IRI Pulse Report Baby Welcome to the Pulse H1 2015 edition for baby. We hope you find it useful. Please do not hesitate to contact us if you have any questions or comments at EU.Marketing@IRIworldwide.com. H1 2015 IRIworldwide.eu
About the Report This baby report is one of 10 super category reports designed to show high-level comparison and analysis for retail markets across major countries in Europe. This report contains data gathered from across Europe. This market was split into the following categories: baby food, baby milks and drinks, nappies, and baby toiletries. The report highlights key metrics, such as total sales, market trends, category share, and winners and losers for Europe as a whole and for individual countries. The data has been sourced from IRI retail databases and Eurostat the statistical branch of administration for the European Commission. The countries included in the report are: France, Germany, Italy, the Netherlands, Spain, and the United Kingdom (UK). The market channels used for each country in this report are as follows: Country UK Channels used Hypermarkets, supermarkets, drugstores and impulse outlets ES Hypermarkets, supermarkets, hard discounters and drugstores DE NL IT FR Hypermarkets, supermarkets, hard discounters and drugstores Hypermarkets, supermarkets, hard discounters and drugstores Hypermarkets, supermarkets, small self service, hard discounters and drugstores Hypermarkets and supermarkets For analytical purposes, the data sourced from available retail databases has been consolidated to provide consistent results. However, for some countries it has not been possible to source data pertaining to certain categories. Where this occurs, it has been documented in the Notes section found at the end of the report. 2
On the Radar In 2015, Germany and the Netherlands drove the baby care trend in Europe, with sales increasing by 1.5%. Baby milk and drinks is the strongest growing category with positive value sales across most countries. ECONOMIC FIGURES INFLUENCING CONSUMER BEHAVIOUR POPULATION IN MILLIONS UNEMPLOYMENT (%) AVERAGE 12 MONTH INFLATION RATES GDP IN MILLIONS ( ) CRUDE BIRTH RATE PER 1000 INHABITANTS Jan. 2015 Jan. 2014 Jun. 2015 Avg. 2014 Jun. 2015 Avg. 2014 2014 2013 2014 2013 France 66.3 65.8 10.2 10.3 +0.2 +0.7 2 132 449 2 116 565 12.4 12.4 Germany 81.1 80.7 4.7 5.0 +0.4 +0.9 2 915 650 2 820 820 8.6 8.5 Italy 60.7 60.7 12.7 12.7 +0.0 +0.3 1 616 253 1 609 462 8.3 8.5 Netherlands 16.9 16.8 7.0 7.4 +0.1 +0.5 662 770 650 857 10.4 10.2 Spain 46.4 46.5 26.6 24.5-0.6 +0.0 1 058 469 1 049 181 9.2 9.1 UK 64.7 64.3 5.6 6.1 +0.6 +1.7 2 222 912 2 017 193 12.0 12.1 Source: Eurostat, June 2015 3
PULSE REPORT Global Trends TOTAL BABY VALUE SALES AND GROWTH AND DECLINE -1.3% +11.7% -4.2% +14.7% VALUE SALES IN MILLIONS ( ) Total EU 7 749 FR 1 728 UK 1 797* DE 1 684 IT 896 ES 1 076-3.4% -4.2% NL 568 *based on an exchange rate of 1.27 to the pound TOTAL EUROPE +1.5% TOTAL BABY VALUE SALES FOR THE LAST SIX QUARTERS 2,000 1,800 1,600 452 443 443 420 433 432 France 1,400 1,200 1,000 800 600 400 200 0 375 386 404 430 426 424 234 230 229 218 228 221 129 122 132 141 148 148 279 278 277 260 271 268 459 451 458 446 446 448 30-Mar-14 29-Jun-14 28-Sep-14 28-Dec-14 29-Mar-15 28-Jun-15 Germany Italy Netherlands Spain UK Period Ending 4
PULSE REPORT Europe CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 25.9% 2 781 2 006 35.9% 19.9% 1 540 1 423 18.4% Nappies Baby Milk and Drinks Baby Food Baby Toiletries TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago 2 781 2 006 1 540 1 423 KEY TRENDS Across Europe most baby categories show negative developments in value sales. In 2015, baby milk and drinks grew by 16.1% versus 2014. The largest value drivers for this growth were Germany and the Netherlands. Germany is the only country with positive value sales across all baby categories. The UK shows the largest value sales: 1.797 Million in total. 16.1-2,9-2.5-3.1 Nappies Baby Milk and Drinks Baby Food Baby Toiletries % vs. YA Europe includes: France, Germany, Italy, the Netherlands, Spain and the United Kingdom 5
