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Baby Food and Drink - US - January 2009

With only a slight increase in the population of children aged three and under and slow but steady increases in the percentage of mothers who breastfeed their babies, the baby food and drink market has experienced only minimal dollar sales increases over the past five years. Economic pressures are likely to continue to depress category growth, at least in the short term, yet pockets of opportunity still exist in areas such as organics and private label.

This report examines the following market topics:

  • How the strong advocacy of breastfeeding by the medical community and various organizations affects not only the market potential for baby formula but also guides formula innovation and marketing

  • The impact of USDA's WIC program on various aspects of the baby formula market, from breastfeeding rates to market share

  • An assessment of new product activity across all segments of the category

  • How entrepreneurial moms are trying to carve out their own small portion of a market dominated by three major manufacturers

  • How supermarkets continue to dominate sales despite inroads from other channels promising value and convenience

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Consumer survey data
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                    • Market at a glance
                      • Category sales concentrated among a few major players
                        • Breastfeeding advocacy defines competitive context for baby formula
                          • USDA’s WIC program provides substantial support to baby formula
                            • In baby food, the competition expands rapidly with the age of the child
                              • Supermarkets continue to lead despite inroads by other channels
                                • Subtle demographic shifts will affect market for baby food and drink
                                  • Three brands control baby formula segment
                                    • Gerber continues to dominate baby food and drink
                                      • Heavy new product activity in key segments
                                        • Formula advertisers use a variety of tactics to connect directly to moms
                                          • Usage, attitudes and motivations
                                            • Consumers spend only a short time in the market
                                              • First babies more likely to be breastfed, fuel information overload
                                                • Despite higher prices, majority of moms use toddler foods at least some of the time
                                                  • Nutrition tops convenience as reason for using toddler-specific foods
                                                    • Moms seek –free foods
                                                      • Moms appear open to more store brand options
                                                        • More attention needs to be drawn to frozen products
                                                        • Insights and Opportunities

                                                          • Less is the new more
                                                            • Figure 1: Attributes of importance when choosing baby/toddler foods, by whether child under three is first child, October 2008
                                                          • Opportunity exists for a value proposition
                                                            • Growing with toddlers
                                                              • Reimagining the baby food shopping experience
                                                              • Fast Forward Trends

                                                                  • Simplify and purify
                                                                    • What it means for baby food and drink
                                                                      • Trading down (but a little trading up too)
                                                                        • What it means for baby food and drink
                                                                        • Market Size and Forecast

                                                                          • Key points
                                                                            • Category faces considerable challenges to growth at every age and stage
                                                                              • Yet pockets of opportunity still exist
                                                                                • Figure 2: FDMx sales of baby food and drinks, at current prices, 2003-13
                                                                                • Figure 3: FDMx sales of baby food and drinks, at inflation-adjusted prices, 2003-13
                                                                              • Wal-Mart sales
                                                                              • Competitive Context

                                                                                • Category sales concentrated among a few major players
                                                                                  • Advocacy of breastfeeding defines the competitive context of baby formula marketing
                                                                                    • USDA’s WIC program provides substantial support to baby formula
                                                                                      • The competition expands rapidly with the age of the child in the baby food and snack segment
                                                                                        • A natural market for mompreneurs
                                                                                        • Segment Performance

                                                                                          • Key points
                                                                                            • Formula dominates category
                                                                                              • Broader array of alternatives holds other segments in check
                                                                                                • Figure 4: FDMx sales of baby food and drinks, by segment, 2006 and 2008
                                                                                            • Segment Performance—Baby Formula

                                                                                              • Key points
                                                                                                • Macro factors may curb further growth
                                                                                                  • Baby formula marketers strive to match breast milk
                                                                                                    • Figure 5: FDMx sales and forecast of baby formula, at current prices, 2003-13
                                                                                                • Segment Performance—Baby Food & Snacks

                                                                                                  • Key points
                                                                                                    • Product improvements and organic haven’t lifted category
                                                                                                      • Beyond basic nutrition
                                                                                                        • Organic growth
                                                                                                          • Toddler-specific foods may have greater potential
                                                                                                            • Figure 6: FDMx sales and forecast of baby food and snacks, at current prices, 2003-13
                                                                                                        • Segment Performance—Baby Electrolytes

                                                                                                          • Key points
                                                                                                            • Segment lacks new products to regenerate interest
                                                                                                              • Figure 7: FDMx sales and forecast of baby electrolytes, at current prices, 2003-13
                                                                                                          • Segment Performance—Baby Juice

