Baby care - The parent trap

Baby care is the only C&T sector where its primary consumers are not purchasers. The sector relies on the interest and loyalty of parents, and the industry is successfully playing on the complex motives governing their purchasing decisions. ECM looks at a category that is growing up fast.

The May acquisition of Avent by Philips for a princely €675m is an indication of just how hot the baby care market is becoming. Now, Avent's business may well be primarily focused on baby and infant feeding products, but it also has a toiletries arm – an area that is attracting an increasing number of players.

This increased interest is hardly surprising. According to Euromonitor, the global baby care market, which actually spans children aged up to 10, was worth $4.41bn in 2005. This represents a staggering 70.3% hike since 1997 and up a respectable 7.4% on the previous year – standing out in sharp relief against a stagnant C&T market.

This growth can't be explained away by demographics. Despite the rise in the global population, progress in family planning has meant that birth rates are actually falling in most developed and developing countries. The United Nations says that fertility has fallen from 2.6 children to 1.8 in the developing world, while the rate in developing countries, which make up 80% of the world's population, has fallen from 5.9 to 3.9. The top 10 fertility countries are all to be found in the poorest African countries, with rates ranging from 7.0 to 7.5, while the bottom 10 include Hong Kong, Spain and Italy, ranging from 0.9 to 1.2. A notable – and important – exception is the US, where the birth rate is actually rising.

Mirroring this fall in fertility is the fact that women in the developed world are choosing not only to have fewer babies, but to have them later in life too, due to increased take-up of further education and careers. The UN says that in 2004 the median age of mothers at first birth stood at 29.6 in New Zealand (the highest in the world), followed by 29.1 in the UK and Spain, 28.8 in Switzerland, 28.7 in France and 28.6 in the Netherlands. As a measure of this trajectory, the UK's national statistics show that the average age at first birth rose from 28.5 to 29.5 between 1995-2005.

Combined with the increasing personal incomes in the developed world, this means that there is more money to spend on fewer children. Among the Big 5, for example, where the overall C&T market is virtually flat, France saw its expenditure on baby care grow 5.3% to $175.7m in 2005, according to Euromonitor, Italy's market grew 2.2% to $187.3m, Spain's put on 5.5% for a total of $163.7m and the UK market rose 4.2% to $194.9m. Only Germany confounded expectations, decreasing 3.9% to $159.7m despite its bigger population and gently rising C&T market.

So, what makes consumers willing to spend relatively heavily on their children while cutting back on their own expenditure? It's a mixture of love and guilt, according to some analysts – love that can be lavished on fewer babies and guilt that there may be less time to spend with them due to pressures of work. As a result, this is fuelling growth in two particular sectors of the market. At the more functional end of the market, baby toiletries grew 4.1% in Western Europe to $410.5m and 9% to $1.67bn on a global basis. At the more pampering and/or problem solving end, baby skin care sales rose 3.3% to $402.6m in Western Europe and 6.6% globally to $1.4bn.

However, every baby care sector was expanded by the growth of products with a natural positioning. Parents frequently assume that products made with natural ingredients are safer and healthier than those with synthetic materials. Popular ingredients include goat’s milk, oat products, aloe vera, vitamins and minerals. Word of mouth has proved to be an incredibly strong weapon for smaller, though not necessarily cheaper, brands operating in this area and has opened up new revenue streams for some operators. “Natural product companies are expanding into baby care,” says Euromonitor's Briony Davies C&T account manager. “Companies like Green Mama, Weleda and Jason Natural Products are all expanding their baby care lines, capitalising on the overall growth of the sector and increasing interest in natural products from mums.”

These products frequently have at least some organic content. Just as the organic baby food sector is growing, so is the organic baby care category. Jason, for example, teamed up with organic baby food manufacturer Earth's Best to create the Earth's Best Organic Baby Care range. The six-strong line-up is 70% organic and 100% natural and contains natural oat extract, beta-glucan as well as oat oil to soothe and moisturise. Similarly, Baby Organics from mypure contains certified organic blends of oils, plant extracts and essential oils chosen to heal and preserve sensitive skin.