Europe TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES 0 200-100 -60-20 Baby Milk and Drinks 277.4-39.2 Baby Food -45.1 Baby Toiletries -81.8 Nappies CATEGORY INSIGHTS Baby milk and drinks is the only category showing positive value sales, growing by 16.1% across Europe. Germany (38.2%) and the Netherlands (31.0%) are leading value drivers, followed by the UK (13.0%), and Italy (0.9%) who are also showing value sales. The strong market development is being driven by high demand from Chinese customers who purchase high quality baby milk powder in Europe and then send it to China. Nappies are showing a negative trend with (-2.9%) 81.8 million loss in value sales. Sales decline is driven by the UK ( -52.8 million), France ( -23.7 million), Spain ( - 16.9 million) and Italy ( -13.0 million). The value sales decline for baby toiletries ( -45.1 million across Europe) is mainly driven by the UK ( -20.8 million). France ( -8.6 million), Italy ( -3.8 million) and the Netherlands ( -0.8 million) are also declining. Baby food also continues to show a negative trend in Europe, with a loss of 39.2 million value sales. Italy is the main driver for this trend with -23.8 million, followed by France ( -14.6 million) and the UK ( -12.9 million). Europe includes: France, Germany, Italy, the Netherlands, Spain and the United Kingdom 6
PULSE REPORT France CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 24.8% 686 39.7% 19.9% 428 344 270 15.6% Nappies Baby Food Baby Milk and Drinks Baby Toiletries TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago 686 428 344 270 KEY TRENDS The baby sector experienced a value sales decline of 3.2% across hypermarkets and supermarkets (HM/SM), (and -1.7% across HM/SM+Drive+hard discount) but only - 0.7% in volume; deflation is important especially in the baby food market: -3.9%. E-commerce continues to develop: growing 15.7% for baby toiletries, 17.5% for baby food, 13.4% for milk, and 16.4% for nappies. In contrast to the total market, parapharmacies show a value increase of 10.2%, with 21.7% for baby food. -3.3-3.3-4.3-3.1 Nappies Baby Food Baby Milk and Drinks Baby Toiletries % vs. YA 7
France TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES -25-15 -5-8.6 Baby Toiletries -14.6 Baby Food -15.4 Baby Milk and Drinks -23.7 Nappies CATEGORY INSIGHTS Baby food is suffering due to a decline in purchases of salted baby food, specifically vegetables, and baby food with fruits. We have seen an increase in volume sales of 21.7% in baby food for parapharmacies due to the many food scandals in France and the need for higher quality products. For baby toiletries, baby care is keeping a positive trend of 7.4%, but wipes (-4.5%) and toilet products (-5.9%) have been in a steady decline. Nappies show a negative trend (-3.3%) in hypermarkets and supermarkets, but overall are stable: 0.5% moving annual total (MAT) in hypermarkets, supermarkets, click and collect and hard discount. Families prefer buying nappies through the click and collect channel (13.5% MAT). Baby milk and drinks show a value sales loss of 4.3%. The influence of food scandals is visible in this category: this sub-category is in decline in the traditional retailers channel, but parapharmacies show a positive trend of 25.0% in value sales. Additionally, French mothers are breast feeding more than before which is impacting this market. 8
PULSE REPORT Germany CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 35.8% 623 602 37.0% 289 170 17.2% 10.1% Baby Milk and Drinks Nappies Baby Food Baby Toiletries TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago 623 38.2 Baby Milk and Drinks 602 289 170 4.2 4.6 3.7 Nappies Baby Food Baby Toiletries % vs. YA KEY TRENDS Baby milk and drinks with more than 35% market share have recorded double-digit growth. The growth is driven solely by the baby milk segment (approximately 34% share), while baby drinks declined. Drugstores and hypermarkets continue to lead the growth for baby milk. Baby milk continues to benefit from the high demand from Chinese customers who buy high quality baby milk powder in Germany and send it to China. The largest baby market sector, the nappy category, has shown positive growth throughout all the channels with the greatest growth coming from drugstores. Baby food has also shown positive growth, which has mainly been driven by drugstores and hypermarkets with grocery channels posting stable growth. The baby toiletries category shows stable growth attributed to drugstores. 9
Germany TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES 0 100 200 Baby Milk and Drinks 172.2 Nappies 24.3 Baby Food 12.8 Baby Toiletries 6.1 CATEGORY INSIGHTS The baby milk and drinks category is the strongest performing category in the baby market with baby milk as the main sales driver. The ongoing demand from Chinese residents purchasing baby milk powder from German stores and sending it to China continues to help positive growth. Shoppers face out of stock situations very often. Private labels in drugstores have seen significant growth as an impact of the special situation. With increased prices, drugstores remain the main point of sale for baby milk followed by hypermarkets. The baby juice sector