                                                                                                            • Key points
                                                                                                              • Sales declines expected to continue
                                                                                                                • Figure 8: FDMx sales and forecast of baby juice, at current prices, 2003-13
                                                                                                            • Retail Channels

                                                                                                              • Key points
                                                                                                                • Supermarkets continue to lead despite inroads by other channels
                                                                                                                  • Figure 9: FDMx sales of baby food and drinks, by retail channel, 2006 and 2008
                                                                                                                • Sales of baby food and drink in natural food stores
                                                                                                                  • Figure 10: Natural product supermarket retail sales of baby food and drink, at current prices, three years ending November 4, 2008
                                                                                                              • Retail Channels—Supermarkets

                                                                                                                • Key points
                                                                                                                  • Supermarkets have lost share to channels offering value and convenience
                                                                                                                    • Organic plus private label could be a formula for success for supermarkets
                                                                                                                      • Figure 11: Supermarket sales of baby food and drinks, 2003-08
                                                                                                                  • Retail Channels—Drug and Mass

                                                                                                                    • Key point
                                                                                                                      • Mass merchandisers well positioned to increase category sales
                                                                                                                        • Drugstores win share with convenience
                                                                                                                          • Figure 12: Drug stores and mass merchandisers’* sales of baby food and drinks, 2003-08
                                                                                                                      • Market Drivers

                                                                                                                        • Key points
                                                                                                                          • Population growth of kids under three, already expected to slow, may decline further with a weakening economy
                                                                                                                            • Figure 13: U.S. population estimates and projections of children age three and under, 2003, 2008, and 2013
                                                                                                                          • Hispanics continue to grow in importance to the baby food and drink market
                                                                                                                            • Figure 14: U.S. population estimates and projections of children age three and under, by race/Hispanic origin, 2003, 2008, 2013
                                                                                                                          • Breastfeeding’s slow but steady gains reduce market potential for formula
                                                                                                                            • Figure 15: Breastfeeding rates for U.S. children, based on interviews conducted from July 2001 through December 2007 among caregivers of 19-35 month old children born from 1999-2005
                                                                                                                        • Leading Companies

                                                                                                                          • Key points
                                                                                                                            • Nestlé looks to leverage synergies between formula and baby food
                                                                                                                              • Bristol-Myers Squibb plans to spin off Mead Johnson
                                                                                                                                • Abbott Labs demonstrates commitment to nutrition
                                                                                                                                  • Most private label formula produced by a single company
                                                                                                                                    • Figure 16: FDMx sales of baby food and drinks, by leading manufacturers, 2007 and 2008
                                                                                                                                • Brand Share—Baby Formula

                                                                                                                                  • Key points
                                                                                                                                    • New WIC contracts propel Similac share gain in 2008
                                                                                                                                      • Private label rises as economy sinks
                                                                                                                                        • Figure 17: FDMx brand sales of baby formula in the U.S., 2007 and 2008
                                                                                                                                    • Brand Share—Baby Food and Snacks

                                                                                                                                      • Key points
                                                                                                                                        • Gerber leverages awareness and size to maintain share lead…
                                                                                                                                          • …but faces competitive challenges on several fronts
                                                                                                                                            • Private label
                                                                                                                                              • Organic
                                                                                                                                                • Toddler
                                                                                                                                                  • Figure 18: FDMx brand sales of baby food and snacks in the U.S., 2007 and 2008
                                                                                                                                              • Brand Share—Baby Electrolytes

                                                                                                                                                • Key points
                                                                                                                                                  • Pedialyte competes more broadly for rehydration
                                                                                                                                                    • Figure 19: FDMx brand sales of baby electrolytes in the U.S., 2007 and 2008
                                                                                                                                                • Brand Share—Baby Juice

                                                                                                                                                  • Key point
                                                                                                                                                    • Gerber and baby juice segment are one and the same
                                                                                                                                                      • Figure 20: FDMx brand sales of baby juice in the U.S., 2007 and 2008
                                                                                                                                                  • Brand Qualities

                                                                                                                                                    • Gerber anchored by long-term focus on baby and mom
                                                                                                                                                      • Product breakthrough a key survival strategy for Beech-Nut
                                                                                                                                                        • Earth’s Best, an organic pioneer, continues to expand
                                                                                                                                                        • Innovation and Innovators

                                                                                                                                                          • Overview
                                                                                                                                                            • What’s been added
                                                                                                                                                              • What’s been taken out
                                                                                                                                                                • Snack time
                                                                                                                                                                  • Introducing all new tastes
                                                                                                                                                                    • The big chill
                                                                                                                                                                    • Advertising and Promotion

