Increased demand of the organic and gluten free food is likely to drive the market in North America and is expected to value at US$7.49 billion, with expansion at a CAGR of 6% over the forecast period by 2025.
- Definition / Scope
- Market Overview
- Market Risks
- Top Market Opportunities
- Market Trends
- Industry Challenges
- Technology Trends
- Pricing Trends
- Regulatory Trends
- Other Key Market Trends
- Market Size and Forecast
- Market Outlook
- Technology Roadmap
- Distribution Chain Analysis
- Competitive Landscape
- Competitive Factors
- Key Market Players
- Strategic Conclusion
Definition / Scope
Baby food has nutritional value and is either partial or total replacement for breast milk for infants and toddlers. The baby food is segmented into the following categories:
- Market segment by Type: It covers milk formula, dried baby food, prepared baby food, bottled and canned baby food
- Market segment by Ingredients: It covers fats and oils, protein, lactose, flour, vitamins, and minerals
- Market segment by Distribution Channel:It includes a supermarket, specialty stores, small grocery stores
- Market segment by Formulation: It covers powdered and liquid
- Market Segment by Application: It covers the age range from 0-6 months, 6-12 months,>12 months
Baby Food industry is one of the competitive industries in the United States of America. Being one of the most populous and developed countries, US came in second place for baby food market with about 7 billion dollar sales while China was the first with over 13 billion dollar sales as of the data of 2017.
The United States of America has dominated the baby food market in North America with the highest revenue by percentage.
Looking at the segmentation of baby food by types; the milk formula seemed to be gaining the highest number of consumers, considering the fact of it being one of the effective replacements for the breast milk. Milk Formula accounted for almost three-quarters of the retail sale while the prepared wet meals accounted for almost 23% of the retail sales.
The increasing trend towards more organic and nutritional food, the overall market of the prepared wet meals have taken a larger share. (22.7 % in 2018, compared with 18.3% in 2012).
Looking through the segmentation by distribution channel, accounting for almost two-thirds of the infant formula sales, the supermarket has been dominating the baby food market.
In the last three years, the value of sales of the baby product has not changed much, amounting about 6.9 billion US dollars while the average US household expense has dropped drastically.
The average household spent an average of $42 in baby food products between the years of 2007 to 2009 while the expense decreased to $24 from 2014 to 2017.
The United States ranks 11th in the world’s GDP per capita, and after the recession of the three years in the baby food market, the market sale is expected to increase with the increase in the consumer confidence.
Stringent Government Regulations: United States Department of Agriculture (USDA) has set out some specific requirement for producing the organic food and inspects the produced organic food to ensure that they meet the standard set bar by considering the factors like soil quality, use of additives, and pest and weed control.
Implementation of the rules and regulations and following the guidelines ensuring the food product free from harmful chemicals has become one of the competitions between the key players in the baby food market.
Rise in Parental concerns: Owing to the rise in parental concern of what their child eats and what is beneficial for their child growth and development, the organic food is gaining more market value.
The use of harmful chemicals (pesticides, fertilizers, artificial colors, sweeteners, and flavors) has a negative effect on the health of the baby and the increase in awareness about the eco-friendly farming techniques, impacts the purchase of the products.
Nutritional values: With the growing knowledge of the child requiring adequate nutritional values for their growth and development, the demand for the packaged baby food with proper nutritional values is increasing. The market players focus on launching baby foods with adequate nutritional content and minimum preservatives.
Low nutritional values act as a risk of not meeting the guidelines laid by the competent authorities for the manufacturers of the food product, adding to the possibility of losing the market value.
Pricing: Pricing of baby food products plays a vital role in sustaining a product in the market. The pricing of the food products also differs as per the content of the nutrition in the package and the effort required in handling and storing without any contamination. According to the Department of Agriculture, USA, in comparison to conventional food, organic food has higher pricing.
For instance, a 25.7-ounce container of traditional infant formula costs about 23.5 dollars whereas the same amount of organic food costs around 27.50 dollars. The growing demand for nutritive products has increased the sales of organic food, despite the pricing, especially in urban areas.
