Big Potential in Tiny Consumers

Contact Author Carrie Lennard, Euromonitor International
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  • North America and Western Europe accounted for a 41% share of the $7 billion category in 2009.
  • Growth has been strongest in Latin America, and the region is predicted to add $414 million in absolute growth to the category 2009–2014.
  • Despite the economic downturn in 2009, the increase in the number of middle-income consumers resulted in strong sales of value-added products, with the share of private label remaining just under 4% globally.
  • The star performers globally were baby hair care and baby toiletries, boosted by female consumers increasingly opting to buy baby care products for their own use.
  • Baby sun care was the only category to experience consistent growth in 2009, achieving a 4% increase in North America and proving to be one of the more resilient categories to the recession in mature regions.

Baby care proved to be one of the most resilient categories during the onslaught of the recession, and outperformed the beauty industry as a whole (4%) with 7% value growth in 2009, according to market research firm Euromonitor International. Despite this, the category remains rather a niche globally, with sales heavily focused on the wealthier developed regions of North America and Western Europe, which together accounted for a 41% share of the $7 billion category in 2009. In turn, baby care accounted for just 2% of total value sales in 2009, meaning that there is still much work to be done before it can be considered a major driving force in the beauty industry.

Soaring Growth in Africa; Middle East

Although it is clear that the high disposable income regions of North America and Western Europe dominate baby care sales globally, they are no longer the primary growth-drivers. While value sales in emerging regions are still comparatively very low, many managed to maintain or even better their 2008 value growth rates. According to Euromonitor statistics, growth has been strongest in Latin America (20% in 2009) and Eastern Europe (9%), albeit from a far lower base than in mature regions like North America and Western Europe.

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Africa and the Middle East achieved value growth of 13% in 2009, up from 12% the previous year. Despite this, the region cannot be considered a major focal point for growth in baby care because with sales of just $4 billion in 2009, it accounted for just a 7% share of global baby care sales. Furthermore, some of this growth was due to a high inflation rate that kept value sales high while volume growth declined or remained stagnant.

Latin America is the Region to Watch

Latin America is set to be a key contributor to global baby care growth and is predicted to add $414 million in absolute growth to the category 2009–2014, more than any other region. The region already accounted for a 24% share of total baby care value sales in 2009, and posted a dynamic growth rate of 20% in value terms, higher than the previous year (17%). The region’s comparatively high birth rate was a major contributor to the boom in baby care products; its birth rate of 19 per 1,000 inhabitants in 2009 was far higher than that of Western Europe, for example, with a birth rate of just 12 per 1,000 inhabitants. Furthermore, rising disposable incomes in the region meant that parents were able to spend more money on their children.

Despite the economic downturn in 2009, the increase in the number of middle-income consumers resulted in strong sales of value-added products, and strong growth for products that consumers previously could not afford as an everyday purchase—baby and child-specific sun care, for example, registered excellent growth of 15% in 2009.

Natural/Organic Sales on the Rise

Natural and organic baby care products continued to be a significant trend in 2009 in regions where available. Many consumers start buying organic baby care products when they first become parents, deeming these product to be “best” for their children, and thereafter are unwilling to trade down from products that are perceived as being of a high quality.

As they start reading labels on foods for their children, consumers are more inclined to read labels on baby care products too, being on the lookout for preservatives such as parabens and other additives. The fear of common beauty ingredients such as PEG (propylene glycol) and sodium laureth sulfate has sent parents flocking to the emerging natural and organic baby care segment.

The key markets for organic and naturally positioned baby care products are affluent regions such as Western Europe and the U.S., primarily due to the often high price points of organic brands. Germany is the most mature market for natural baby care products, with many of the biggest names in natural beauty, such as Lavera and Weleda, originating from the country. These brands are becoming increasingly popular abroad, and German natural product manufacturers are focusing on expanding sales in other European countries, notably France and the U.K.

Popularity of Natural Sets/Kits Takes Off

Natural baby care starter kits are now often given as presents to expectant mothers as the popularity of baby showers held by mothers-to-be spreads beyond the U.S. into other countries. Products such as the “Getting Started” kit or the “Baby Bee Bundle of Joy Basket” from natural beauty stalwart Burt’s Bees and the “Mom and Baby Set” from Lavera are being sold as gifts for mothers and babies, the idea being that new mothers will then become regular purchasers of these brands once the trial-sized bottles in the kit run out.

No Major Inroads for Private Label

As a consequence of this careful attitude regarding the products parents are willing to use on their children, private label baby care did not experience anywhere near the same level of discounting as the overall adult beauty market. For many parents, the most important factor in baby care remains the quality of the product or reputation of the brand rather than price. The share of private label remained at just under 4% globally in 2009, unchanged from 2008 despite far more difficult economic circumstances globally, according to Euromonitor International.

Baby Toiletries Dominate Category Sales

The star performers globally were baby hair care and baby toiletries, both of which outperformed their 2008 growth rates—the former achieving 9% global value growth in 2009, an improvement of two percentage points on the previous year. Sales of baby toiletries, in particular, are also being boosted by female consumers increasingly opting to buy baby care products instead of adult products because they are seen as milder than normal body care products, and are also often less expensive.

Sun Care Sales Remain Buoyant Across Regions

Baby sun care was the only category to experience consistent growth in 2009, registering 5% globally—but, more importantly, it achieved a 4% increase in North America, proving to be one of the more resilient categories to the recession in mature regions. Demand for baby care products is being driven by greater awareness of the damage caused by unprotected sun exposure. The health care community and sun care manufacturers have educated parents regarding the fact that protection from the sun is a year-round and lifetime necessity, and not just for sunbathers at the beach. Many parents now take notice of dermatologists’ claims that people receive as much as 80% of their lifetime sun exposure by the age of 18. As a result of these health fears, demand for baby and child-specific sun care products has risen in recent years. Parents tend to rely on familiar brand names for child sun protection, and, as a result, Beiersdorf’s Nivea is the world’s leading brand in the category.

Major Beauty Players Focus on Baby Care

Avon has signalled its intention to focus on the baby care category by acquiring Tiny Tillia in April 2010, a child-specific personal care company that is present primarily in the U.S. market. In keeping with the trend toward natural and organically positioned products in baby care, the range is paraben-free and errs toward the premium end of the price scale, costing around $12 for a bottle of bath additive.

Beauty specialist Sephora launched The Healthy Baby Collection (May 2010), produced by Lavanila Laboratories, which is marketed as being a collection of chemical-free, vitamin-enriched, infant-safe formulas. The range is the only baby care line currently stocked by the retailer that focuses primarily on the adult female consumer base.

Outlook Good, but Category Remains Niche … So Far

Globally, the baby care category shows a great deal of potential. According to Euromonitor, it is set to add a further $1.9 billion in absolute growth 2009–2014, although ultimately this will account for just 2% of total beauty absolute growth over the same period. Reflecting the growing importance of the wider skin care category, baby skin care is set to add the most in value terms with $434 million, or 23% of the total absolute growth in baby care. The natural and organic trend is expected to continue to be a main contributor to maintaining growth in mature regions such as Western Europe and North America as parents continue to trade up to higher-priced “free from” products.

Carrie Lennard is a research analyst at Euromonitor International.