                                                                                                                                                                      • Key points
                                                                                                                                                                        • Formula makers reach out …carefully…directly to moms
                                                                                                                                                                          • Gerber sets the bar
                                                                                                                                                                            • Partnerships with doctors, hospitals key marketing practice
                                                                                                                                                                              • Marketers walk a fine line
                                                                                                                                                                                • Brand focus: Nestlé Good Start
                                                                                                                                                                                  • Figure 21: Nestlé Good Start Supreme/Guarantee TV ad, 2008
                                                                                                                                                                                • Brand focus: Gerber
                                                                                                                                                                                  • Gerber baby food
                                                                                                                                                                                    • Figure 22: Gerber baby food with DHA TV ad, 2008
                                                                                                                                                                                  • Gerber Graduates
                                                                                                                                                                                    • Figure 23: Gerber Graduates Lil’ Entrees TV ad, 2007
                                                                                                                                                                                    • Figure 24: Gerber Graduates Mini Fruits TV ad, 2007
                                                                                                                                                                                    • Figure 25: Gerber Graduates Variety TV ad, 2007
                                                                                                                                                                                • Web Marketing

                                                                                                                                                                                  • Brand websites reach out to information-seeking moms
                                                                                                                                                                                    • Information sources abound
                                                                                                                                                                                      • StrongMoms (Similac) strives for independence and community
                                                                                                                                                                                        • Enfamil keeps it simple with basic information and subtle advocacy for formula-feeding
                                                                                                                                                                                          • Start Healthy Stay Healthy Resource Center leverages the combined strength of Gerber and Nestlé
                                                                                                                                                                                            • Earth’s Best tells organic brand story
                                                                                                                                                                                            • Usage of Baby Food and Drinks

                                                                                                                                                                                              • Age of child most significant factor in determining household penetration
                                                                                                                                                                                                • Figure 26: Household incidence of using baby formula, by age of children in household, April 2007-June 2008
                                                                                                                                                                                              • Younger parents more likely to use formula and baby food
                                                                                                                                                                                                • Figure 27: Household incidence of using baby formula, by age, April 2007-June 2008
                                                                                                                                                                                              • Category use higher in lower income households
                                                                                                                                                                                                • Figure 28: Household incidence of using baby formula, by household income, April 2007-June 2008
                                                                                                                                                                                              • Incidence of using formula significantly higher in Asian households
                                                                                                                                                                                                • Figure 29: Household incidence of using baby formula, by race/Hispanic origin, April 2007-June 2008
                                                                                                                                                                                              • While most moms use formula, exclusive use increases after first child
                                                                                                                                                                                                • Figure 30: How babies/toddlers are fed, by whether child under 3 is first child, October 2008
                                                                                                                                                                                              • Lower-income moms more likely to use formula exclusively
                                                                                                                                                                                                • Figure 31: How babies/toddlers are fed, by household income, October 2008
                                                                                                                                                                                            • Brand Preferences

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • Enfamil retains lead in formula usage
                                                                                                                                                                                                  • Figure 32: Brands of formula used, April 2007-June 2008
                                                                                                                                                                                                • Use of Gerber baby food nearly universal
                                                                                                                                                                                                  • Figure 33: Brands of baby food used, April 2007-June 2008
                                                                                                                                                                                              • Attitudes and Motivations

