The baby care market at full speed ahead

Date: 18/10/2012 Comments: 0
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The baby care market at full speed ahead

The crisis may have shaken the FMCG markets in South East Europe, and caused double-digit decline in number of consumer goods sectors. It has however passed the Baby Care market largely untouched. The sales of baby specific products across the region has continued to grow steadily over the last five years, and only few markets (like Croatia and Slovenia) has witnessed temporary declines in 2009. The rest of the countries in SEE witnessed average growth of 6.8% in current value terms in 2011, a growth rate much faster than the growth in the respective adult categories. The growth rate was noticeably higher in Macedonia and Serbia.

The markets

There are several noticeable differences among the countries in view. On one hand, there are countries like Bulgaria and Romania, where the per capita consumption of baby care products remain among the lowest in Europe, and where the good performance of the market is largely due to the low base and the more compact group of urban parents, who constitute the core of the consumer group purchasing baby care products. On other hand, there are countries like Croatia, Slovenia and Bosnia, where the consumption is at the mid-European level. In those countries baby care products record much slower growth year on year, mainly because the market is already more saturated.

One major exception of the rule seems to be Serbia. There the baby care products consumption per capita is higher even than the consumption in countries like Finland and Iceland. There is a simple explanation for this. Women in Serbia consider baby care products as more healthy and of better quality than the products designed for adults, and are purchasing them with higher frequency, even if they don’t actually have babies.

The products

There are however also similarities between the SEE markets. The most common one is the appetite for products based on natural ingredients. All consumers want the best for their children, and are also deeply affected by the advices of pediatricians, so they are naturally looking for products without potentially harmful chemicals and more organic ingredients. No doubt products based on argan oil or aloe are much more expensive than their non-natural counterparts, but the SEE consumers, who are otherwise very price sensitive, prefer the best quality for their babies despite the higher prices.

It is important to note, that there is no strong brand loyalties among the parents in any of the reviewed markets. As result consumers are much keener to experiment with various new brand offerings, and are sensitive to word of the mouth recommendations form their friends, internet forums and pediatricians about what they are purchasing. Few products manage to retain their good reputation and to count on it for ongoing sales. Among those are Johnson and Johnson, Nivea Baby and other brand of multinational producers. However, consumers are increasingly avoiding products including parabens, which are present in many of the formulas of the established market players.

The Players

Multinational companies continue to dominate the sales of baby care products in the region. In all of the regional markets Beiersdrof and Johnson & Johnson appear among the top players. The Serbian subsidiary of Henkel is also quite strong. Local market players are also performing well, although they fall behind the big players. The local manufacturers have a particular advantage as they usually market products with lower unit prices and good reputation among the consumers. On other hand the limited advertisement and point of sales promotions, organized by them are decreasing their chances to head the competitive ladder.

The Distribution

Majority of the baby care products in the region are sold though store based retailing. However, recently the Internet is turning into an important factor for baby care products sales, as many young parents are browsing online for information about their purchases and consumer reviews in online forums, and consequently are purchasing more online. Online sales also sometimes offer better unit prices than the corresponding products purchased through the retail network. The offline portion of sales is distributed between chemists/pharmacies, drugstore chains and modern retailers –supermarkets, hypermarkets and discounters. Although the sales though grocery retailers already have significant share in countries like Bulgaria or Serbia, drugstores and pharmacies remain very important channel for baby care sales, mainly because of the specialized advice, which shop assistants there can offer to the clients.

The advertisement

Baby care products, as mentioned above, are mainly advertised by viral marketing, word of mouth messages and recommendations by other parents, pediatricians and pharmacists, etc. Some products, mainly baby specific hair care products are also advertised through the mass media, but majority of brands would prefer to advertise online in specialized parents forums or though the retail distribution channels. Promotions are playing important role in the popularization of the baby care brands, as consumers are not particularly loyal to the brands presented and tend to experiment with new products, especially if they come in “two on the price of one” form.

The prospects

The forecast period looks cloudier for the baby care industry than the last five years have been. The fast growth witnessed before the crisis is not expected to return soon, especially when couple of the countries in the region are heading for a second dip in the recession. But as long as parents would continue to search for the best for their babies despite the economic hardships, the market for baby products is not expected to suffer much. The forecast compound annual growth rate in constant value terms is expected to be around 2.2% in each of the reviewed markets for the period until 2016.

The main driver for the growth in future is expected to remain the curiosity of the consumers and their will to experiment with new formulas and their continuous sharing of information on manufacturers and products with the other consumers. Manufacturers are expected to expand their operations in less developed sectors like baby and child specific hair care and baby specific sun care, while continuing to market products in the well-established baby toiletries and baby skin care categories. With the growing popularity of Internet in the region and the growing penetration of high speed internet connection, more consumers are also expected to make informed decisions and to make their purchases online. Overall the industry is heading for a challenging period, at full speed ahead.

 

Ivan Uzunov

Euromonitor International

 

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