Increasing prosperity and modernization in developing markets drives baby food/diaper growth:
46% of baby food and 51% of diaper value sales come from North America and Europe, but developing markets are growing fastest.
Sales of baby food pouches and organic products are growing strongly, increasing 28% and 26%, respectively, from one year ago.
New York – Aug. 25, 2015 – Parents everywhere want the very best for their child—from the food they put in their mouths to the diapers they put on their bottoms, and they’re willing to spend for it. Nielsen estimates baby food and formula sales around the world will reach nearly $30 billion in 2015 and the diaper market is estimated to exceed $29 billion, representing huge opportunities for manufacturers and retailers.
For baby care manufacturers, the battle for baby bucks come with a fair share of challenges. Globally, births have declined 45% on average between 1960 and 2013, according to the World Bank. In addition, competition in the baby care market is fierce and numerous branded and store-brand products at various price points compete for mom’s attention. Moreover, the window for purchasing baby care products is relatively short.
“Despite challenges, opportunities in the baby care market remain sizeable,” said Liz Buchanan, director, Global Professional Services, Nielsen. “Consumers are deeply invested in these categories, and they are highly discriminating about the products they buy for their children. However, to achieve competitive advantage in a space dominated by only a few major brands, a deep understanding of what is driving product choice is critical.”
To better understand trends within baby care categories such as baby food and diapers and why consumers choose one brand over another, Nielsen polled online respondents in 60 countries who have made a baby care purchase in the past five years. The findings reveal important insights about the path to purchase and identify the online and offline sources most influential in the process.
Rapid urbanization, the growth of the middle class and rising rates of female participation in the labor force in many developing markets has encouraged the adoption of convenience-oriented lifestyles, making baby formula and prepared baby foods more desirable.
According to World Bank data, between 1990 and 2013, the percentage of women in the workforce grew more than four percentage points in the 60 markets included in the survey. As many working mothers return to their jobs shortly after giving birth, prepared baby foods and formulas provide an appealing alternative for working mothers, bridging their desires for healthy, nutritious food with their need for convenience.
“The rising middle class in the developing world has opened new opportunities in the baby care market, as the need for products that are compatible with a working mom’s schedule is growing,” said Buchanan. “And these opportunities include baby care products in the premium space. In fact, in many countries, the cache of premium products is an important symbol of one’s social status.”
Today, 49% of baby food value sales come from Asia-Pacific, 27% from Europe and 19% from North America, but Latin America and Africa/Middle East are growing faster. In the baby food category, value sales grew 4.9% over the previous year in Africa/Middle East and 2.1% in Latin America. In Asia-Pacific, value sales results were mixed. Value sales grew in Indonesia (4.6%), India (3.8%) and Taiwan (1.6%), but declined in China (-5.1%), primarily by consumers shifting to e-commerce and baby-specialty stores, which is not reflected in this data. By comparison, value sales in Europe grew 1.1% and were flat in North America (-0.5%), and volume sales also stagnated or declined in many countries in these regions. In the baby formula category, developing-market growth was more impressive. In the 12 months ending December 2014, value sales grew by double-digits in Latin America (37.3%) and Africa/Middle East (16%). These regions also have some of the fastest-growing markets in terms of formula volume sales. In Europe, value sales grew 7.3%, but volume sales were mixed. Baby formula value sales also increased in Asia-Pacific (4.9%) and North America (1.2%).
More than one-third of global respondents say good nutrition (37%) and safe ingredients/processing (36%) are most important when deciding what baby food product to purchase, the second- and third-most commonly cited attributes, respectively (trusted brand tops the list, cited by 39% of respondents). Organic and all-natural foods are also an important purchase consideration, particularly in Asia-Pacific and in Europe, cited by 31% of respondents in each region. In comparison, 26% of African/Middle Eastern, 20% of Latin American and 18% of North American respondents say organic is an important consideration in their baby food purchasing decisions. While North Americans rate organics below the global average in importance, the region leads the way in actual purchasing, accounting for 72% of organic sales measured in 16 countries.