Contamination: Improper packaging and the contamination of the food may be a major risk for the baby food market. In the world of urbanization and healthy eating, contamination and exposure to quality issue, will receive a deadly sales impact and could cause major fallout of the food market.
In early 2018, one of the world’s dairy companies though confined to Europe, Africa, and Asia when experienced salmonella contamination, the extensive press coverage even in the US affected the food market there.
Top Market Opportunities
- The innovation of the product and revolving it around the demand for health, nutrition, flavors, and packaging are some of the factors that a company can focus to increase their value in the market
- Considering the nutritional factors as per the demand of the consumers; the launch of the organic foods, free of additives or artificial flavors seems to raise the product launch opportunities for the market players. Consumers are now more aware of the positive effects of organically prepared baby food which is likely to create more opportunities in the market.
- With the rapid development of the technology, and increase involvement of the others in the employment, not only the traditional distribution channel (Hypermarket, supermarket, drug stores, specialty stores) but the online shopping platform has also become popular among the consumers.
- Declination in poverty rates has boosted the adoption of baby food products.
Urbanization and changing lifestyle: Raising urbanization in most part of the country and declination in the poverty rate along with the changing lifestyle of the people has increased the adoption of the baby food by the new parents.
Also searching for the nutritious food for their baby’s growth and development and adoption of the healthy lifestyle has increased the market for the organic products and had made a great deal in driving the US baby food market.
Increase in working women ratio: Owing to the rise in literacy rate and supportive government policies, the number of women in the labour workforce is increasing. As in the data from 2018, 70% of mothers in US household with children below than 18 years work, with growth from 47% as in of 1975.
In about 4 of 10 US households, mothers are the primary bread winners. Statistics also show that in nearly half of the households, both the parents are employed full time. The infant formulas and other baby products make the life of these working parents easier and convenient, with saving the time of the manual preparation and ultimately boost the baby food market
Improved distribution channels: The hypermarkets, supermarkets were the key distribution channel for baby food products but now owing to the growth of the technology and internet and also the changing lifestyle, the online sales has become one of the more easier, convenient and popular ways of distribution of food products.
Considering the increasing use of smart phones, and easy payment methods, online sales method is expected to grow further in coming years. The online sale of these products is not only an ease for the consumers, but also for the market players with more opportunity for advertisement of their products.
E-commerce websites are gaining extensive popularity and the trend of online shopping is growing and expected to positively impact the expansion of the market.
Declining Birth Rate: As the birth rate in the USA has been decreasing, there are fewer babies to feed. This decrease in the number of consumers directly impacts on the market of the baby food.
Increased breastfeeding activity: Breastfeeding is continuously being promoted for infant’s health in national and international level of policy making. Obstetricians and Gynecologists suggest the new mothers to exclusively breastfeed their babies for the first six month of their life owing to the nutrition that they get from the mother’s milk.
With increased awareness on the benefits of breastfeeding, the number of women breastfeeding their babies has increased over the years. This decreases the sales of the baby food especially the infant milk formula.
Home cooking: The organizations that tend to promote breastfeeding, also suggest the mothers to home cook for their babies once they start on the solid diets. The numbers of women showing interest in cooking food for their babies has also been increasing owing to the risk of lack of nutrition in the prepared baby food products.
High competition: Intense competition prevails between the market vendors as it is subjected to rapidly changing consumer demands and preferences. They adopt new strategies and launch new products as per the demands of the consumers and are always looking for the new opportunities to tap into the market.
The new emerging food industries have to do a lot to mark their foot in the market between those vendors that have been gaining name in the market through many years.
Food safety issue: Safety of the food products that they have been buying has always been a major issue among the consumers. And owing to their baby’s health, growth and development, most parents have doubts on the prepared baby foods and prefer home cooking for their babies.
The risk of contamination and the addition of preservatives and artificial flavours in the baby have been negatively impacted the market sales and preparing pure nutritious organic baby food has become one of the challenges in the industry.
Waste management: Giving the preference to the convenience of busy parents, the single use packaging system of the baby food has widespread, which generates a considerable amount of waste.