                                                                                                                                                                                                • Key points
                                                                                                                                                                                                  • New moms look to a broad array of information sources
                                                                                                                                                                                                    • Figure 34: Sources of information on baby nutrition, by whether child under three is first child, October 2008
                                                                                                                                                                                                  • Lower income moms more likely to rely on family for feeding advice
                                                                                                                                                                                                    • Figure 35: Sources of information on baby nutrition, by household income, October 2008
                                                                                                                                                                                                  • Doctors’ orders drive incidence of prenatal vitamins, but not breastfeeding supplements
                                                                                                                                                                                                    • Figure 36: Incidence of taking prenatal vitamins and supplements, October 2008
                                                                                                                                                                                                  • A majority of moms use toddler foods at least occasionally
                                                                                                                                                                                                    • Figure 37: How toddlers are fed, October 2008
                                                                                                                                                                                                  • Moms value a mix of nutrition and convenience in toddler foods…
                                                                                                                                                                                                    • Figure 38: Why toddler foods are used, by whether child under 3 is first child, October 2008
                                                                                                                                                                                                  • …but economic pressures may reshape the value proposition
                                                                                                                                                                                                      • Figure 39: Why toddler foods are used, by household income, October 2008
                                                                                                                                                                                                    • What’s most important about baby food is what’s not in it
                                                                                                                                                                                                      • Figure 40: Attributes of importance when choosing baby/toddler foods, by whether child under 3 is first child, October 2008
                                                                                                                                                                                                    • Household income influences what moms look for in baby food
                                                                                                                                                                                                      • Figure 41: Attributes of importance when choosing baby/toddler foods, by household income, October 2008
                                                                                                                                                                                                    • Opportunity for store brands is large as recession forces moms to economize
                                                                                                                                                                                                      • Figure 42: Opinions and behaviors regarding baby/toddler foods, October 2008
                                                                                                                                                                                                    • Experienced moms more likely to economize when shopping for baby food and drink
                                                                                                                                                                                                      • Figure 43: Opinions and behaviors regarding baby/toddler foods, by whether child under 3 is first child, October 2008
                                                                                                                                                                                                    • Lower income moms’ behaviors and beliefs favor economizing
                                                                                                                                                                                                      • Figure 44: Opinions and behaviors regarding baby/toddler foods, by household income, October 2008
                                                                                                                                                                                                    • Awareness of frozen baby food remains low
                                                                                                                                                                                                      • Figure 45: Interest in frozen baby food, October 2008
                                                                                                                                                                                                  • Custom Consumer Groups

                                                                                                                                                                                                    • Mother’s employment status: working vs. non-working
                                                                                                                                                                                                      • Working moms more likely to combine breast and bottle
                                                                                                                                                                                                        • Figure 46: How babies/toddlers are fed, by employment status, October 2008
                                                                                                                                                                                                      • More similarities than differences in importance of key attributes
                                                                                                                                                                                                        • Figure 47: Attributes of importance when choosing baby/toddler foods, by employment status, October 2008
                                                                                                                                                                                                      • Working moms more practical, less brand loyal
                                                                                                                                                                                                        • Figure 48: Opinions and behaviors regarding baby/toddler foods, by employment status, October 2008
                                                                                                                                                                                                    • Cluster Analysis

                                                                                                                                                                                                      • Introduction
                                                                                                                                                                                                        • Brand Buyers
                                                                                                                                                                                                          • Who they are
                                                                                                                                                                                                            • Opportunity
                                                                                                                                                                                                              • Brand Bargainers
                                                                                                                                                                                                                • Who they are
                                                                                                                                                                                                                  • Opportunity
                                                                                                                                                                                                                    • Store Branders
                                                                                                                                                                                                                      • Who they are
                                                                                                                                                                                                                        • Opportunity
                                                                                                                                                                                                                          • Cluster characteristics
                                                                                                                                                                                                                            • Figure 49: Baby food clusters, October 2008
                                                                                                                                                                                                                            • Figure 50: How baby/toddler is fed, by baby food clusters, October 2008
                                                                                                                                                                                                                            • Figure 51: Sources of nutrition information, by baby food clusters, October 2008
                                                                                                                                                                                                                            • Figure 52: Incidence of taking prenatal vitamins and supplements, by baby food clusters, October 2008
                                                                                                                                                                                                                            • Figure 53: How toddlers will be fed, by baby food clusters, October 2008
                                                                                                                                                                                                                            • Figure 54: Attributes of importance when choosing food and drinks, by baby food clusters, October 2008
                                                                                                                                                                                                                            • Figure 55: Opinions and behaviors regarding baby/toddler foods, by baby food clusters, October 2008
                                                                                                                                                                                                                            • Figure 56: Interest in frozen baby food, by baby food clusters, October 2008
                                                                                                                                                                                                                          • Cluster demographics
                                                                                                                                                                                                                            • Figure 57: Baby food clusters, by income group, October 2008
                                                                                                                                                                                                                            • Figure 58: Baby food clusters, by employment status, October 2008
                                                                                                                                                                                                                            • Figure 59: Baby food clusters, by marital status, October 2008
                                                                                                                                                                                                                          • Cluster methodology
                                                                                                                                                                                                                          • IRI/Builders Panel Data—Key Household Purchase Measures

                                                                                                                                                                                                                            • Consumer insights—baby food and drinks
                                                                                                                                                                                                                              • Household purchase activity
                                                                                                                                                                                                                                • Brand map
                                                                                                                                                                                                                                    • Figure 60: Brand map, selected brands of baby food/snacks, by household penetration, 2008*
                                                                                                                                                                                                                                  • Brand leader characteristics
                                                                                                                                                                                                                                    • Key purchase measures
                                                                                                                                                                                                                                      • Figure 61: Key purchase measures for the top brands of baby food/snacks, by household penetration, 2008*
                                                                                                                                                                                                                                  • Appendix: IRI/Builders Panel Data Definitions