“Consumers are increasingly health conscious and looking for natural, minimally-processed foods, and the stakes are even higher when it comes to their babies,” said Buchanan. “More parents are seeking foods that set their children up for a healthy life—even if it comes at a premium. We expect this segment will continue to grow as more parents can afford to trade up. In developed markets, where birthrates are lower and baby care categories are highly saturated, growth will primarily come from innovation and premiumization. In developing markets, innovation will be important, but increasing demand will be the biggest growth driver.”
In terms of packaging, products in tubs or glass make up the vast majority of baby food value sales (87%) in 16 select markets. But when it comes to growth, pouches (containers with plastic spouts at the top from which foods can be sipped) are growing fastest, with value sales increasing 28% between December 2013 and 2014. In fact, pouches grew by triple digits in the Ukraine (916%), Brazil (528%), Portugal (316%), Russia (264%), the Netherlands (184%) and Spain (125%). In the U.S.—the largest pouch market in the study by a wide margin—sales grew 7% over the previous year. Sales for products packaged in tubs or glass, on the other hand, were flat worldwide and declined in the majority of markets analyzed, including the U.S. (-2%).
“The popularity of pouches is largely driven by their ease and flexibility,” said Buchanan. “Pouches provide convenient, portable nutrition that’s extremely compatible with consumers’ on-the-go lifestyles, and they promote self-feeding and independence.”
Value sales in the diaper market are less concentrated than the baby food and formula market. More than half of value sales share come from North America and Europe (34% and 17%, respectively), while Asia-Pacific and Latin America each claim more than one-fifth of sales each (23% and 21%, respectively). While open diapers (traditional taped diapers with high absorbency) are the largest segment and experienced strong growth in 2014, rising 7% over the previous year, the strongest growth came from diaper pants, which slide on, but have absorbency closer to an open (taped) diaper. The diaper pants segment increased 20% over the previous year, with sales largely concentrated in Asia-Pacific and Europe.
Global baby care consumers are more likely to purchase baby supplies in a physical store rather than online, but this trend is changing as more consumers are switching to online channels. E-commerce retailers are able to compete on price and convenience due to reduced capital investment in physical infrastructure and, in some cases, the elimination of links in the supply chain. And it offers a compelling proposition for busy parents: the convenience of shopping whenever, wherever they desire, often with free delivery to their front door.
What kinds of baby care products are consumers buying online? Global respondents are most likely to have bought baby toys (38%) and clothes (34%). Twenty-three percent of global consumers say they’ve bought diapers online and 17% have bought baby food.
Asia-Pacific leads the way in self-reported online purchasing, especially for diapers and baby food. Thirty-one percent of respondents in this region say they’ve bought diapers online and one-quarter has bought baby food. Within Asia, Hong Kong and Korea lead the way in online purchasing. E-commerce retail sales show impressive year-over-year growth in China. Between 2013 and 2014, online infant formula sales rose 32%, baby food grew 44% and diapers grew 60%. In Europe, online baby food sales rose 43%, fueled by strong growth in France.
“E-commerce’s strength in Asia has been driven by several factors,” said Buchanan. “Infrastructure improvements and increased smartphone and Internet penetration have brought more potential shoppers online, particularly in rural regions. Also, online product assortment is often much broader than in traditional channels, giving consumers access to a new world of goods that may not have been previous available.”
 Based on Nielsen retail sales data for infant nutrition, infant cereal and infant formula categories in selected countries, which cover an estimated 95% of global baby food and formula sales.
 Based on Nielsen sales data for baby diapers and wipes in 63 countries, which account for an estimated 90% of global value sales.
Andrew McCaskill, 347.331.5725, [email protected]
The Nielsen Global Baby Care Survey was conducted between Feb. 23-March 13, 2015, and polled consumers in 60 countries throughout Asia-Pacific, Europe, Latin America, the Middle East, Africa and North America who have made a baby care purchase in the past five years. The sample has quotas based on age and sex for each country based on its Internet users and is weighted to be representative of Internet consumers. It has a margin of error of ±0.6%. This Nielsen survey is based only on the behavior of respondents with online access. Internet penetration rates vary by country. Nielsen uses a minimum reporting standard of 60% Internet penetration or an online population of 10 million for survey inclusion. The Nielsen Global Survey, which includes the Global Consumer Confidence Index, was established in 2005.