As the environmental consciousness among the consumers is increasing, the industries are developing the packaging system that responds to the environment and creates less waste, unlike the single packaging that has been prevailing through the years challenging the industries to adopt the new change as per the demand of the market.
Production procedure: With the rising concern of the parents, the demand of the organic baby food in the market is increasing. The awareness and use of the eco-friendly farming techniques is increasing but requires proper knowledge on correct and proper use of the factors like soil quality, use of additives, and pest and weed control.
Meeting the government set regulations: There are certain specific requirements set out by the United States Department of Agriculture (USDA) that has to be met before the industries can distribute their products to the market.
Meeting the demand of the consumers and fulfilling the set requirements has been a challenge for the industries. Regulating the similar legislation, US Food and Drug Administration’s (FDA’s) centre for Food Safety and Applied Nutrition ensures the manufacturing of baby food within allowed constraints.
The use of animal’s milk for feeding the babies has been noted since 2000BC and since then alternative milk sources have evolved with time. The kind of animal milk depended on the type of animal available like- goats, sheep, camels, pigs, horse, most popular being cows, till the end of the 19th century.
Infant food was first developed and marketed in liquid form and powder form in 1865, for better preservations. Till then formula consisting of cow’s milk, malt flour, and potassium bicarbonate was considered perfect as infant formula.
With the development of the technique to sterilize the food in sealed containers, by Nicholas Appertin 1810, the invention of evaporated milk (unsweetened condensed milk) followed. Since then the new products and the formulas were rapidly introduced in the market and they consisted of carbohydrates like starch dextrins and sugars.
Over time with growing demands, the technologies being used for the production of the baby food have been improving and similarly with the concern and risk of contamination the technology for its purification and sterilization have evolved. The baby food companies undergo more than 260 tests on each product to ensure that they meet all legislation for baby foods.
As potential techniques to increase the nutritional value of the products, and to ensure the microbiological efficacy, the new novel technologies like High Hydrostatic Pressure and Micro capsulation are being evolved.
- High Pressure Processing (HPP): It was developed in the food industry as an alternative of pasteurization and sterilization to produce safe food and is emerging as better technology. High Pressure Thermal Sterilization (HPTS) has proven to be an effective technology for Furan content in the baby food puree.
- Drum Drying Technology: For the dried baby food, drum drying technology is known for the unique taste and full gelatinization. With this technology, the wet product is dried and as this requires high temperature for the process, the product will be pasteurized while being dried.
In comparison to the other countries, the cost of the infant formula is high in the United States and the price seems to be growing over the years.
- Demand of organic food: With growing parental concern about the nutrition of the baby food, the demand of the organic food is increasing, but the pricing of the organic baby food is higher in comparison to the conventional food owing to the technology and the product cost that is invested in the production of the organic baby food.
- WIC program: Through US federal government special nutrition program for Women, Infants, and Children (WIC) more than half of the infant formula used in the US is provided free of cost. This program serves the low level income women with infants at nutritional risk. In this program, the average monthly food cost per person was 37.54 US dollars as per the year 2004. The cost of these free distribution products is paid by the US treasury and also under the negotiation with the formula companies; they also provide 85-98% rebates to WIC in per can of food. This high percentage of rebates by the formula companies may be because that the actual manufacturing cost of the product is much less than the set wholesale or retail price that they don’t go in loss even after the paying of the rebate. It is seen that the retail price of the baby food is high in those areas where the WIC is more active as the grocers know that WIC will cover the cost.
With the trend of feeding the home cooked food to the infants and toddlers, and owing to the high retail price of the baby food in the market, most parents are inclined towards home cooking. This seems to save a considerable amount of money of the consumers.
Food product safety, distribution, and management in the USA is managed mainly under three organizations; namely; U.S. Food and Drug Administration (FDA), International Food Protection Training Institute (IFPTI) and United States Department of Agriculture(USDA).
Food and Drug Administration (FDA) has specific laws and regulation relating to the manufacture of the infant formula:
- Federal requirements for the manufacture of infant formula for marketing in the United States, including registration and requirements Person responsible for the manufacturing of the product must comply with the Federal Food, Drug, and Cosmetic Act 21 USC 321
- Federal submission requirements for persons responsible for the manufacture of the new infant formula This law requires the person responsible for the manufacturing and distribution of the baby food product to submit the information relative to the product 90 days be for marketing the product.