continues to decline, presumably because it is reflecting the same decreasing demand for baby drinks in Germany. The nappies market holds a market share of 35.8% with positive growth in sales. Drugstores, being the main channel, with approximately 57% value market share, attributes to almost the entire growth for this category. Hypermarkets only saw modest growth in this category. Aldi grew, as other discounters declined, with better volume rotation and slight price and volume increase. Private labels with 33.0% market share have grown within drugstores (11.9% versus previous year), and show stable growth in hypermarkets (6.6% versus year ago). Growth is mainly for from up to 20 Kg segment which has almost 56% market share. The baby food category growth is mainly attributed to drugstores (6.2% versus previous year). Other channels hypermarkets, grocery and discounters also posted stable growth. An increases in price, volume and promotions helped the overall sales grow. Private labels have a presence only in drugstores, and shows 6.9% growth led by slightly increased prices and volume. Baby toiletries growth is attributed to sales increase in drugstores and hypermarkets. While hypermarkets grew with more promotions, drugstores grew as volume rotation grew. Wet wipes are the biggest segment, with around 80% value share of baby toiletries, and have the highest growth. 10
PULSE REPORT Italy CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 358 31.4% 282 40.0% 141 115 15.8% 12.9% Nappies Baby Food Baby Toiletries Baby Milk and Drinks TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago 358-3.5 282-7.8 141 Nappies Baby Food Baby Toiletries -2.6 % vs. YA 115 0.9 Baby Milk and Drinks KEY TRENDS Total baby care in Italy shows a decline of 0.8% in volume and 4.0 % in value for year ending June 2015. The negative volume trend is mainly driven by a sales decline in hypermarkets (-8.3% in volume) and discounters (-4.6%), which account for 26.4% and 4.1% of category sales respectively. The nappies category shows a decline in volume (-3.8%) across all channels, except for supermarkets (+0.3%) and drugstore (+0.4%). A noticeable growth of volume base sales in supermarkets (+3.1%). Baby milk and drinks (value share of 12.3%) shows an increase focused on milk (3.4% in volume in the modern channel: hypermarkets, supermarkets and small self service). Baby food representing 31.4% of baby care sales, shows the strongest decline of 6.8% in volume and a 7.4% decline in value. Promotional pressure is still increasing for this category. The greatest pressure is in baby toiletries and in nappies especially in hypermarkets (more than 40%), contributing to lower manufacturers margin. 11
Italy TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES 0 1 1 2-25 -15-5 Baby Milk and Drinks 1.0-3.8 Baby Toiletries -13.0 Nappies -23.8 Baby Food CATEGORY INSIGHTS Baby products are showing a negative trend in H1 2015, driven by baby food and nappies, which account for the sales lost in the market ( 36 million in one year). Within baby food, the most significant negative contribution is from homogenized baby food and biscuits. Homogenized baby food are considered expensive and in some cases not healthy for babies, and are increasingly being replaced by home made meals. Concerning baby milks and drinks, milk is growing thanks to first month milk (it reached a 3.8% value share) and to follow up milk. Good performances in the supermarket channel where first month milk shows a double digit growth of 10.6% in value. The negative nappies trend is in line with the low birth rate in Italy (the lowest across Europe) which has occurred for the last several years. It is mainly due to a struggling economic situation, which has discouraged couples from starting a family. At the same time, Italians are getting older and women of childbearing age are fewer in number. Baby toiletries and nappies are reflecting a slight growth in the drugstores channel (4.0% and 1.2% in value respectively), driven like all of the personal care categories, by retail network growth. 12