                                                                                                                                                                                                                                      • IRI Consumer Network Metrics
                                                                                                                                                                                                                                      • Appendix: Other Useful Consumer Tables

                                                                                                                                                                                                                                        • Brands of formula used
                                                                                                                                                                                                                                            • Figure 62: Brands of formula used, by household income, April 2007-June 2008
                                                                                                                                                                                                                                          • Incidence of taking prenatal vitamins and supplements
                                                                                                                                                                                                                                            • Figure 63: Incidence of taking prenatal vitamins and supplements, by household income, October 2008
                                                                                                                                                                                                                                          • How toddlers are fed
                                                                                                                                                                                                                                            • Figure 64: How toddlers are fed, by household income, October 2008
                                                                                                                                                                                                                                            • Figure 65: How toddlers are fed, by whether child under 3 is first child, October 2008
                                                                                                                                                                                                                                        • Appendix: Trade Associations

                                                                                                                                                                                                                                          Companies Covered

                                                                                                                                                                                                                                          • Abbott Laboratories
                                                                                                                                                                                                                                          • Albertsons Inc.
                                                                                                                                                                                                                                          • American Institute of Food Distribution
                                                                                                                                                                                                                                          • Beech-Nut Nutrition Corp.
                                                                                                                                                                                                                                          • Bristol-Myers Squibb Company
                                                                                                                                                                                                                                          • Centers for Disease Control and Prevention
                                                                                                                                                                                                                                          • Costco Wholesale Corporation
                                                                                                                                                                                                                                          • CVS Caremark Corporation
                                                                                                                                                                                                                                          • Del Monte Foods
                                                                                                                                                                                                                                          • Food Marketing Institute
                                                                                                                                                                                                                                          • General Mills Inc
                                                                                                                                                                                                                                          • Gerber Products Company
                                                                                                                                                                                                                                          • Greenfield Online
                                                                                                                                                                                                                                          • Grocery Manufacturers Association (GMA)
                                                                                                                                                                                                                                          • Grocery Manufacturers of America (GMA)
                                                                                                                                                                                                                                          • HJ Heinz Company
                                                                                                                                                                                                                                          • Horizon Organic
                                                                                                                                                                                                                                          • International Food Information Council Foundation (IFIC)
                                                                                                                                                                                                                                          • Mead Johnson & Company
                                                                                                                                                                                                                                          • Milnot Holding Corporation
                                                                                                                                                                                                                                          • National Nutritional Foods Association
                                                                                                                                                                                                                                          • Nestlé USA
                                                                                                                                                                                                                                          • Novartis AG
                                                                                                                                                                                                                                          • Novartis Pharmaceuticals Corporation
                                                                                                                                                                                                                                          • Organic Trade Association
                                                                                                                                                                                                                                          • Private Label Manufacturers Association (PLMA)
                                                                                                                                                                                                                                          • Ross Products Division
                                                                                                                                                                                                                                          • Safeway Inc
                                                                                                                                                                                                                                          • SAM's Club
                                                                                                                                                                                                                                          • Shaw's Supermarkets, Inc
                                                                                                                                                                                                                                          • Supervalu Inc
                                                                                                                                                                                                                                          • Target Corporation
                                                                                                                                                                                                                                          • The Hain Celestial Group, Inc.
                                                                                                                                                                                                                                          • The Kroger Co.
                                                                                                                                                                                                                                          • The New York Times Company
                                                                                                                                                                                                                                          • Trader Joe's Company Inc
                                                                                                                                                                                                                                          • U.S. Bureau of Labor Statistics
                                                                                                                                                                                                                                          • U.S. Bureau of the Census
                                                                                                                                                                                                                                          • U.S. Department of Agriculture
                                                                                                                                                                                                                                          • United Nations Children's Fund (UNICEF)
                                                                                                                                                                                                                                          • Walgreen Co
                                                                                                                                                                                                                                          • Walmart Stores (USA)
                                                                                                                                                                                                                                          • World Health Organization
                                                                                                                                                                                                                                          • Zoneperfect Nutrition Co.

                                                                                                                                                                                                                                          Baby Food and Drink - US - January 2009

                                                                                                                                                                                                                                          £3,199.84 (Excl.Tax)