A further advantage of such ranges is that they help to reflect attention back onto their adult offer. Burt's Bees, for example, which recently expanded its baby care range with a hair and body wash formulated with coconut and sunflower oils, says that its baby care products are often parents' first exposure to the brand and an important way of creating brand loyalty across the age range.

However, such ranges tend to be subject to restricted retail through health food and speciality stores and thus carry relatively high prices, a fact that inspired Leila Wilcox to develop an affordable, mass market natural line for cash-strapped parents like her. In just one year, Halos n Horns has grown out of a fledgling line inspired by a television programme about would-be entrepreneurs into a successful brand stocked in an impressive number of UK supermarkets and pharmacy chains, with ambitions to move into Boots and overseas in the coming months.

Wilcox describes the brand as the safe choice for chemical-savvy parents. The hair and body washes and shampoos and conditioners, which contain natural cleansing ingredients and plant-derived conditioners and do not contain SLS, SLES, pthalates or parabens will soon be expanded with body lotion. Sunscreens and products for pregnant women and mothers are also being considered.

Even added together, the revenues of such companies wouldn't make much of a dent in the 36.9% share of the global body care market that Johnson & Johnson enjoys, but it has made the company sit up and take notice. In fact, J&J says it is the first mass market baby care brand to fully respond to the popularity of naturals, working with paediatricians and dermatologists to create the Baby Soothing Naturals range. Launched in June, Intensive Moisture Cream and Nourishing Lotion contain a combination of the purest form of vitamin E and olive leaf extract, both chosen for their anti-oxidant properties to soothe and protect babies' skin, while skin essential amino acids and minerals strengthen its barrier function.

J&J has also tried to extend its brand loyalty into the children’s segment. Last year saw the launch of Johnson’s Junior, a toiletries range for 2-5 year olds which aims to take the strain out of bath-time for both children and parents. The bright packaging is decorated with cartoon characters and is designed to encourage children to use the products themselves.

Other companies have leveraged their brand loyalty from other baby-related areas to enter toddler toiletries. Kimberly Clark, for example, introduced Huggies toiletries in 2004 and this year rounded out the line with Huggies Cleanteam, a shampoo and conditioner, body wash, hand soap, wash mitt and wipes emblazoned with Alphamals characters and bearing a Blue Melon Splash scent.

P&G, meanwhile, took its own nappy brand, Pampers, into toiletries with the Kandoo brand. Designed to encourage kids to clean themselves, the Kandoo products are becoming increasingly segmented. The latest additions, Fruits Fous, are designed for little girls, with pink and purple packaging and a berry fragrance.

Baby Einstein, on the other hand, is using its reputation for learning materials to make a mark in toiletries, joining forces with Solar Cosmetic Labs to create the Baby Einstein Splash & Discover range. And while Huggies and Kandoo use their parent companies’ links with supermarkets and pharmacies for distribution, Baby Einstein is also making use of its relationships with toy retailers in the US such as Toys “R” Us.

Scratching the surface

With infant eczema and skin rashes reportedly on the rise, another segment – sensitive skin products – is also growing fast. In February, Boots launched Boots Baby Sensitive Skin, comprising only the mildest allergy-screened products to respect the skin’s protective barrier. Pierre Fabre moved into the same area at the same time with Avène Pediatril, which offers cleansers, creams, gels and ointments formulated with thermal water. Its sister brand, Klorane, created a line for dry skin featuring gold of pleasure oil as well as an alcohol-free fragrance for sensitive baby skin. Niche brands also stepped up their activity in the segment, with Metanium, for example, introducing Baby Moisturising Cream, Soft Petroleum Jelly, Zinc & Castor Oil Cream and Cradle Cap Cream for sensitive skin soothed and moisturised.

This continued segmentation may allow more adult players to enter the baby care market, particularly brands which have an association with natural skin care. And while there remains plenty of room for growth in the developed world, attention is also turning to developing markets such as India, with its vast population and growing average income. Local giant Marico launched the Sparsh baby care line in July, JL Morison is launching a brand called Baby Dreams, while Godrej is also said to have a range in the works. China is another tempting target due to its single child policy and growing urban affluence. Japanse baby care brand Pigeon is setting up a chain of day care centres in Chinese coastal areas, paving the way for its products.