You can’t advertise to newborns. But you can sure try to reach their mothers. And new moms are trading up big time. That means a $2 billion-plus opportunity over the next four years. According to Datamonitor’s U.S. Baby Market and CPG 2002 report by Janae Lapir, between 2001 and 2006 the market for organic, fortified, and specialty baby products will increase from $88 million to $3 billion. The standard and mass markets, by contrast, will decrease in value from $4 billion to $2 billion. Capitalizing on this opportunity requires an understanding of the structure, competitive landscape, retail channels, and consumer dynamics of this market.
Lapir contends that there is “no difference in the media for reaching the new parent market this year as compared to last year; what is different is the products and the tendency of new parents to trade up or opt for higher-priced alternatives.”
According to Datamonitor’s report, the most important development in the U.S. baby market this year has been the appearance of DHA- (docosahexaenoic acid) and ARA- (arachidonic acid) fortified infant formulas. DHA and ARA are fatty acids present in a woman’s blood after sixth month of pregnancy and in the mother’s milk after birth. Since being approved by the Food and Drug Administration in May 2001, the two leading formula manufacturers in the U.S. — Mead Johnson Nutritionals and Similac Advance — have already introduced new DHA- and ARA-fortified formulas into the mass market. Datamonitor expects sales of fortified formulas to exceed $1.4 billion in 2002, and to constitute 75% of the infant formula market in the U.S. by 2006.
Organic baby food sales have also expanded and are expected to reach $115 million by 2006. Though new parents eat 12% more organic food and 17% more fresh fruits and vegetables than the population as a whole, Datamonitor reports they also reduce their expenditure on eating out in the evenings by 27% and drinking out by 29%. The mark-up on organic and fortified baby products compared to standard baby products is generally about 20%, and Lapir claims that new parents are more willing than ever to trade up in an effort to provide their children with “the very best.”
Recent demographic reports support this upward trend. There are currently 11.7 million children and infants under the age of three in the U.S., and according to a new Centers for Disease Control and Prevention report entitled “Births: Final Data for 2000,” women in the United States are having more children than at any time in almost 30 years. Birth rates for older, more affluent women also continue to rise, with births to women aged 30–34 years increasing 5% in 2000, to 94.1 per 1,000 women, and increasing to 40.4 per 1,000 for women aged 35–39 years.
The impact of older, wealthier new parents is most visible in the baby toiletries segment, which has seen an influx of companies, new and old, touting upscale baby brands. Lapir contends that purchase of personal care items in times of recession increases, though consumers tend to cut the bigger purchases out of their budgets. The luxury and prestige baby toiletries markets have grown substantially. Luxury baby toiletries (Bulgari is the prime example) are generally priced even higher than prestige baby toiletries (such as Origins, Bobbi Brown, and CVL Cosmetics). Niche baby toiletries tend to embody a very specific product philosophy, such as natural, organic, therapeutic, etc. (i.e. Davies, Gate, Baby Spa Inc., and Arizona Babies).
Web-based selling gives new brands the opportunity to differentiate themselves and educate parents with detailed product and ingredient information. A Roper Starch Worldwide survey in 2000 found that Internet usage is higher among women with children than it is for those without children, while a 2000 Grunwald & Associates survey found that 67% of new mothers used the Internet for information on parenthood/family subjects. Lapir contends that new mothers also focus more on child, home, and family content in traditional media, and that new-parent magazines are especially popular.
Enfamil Finds Its Formula
Mead Johnson, maker of Enfamil infant formula, is number one in the infant formula market for a reason. According to Catherine Bartholow, president of RTC Relationship Marketing and author of "Brand loyalty: The mother’s milk of future marketing," an article published in the Washington Business Journal on February 25th, Mead Johnson understands the concept of brand relationship marketing. In her article, Bartholow explains that it is imperative to speak to consumers in a personal and relevant way. Companies can do this by segmenting their customer base and creating messaging strategies to reach each group. Bartholow contends that Mead Johnson effectively accomplished this by customizing communications based on the stage of pregnancy. "Enfamil Family Beginnings," the highly successful marketing program Mead Johnson created, allows the brand to build a dialogue with expecting mothers, while tailoring communications to meet the needs of these women at the right time during and after pregnancy. According to Bartholow, communications to expecting mothers should differ from that to new mothers, just as messages to first-time mothers should differ from those to mothers with more than one child.
With "Enfamil Family Beginnings" Mead Johnson tailored personal and relevant communications to segments within their customer base and the program was therefore successful in building trust and loyalty with mothers. As a result, these mothers were more inclined to choose Enfamil over other types of formula. It’s a simple equation, says Bartholow. Brand relationship marketing strives to create one-on-one relationships founded on trust between the company and the consumer. Over time, these relationships will create loyal brand advocates. Loyal customers will sustain long-term profits, while marketing managers struggle with the reality of meeting short-term revenue targets.