Better baby food gets a boost at mass
Better baby food is a big deal and the evolution of the category is changing what’s critical for its success. Given the intense sensitivity of today’s parents regarding their children’s well being, it’s hardly surprising that wellness issues have manifested themselves so powerfully in the baby food category.
The effect is intensified as baby food producers have expanded into food developed for kids transitioning into solid food and carried the predominant trends along with them.
While manufacturers scramble to find new formulations that satisfy parents, entrepreneurs are developing products specifically suited to emerging concerns, including a variety of new organic brands. But organic isn’t the only consideration. For example, TastyBaby and Jack’s Harvest are labels launched over the past few years to expand frozen baby food in the market—frozen being considered nutritionally superior to shelf stable by some consumers.
In October 2007, TastyBaby rolled into Whole Foods, Bristol Farms, Mollie Stones and PC Greens while Jack’s Harvest products became available nationwide one month later. Such products have other advantages because the entrepreneurs were mothers themselves, thus incorporating practical insights they instilled in the products that bear their labels.
Indeed the founders of TastyBaby and Jack’s Harvest focused on factors that could set them apart from some of the national brands. “Our differentiators include that our food is frozen into individual cubes,” noted Connie Pope, Jack’s Harvest co-founder with Heather Schoenrock, who developed what became the company’s product line in an attempt to find better food for her own children. “We specifically chose 1-ounce cubes. They’re perfect for babies who are just starting to eat, and they reduce waste. Our cubes mix well together, too. So, let’s say baby loves apples but isn’t super crazy about peas. You can mix them and that gives a different flavor, so you can get babies to eat their peas.”
In the meantime, specialty companies are building on leading positions in baby food and related products for young children.The Hain Celestial Group, makers of Earth’s Best Organic baby foods, just announced that it had completed its acquisition of TenderCare International, a marketer and distributor of chlorine-free and gel-free natural diapers and baby wipes under the Tushies and TenderCare brand names.
In September, Hain expanded its Earth’s Best Sesame Street brand of baby and toddler food products to include two new frozen entr?es and the new Organic Smiley Snacks. The Sesame Street line is an Earth’s Best extension into the market for young children that has existed for several years and covers a range of products, including snacks. But, specifically, said spokeswoman Melissa Kreinces, “Smiley Snacks were just introduced.” As for the Sesame Street frozen entrees, they are an extension of a main dishes line introduced the new products, Kreinces said, is they contain a main dish item and vegetables.
Of course, the big kid in the baby food sandbox is Gerber and it has been addressing nutritional considerations lately by adding DHA to its product lineup, a nutrient that is credited with supporting brain and eye development.
Gerber’s leadership of the category has made it a standard, one to which Wal-Mart has responded to with its recently launched Parent’s Choice baby food line. In mid-March, Wal-Mart will roll with three new Parent’s Choice baby food flavors,Very Berry Banana, Tropical Fruit Medley and Pear and Apple Pie Dessert. Also in mid-March, Parent’s Choice is introducing cereal bars as a line expansion for older children. Parent’s Choice cereal Bars contain no artificial flavors or preservatives, and no trans fats. They are made from real fruit and are formulated as a good source of calcium, iron and zinc.
The baby food line is not only expanding but also adding new nutritional factors to meet parental demand for flavor and healthfulness. “We have calcium and DHA and we have probiotics coming in.We see that as a trend, ” said Paul Manning, president and ceo of Parent’s Choice producer PBM.
However, nutrition is just the half of it, Manning pointed out. PBM has been a manufacturer of baby formula, a product area that is subject to ongoing regulatory scrutiny. Manufacturing and related processes for making baby formula are subject to strict quality control requirements, thus making PBM particularly well aware—and well suited to understand—that care in production is critical. The high standards to which it abides in producing formula helped sell Wal-Mart on PBM as its producer of private label baby food, Manning said, as the retailer wanted to set the highest marks for quality and wholesomeness.
“The idea was to integrate our baby formula operations into the next stage of children’s food,” Manning said. “It was the logical next space for us to go into.We’d been looking at it for several years and began testing puree in tubs. Gerber had gone into tubs, and we really needed a sophisticated company approach to compete on product quality and packaging.? We took time developing that opportunity to bring to retailers the best in class.”
Wal-Mart misses January sales mark
The surprisingly weak January sales results Wal-Mart reported Thursday can be viewed as disturbing on a number of levels. For starters, the performance of Wal-Mart’s U.S. stores division, more so than any other retailer, is closely watched as a national economic indicator because it provides broad-based insight into the health of the consumer. As such, it is unsettling that Wal-Mart’s U.S. stores eked out a 0.2% same-store sales increase when the company was expecting a 2% increase for the reporting period ended Feb. 1.
Equally disturbing is what the missed same-store sales estimate says about the pace at which consumers curtailed spending during January. Wal-Mart provided its January same-store sales guidance on Jan. 10, when it announced December 2007 same-store sales that were surprisingly strong at 2.6%. At the time, Wal-Mart already knew what its sales were for nearly one-third of the month when cfo Tom Schoewe said, “During the first two months of the quarter, our comparable-store sales number for U.S. operations has run at about 2%. We expect to run at a similar rate for the January four-week sales period.”
Apparently, sales decelerated rapidly from Jan. 10 through Feb. 1, when the four-week January reporting period ended. The company cited the familiar culprit of unfavorable weather conditions, especially in the Midwest, as contributing to the weakness, and also indicated that gift card redemptions took place at a slower rate during January. It also noted that consumers turned defensive in their purchasing behavior with more gift cards being used to pay for food and consumables purchases rather than more discretionary big-ticket items.
Another possibility for January sales could relate to a reliance on flawed assumptions, certainly with regard to the U.S. consumer, but also as it relates to the effectiveness of merchandising and marketing initiatives. Customer-facing efforts, whether at Wal-Mart or any other retailer, typically gain traction at a slower pace than anticipated by senior management
Despite coming up short against a monthly same-store sales target, it’s worth mentioning that earnings per share guidance for the fourth quarter were unchanged at 99 cents to $1.03.
“Our inventory position remains very good across the country, which has resulted in fewer sales from clearance items than the same period last year,” said Eduardo Castro-Wright, president and ceo of the retailer’s U.S. stores division.
The company will report results for the fourth quarter and full year ended Jan. 31 on Feb. 19, and when it does, sales are expected to increase more than 8% to roughly $375 billion and profits should hit record levels with full-year net income expected to exceed $12.5 billion.
Wal-Mart U.S. misses comps mark
BENTONVILLE, Ark. Wal-Mart’s U.S. January same-store sales rose by 0.5%, less than the 2% forecasted by the company and analysts.
The retailer said that sales of nonessential items like home goods, apparel and jewelry struggled, although groceries and health care items did well.
Wal-Mart placed the blame for the disappointing numbers on unfavorable weather, particularly in the Midwest, and on gift card redemptions that fell below expectations. The company said that customers were holding on to the cards and often using them for food and consumable goods rather than splurging on nonessential items.
Same-store sales rose 0.2% at namesake stores and 2.1% at Sam’s Club locations, which operate gas stations. Including gas prices, same-store sales rose 4.9%. Net sales for the month ended Feb. 1 rose almost 8% to $27.28 billion.