PULSE REPORT The Netherlands CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 256 30.2% 45.1% 171 73 67 12.9% 11.8% Baby Milk and Drinks Nappies Baby Toiletries Baby Food TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago 256 31.0 Baby Milk and Drinks 171 Nappies 73 67 0.4-1.0-1.6 Baby Toiletries % vs. YA Baby Food KEY TRENDS Baby care shows a positive growth in drugstores as well as in supermarkets: while supermarkets grew by 2.5%, drugstores increased sales by 9.6% - total baby care value sales. Growth within total baby is heavily influenced by the export of baby milk to China, total baby growth excluding baby milk is down 2.5% at supermarkets and 1.3% at drugstores. Nappies show a positive growth of 2.0% at drugstores. Nappies growth is driven by price increase. In supermarkets, toiletries (-1.4%), nappies (-1.5%) and baby food (-1.4%) are still in decline. Baby milk is the only growing category (24.7%). Promotional pressure is further declining for this category in drugstores, registering 58.1%, down 2.0% versus one year ago. In supermarkets, the promo pressure increased to 30.4%, up 22.4% versus year ago. Increase is mainly driven by nappies and toiletries. 13
The Netherlands TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES 0 40 80-1 -1 0 0 Baby Milk and Drinks 60.6 Nappies 0.8-0.8 Baby Toiletries -1.1 Baby Food CATEGORY INSIGHTS Non-FMCG channels, including online (Bol.com / Wehkamp) and grey channels keep growing within the baby category. The grey channel in particular is made by stores that sell mainly non-food items and are not tracked by IRI. Supermarkets are most negatively impacted by the grey channel where food products have significantly lower prices. Due to natural and home cooking trends, baby food (excluding milk) is declining in both value and volume sales despite high promotional activity. Upgrading private label assortment provides growth within value. Retailer Albert Heijn introduced a wide range of biologic products in the baby food category. Baby milk export to China remains a big problem. Increased restrictions at most retailers don t have the desired effect, as exports are still growing. In order to keep baby milk supplies available, Dutch stores require only one pack of baby milk can be sold per customer. Brands like Nutricia started it s own web shop to keep it s brand Nutrilon (baby milk) available for Dutch babies. The Hero Baby brand launched a new concept in the baby category: Hero Frozen Babyfood, small pieces of vegetables, pasta, meat or fish which can be combined to get a complete meal. The first tests with these frozen range are positive. 14
PULSE REPORT Spain CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 394 54.5% 24.5% 177 123 4.1% 17.0% 30 Nappies Baby Food Baby Milk and Drinks Baby Toiletries TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago 394 177-4.1 0.2 123-2.8 Nappies Baby Food Baby Milk and Drinks 30 Baby Toiletries 0.1 KEY TRENDS In Spain, the baby category declined in H1 2015, down 2.7% value sales, with negative performance in most of the segments, except baby toiletries, where we observed the positive evolution of sales 0.1%, and baby food with 0.2% growth. The negative trend comes from the private labels for baby milk & drinks category and national brands for nappies. Birth rate is increasing slowly, but does not have a visible influence on the baby care category so far. The negative evolution is observed in both channels, supermarkets and hypermarkets. Promotional activity has increased by 4.4% compared to last year. % vs. YA 15
Spain TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES 0 0 0-20 -10 0 Baby Food 0.4 Baby Toiletries 0.0-3.6 Baby Milk and Drinks -16.9 Nappies CATEGORY INSIGHTS Nappies is the largest segment of Spain s baby category, holding a 54.5% share. The sector is experiencing a decline (-4.1%), driven by the economic crisis. Consumers are opting for cheaper and lower quality. Private label has been a player in this category for a while, representing 39.8% of total value sales (+0.7 points versus one year ago). Baby toiletries grew during this period, with private label losing market share. Baby food has increased sales compared to last year (0.2%). Main manufacturers are still investing in innovation to achieve quality products. New trends for natural products and new flavors are being introduced. Baby milk and drinks is decreasing, with national brands losing market share compared to private labels. Although birth rate is increasing slowly, the baby milk category continues to decrease. Unemployment has affected women aged 20 to 44 years (25.4%) and increases the rate of part-time work: this causes the woman to have more willingness to breastfeed. Also, there is a very strong pro-breastfeeding atmosphere in across media and social networks, which is supported by the World Health Organization. 16