- Registration and submission requirements for infant formula manufactured in the United States for export For the distribution of the product outside the states, the person responsible must register with FDA in accordance with section 412.
- Other pertinent information Submission concerning a change in infant formula that may adulterate the product.
There are also a list of the guidance documents for the industry concerning the for preparation of the food, labelling of the infant formula, substantiation for structure/function claims made in infant formula labels, etc and also some rules and regulations regarding the addition of the amount of selenium into the formula, quality control procedures, indirect food additives, nutrient requirements in the formula etc.
Other Key Market Trends
- The trend of emphasizing on the organic ingredients while manufacturing the baby food products is growing in the market has increased the competition among the manufacturers.
- The popularity of the brands and the use of the new distribution channels for advertisement and sales by the market players are expected to help the market grow at a continuous pace.
- Involvement of the companies in bringing out the innovative product, to enhance the product quality.
- Medical professionals suggesting baby food
- Increasing preference of parents towards Hypo/Anti-allergic Baby Food
- Introduction of the unique flavours
Market Size and Forecast
Though the market size of the baby food product has a little change over the three years, with revenue of US$7062m, US$7274m, US$7488m from 2016-2018; the rising population of women working, increased the nutritional content of the product is likely to raise the consumption of the baby food.
In 2019, the average per capita consumption stood at 2.5kg. As in of March 2019, the per person revenue generated was of US$23.32, in relation to total population figures, and the total revenue amounts to US$7,676 million.
Increased demand of the organic and gluten free food is likely to drive the market in North America and is expected to value at US$7.49 billion, with expansion at a CAGR of 6% over the forecast period by 2025.
As in 2016, Milk formula was the largest baby product segment, and thus it is expected to witness a substantial CAGR over the forecast period. Prepared baby food is expected to record the fastest CAGR of 7% from 2017 to 2025. The baby food is expected to grow annually by 1.6% by 2025.
The Baby food market in the USA is expected to show steady growth over the forecast period by 2023. The future outlook and likely expected growth rates in the market are outlined below:
- The baby food segment in the USA is expected to show a revenue growth of 2.4% in 2020.
- In the baby food market, the volume is expected to amount to 817.6 million kilograms by 2023.
- The milk formula is garnering the highest revenue among the types in US market and is expected to show substantial growth, while the other products like dried and prepared baby food products are expected to show growth over the forecast period by 2025.
Technology in the baby food market is advancing and has helped to bring new innovations in the food products. The leading technology playing a major role in the production of baby food is SPX Flow technology.
The company’s product concentrates in rotating, actuating, hydraulic as well as automated process system in food and beverage, industry and power markets.
SPX excels in design and installation of the systems that are designed to produce infant formulas, follow up formulas as a part of the liquid diet for infants, nutritional formulas and fermented baby products.
The technological advancements are also being applied in feeding the baby through feeding bottles. Some of the advanced technologies that are coming in the market are:
- Precise Baby Formula Machines
- Self Heating baby bottles
- Formula automating devices
- Robotic baby food devices
- Hi-Tech Bottle warmers
- UV-disinfecting infant bottles
- Infant formula machines
Distribution Chain Analysis
Consisting of small and medium sized enterprises, food supply chain or the distribution chains are the complex network or a process that describes how a food product reaches the consumer.
Over the years the food supply chain management has evolved from a series of shorter independent transactions to more collaborative relationships between the producers, processors, manufacturers, and retailers.
In a food supply chain, the food product reaches the consumer via a series of steps that includes production, processing, distribution, retailing and consumption.
The part of the distribution chain in the baby food market that allows access to the consumers are hypermarkets, supermarkets, and small grocery stores while with time the online sales of the products too are garnering the popularity.
There are mainly 12 baby food companies working as the key market players in the United States. If the mergers are added up the numbers can go high. The food market is highly fragmented and with the national and international brands working, the competition has gone high.
