHP is researching how social media can benefit private label sales of diapers. “How do we work independently or in concert with retailers to make social media part of the marketing,” he says. “Our ultimate goal is we are trying to transform category trends into opportunities for retailers.”