PULSE REPORT The United Kingdom CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 30.3% 588 545 368 32.7% 20.5% 296 16.5% Nappies Baby Milk and Drinks Baby Toiletries Baby Food TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago 588 545 368 296 13.0 KEY TRENDS All baby categories declined, except baby milk. The decline is driven by a slowdown in birth rates. However growth in milk is important as it represents 28.3% share of all baby categories with a current growth rate of 13.0%. A big contributor to baby milk growth is the export of this product category to China. Nappies remain the largest sector, but show the greatest decline. However there is a big movement of shoppers toward discounters e.g. Aldi (private label) and buying nappies online in bulk via Amazon. These sales not being tracked by IRI. -8.2-5.3-4.2 Nappies Baby Milk and Drinks Baby Toiletries Baby Food % vs. YA 17
The United Kingdom TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES 0 40 80-60 -40-20 0 Baby Milk and Drinks 62.5-12.9 Baby Food -20.8 Baby Toiletries -52.8 Nappies CATEGORY INSIGHTS The baby sector is in an overall decline driven by a decrease in birth rates and an increase in consumer preference for discounters and online channels. Baby milk growth is coming from all life-stages especially newborn and toddler. Aptamil is the best selling brand with more than 50% market share in the latest time period. Their growth is driven by newborn and toddler milks. High levels of price inflation helps to drive value sales and is one of the highest of all the UK categories. In addition we still see high levels of milk export to China through powders. In 2015 the percentage of growth increased versus year ago. For baby food we see a huge drop in volume as consumers switch to smaller, more premium products, particularly opting for jars instead of pouches. As a result we see high levels of price inflation. The market continues to be highly promoted, but with reduced efficiency. In addition, we continue to see high levels of new product developments (NPD). In nappies, private label taped diapers is no longer making gains as it had done in previous periods. As a result of this and the continued growth from discounter and online channels, the category is now in the unusual situation of declining prices and declining volume sales. 18
Final Notes Notes on category definitions for countries Due to the diverse products found in individual countries across this market it was necessary to consolidate the available data into the categories in this report. In some cases it was not possible to align products across all six countries, hence the need to highlight any anomalies in the report. These exceptions are listed below: Baby milk and drinks The data from France in this report only contains baby milk, whereas the other countries include other baby drinks and baby milk. 19
Resources To gain insight into opportunities across specific categories, segments, channels or retailers, contact your IRI client service representative regarding custom analyses leveraging the following resources: InfoScan Census is a syndicated retail tracking service that enables manufacturers and retailers to acquire industry insights used to make better business decisions. InfoScan Census utilises the data that IRI collects from grocery, drug, and mass merchandise retailers to provide the most comprehensive and accurate syndicated data offering in the FMCG sector. With access to accurate, granular detail by category, geography, measure and time period, clients have the tools needed to develop marketing and sales strategies based on product performance, distribution, and promotion responsiveness. All data about baby comes from InfoScan Census. IRI Consulting provides strategic insights and advice leveraging a variety of data sources, predictive analytics, enabling technologies, and business analyses to help FMCG manufacturers and retailers address significant sales and marketing issues effectively. FOR MORE INFORMATION Please contact Kristina Thum, Client Growth Delivered, IRI at Kristina.Thum@iriworldwide.com with questions or comments about this report. About IRI. IRI is a leading provider of big data, predictive analytics and forward-looking insights that help CPG, OTC health care, retailers and media companies to grow. With the largest repository of purchase, media, social, causal and loyalty data, all integrated on an on-demand cloud-based technology platform, IRI guides over 5,000 clients globally in their quests to remain relentlessly relevant, capture market share, connect with consumers and deliver growth. www.iriworldwide.com Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA, Tel +44 (0) 1344 746000 Copyright 2015 Information Resources, Inc. (IRI). All rights reserved. IRI, the IRI logo and the names of IRI products and services referenced herein are either trademarks or registered trademarks of IRI. All other trademarks are the property of their respective owners. 20