The baby food companies are continuously focusing on the expansion of the facilities by meeting the demands of the consumers producing products with health benefits.
The parents are looking for the more convenient baby products and the demand for the brand named baby food and formula has risen substantially since the past few years challenging the newly formed food companies to mark their name in the market.
The popularity of international and regional brands has helped them to play in the market with them collecting more than 50% of the revenues.
With the growing market and introduction of the new companies in the market, there is always the threat of new entrants to other companies and the rivalry between the two companies has also increased the competition in the market.
The Key factors based on which the market players of the baby food compete are:
- Pricing: With the growing demand of the organic and urbanization, the consumers are willing to buy the baby food high in price considering the nutritious value in them. But the price also plays a role in what products to buy. Pricing of these baby food products is one of the main reason that most of the new parents are opting for the home made baby food.
- Technology: The baby food companies are using new technologies for producing as well as sterilizing the food products and with the popularity of few technologies in production as well as the processing of the food, the competition in the market has seen growth in last few years.
- Nutrition: Nutritional values in the baby food products have been one of the main factors for the competition between the manufacturers considering the rising parental concerns about their baby’s health, growth, and development. Any contamination or compromise seen in those products can be major fallout for not only that company but also the whole food market.
- Distribution ease: The market players are constantly trying to improve their distribution through various advertisement and channels and are opting for the channels that provide ease to both consumers and producers. Thus, the online sale of the product is garnering popularity among the market players.
- Packaging: Apart from the product name, brand name, and the nutrition the attractive packaging is one of the factors that attract the consumers and the market players are adopting packaging system as one of the strategies to improve the sales.
- Market Strategies: In the competitive market of the food, the market players adopt various strategies to strengthen their market position. Some companies look for better advertisements, partnerships, and collaboration while some focus on launching new products claiming to be healthy and full of nutrition. For instance, in 2016, one of the leading companies in the baby food market, Abbott laboratories, under the name of curate launched a non-genetically modified, gluten free snack bar which was also free of preservatives, flavours, and colours; thus increasing their own market value and also the competition in the market.
Key Market Players
Following are the key market players in the baby food industry in the United States.
- Abbott Nutrition: It is an American health care company serving with dietary supplements. The U.S. market for baby food was dominated by Abbott Laboratories with significant market share in 2015.
- Mead Johnson Nutrition: It is a leading manufacturer in pediatric supplement and infant formulas. Routine Infant formulas, Feeding solution formulas, Toddler formulas, dietary supplements, Metabolic formulas are some popular products. With 38% of share in the market as in of 2018, it is leading the market after Abbott.
- Nestle: It is a Swiss multinational company working in the food products including baby food. Itclaimed13% of value in the US baby food market as in 2018.
- Danone: It is a French multinational company for food products. Working in the baby food market as Danone early life nutrition has mainly been working in infant milk formulas.
- Heinz: It is an American food processing company, and manufactures thousands of food products. It’s baby food sector has been producing the products ranging from milk formulas, cereals, puree to light snacks.
- Ella’s kitchen: It is a company that solely focuses on Baby and toddler food and has been playing well in the market.
Some of the other companies working are Bristol Myers squibb, Beech nut, SMA nutrition, Baby organix, etc.
The restraints of the baby food market is very strong and have been impacting the market recently, but with the application of the proper strategies by the industries, the demand for the baby food products seems to be increasing.
Meeting the demands of the consumers and building up the innovative ideas to introduce the new products can be one of the strategies to be adopted by the baby food industries to increase their value in the market.
The baby food market is one of the most competitive markets in the United States and though gaining popularity in the world, the data of the USA from the last three years has not shown much change. Declining birth rate and breastfeeding programs seem to be restraining the market but with an increased number of working women, the introduction of baby food with high nutrition, etc is expected to show the market growth of 1.6% annually.
- CAGR: Compound Annual Growth rate
- FDA: Food and Drug Administration
- IFPTI: International Food Protection Training Institute
- USDA: United States Department of Agriculture
- HPTS: High Pressure Thermal Sterilization
- HPP: High Pressure Processing
- WIC: Special nutrition program for Women, Infants, and Children
- USA: United States of America