Nestle’s acquisition of Pfizer’s infant nutrition business has put the spotlight on a category that holds promise in a country where nutritional needs of young children is rapidly gaining ground.
Consider this: On an average, there are 25 to 27 million births a year in India. Even if the top 10-20 per cent of this is taken into account, that would mean a market opportunity of 2.5 to 5 million a year, says Technopak Advisors President Saloni Nangia.
This explains why Nestle was keen to lay its hands on Pfizer’s infant nutrition business. “Pfizer’s strong brands and product portfolio, besides its geographic presence — 85 per cent of its sales are in emerging markets — will complement our existing infant nutrition business perfectly,” Nestle CEO Paul Bulcke had said on the day the Rs 62,000-crore acquisition was announced.
Nestle enjoys a leadership position in the category, which has been key in its existence of over 150 years. Its roots can be traced to the nineteenth century, when pharmacist Henri Nestle came up with the first nutrition formula for babies whose mothers could not breast-feed.
In India, Nestle commands an 85 per cent share in baby foods, a Rs 1,500-crore market in the country. This market is growing at 10-15 per cent a year. The only other brand that enjoys some equity here is Farex, the oldest infant nutrition brand in the country — now owned by Danone, which acquired it following the buyout of Wockhardt’s nutrition business last year. There also are a few other products, such as Mead Johnson’s Enfamil, Abbott Nutrition’s Similac and Amul’s Amulspray. But, market experts say, none of these has the kind of grip on the market Nestle has with its basket of brands like Nestum, Nan, Lactogen, Nestogen and Cerelac.
Distribution & segmentation
Despite being heavily regulated (baby food products cannot be advertised in India), Nestle has successfully tapped both modern and traditional trade. Edelweiss Capital Associate Director (Research) Abneesh Roy says: “Walk into any pharmacy and you’ll find Nestle products prominently displayed.” So is the case with modern trade, where the company’s baby food brands can be found across supermarket chains.
Experts say, besides traditional and modern trade, companies also use doctor referrals to push their products. While Nestle did not respond to a detailed questionnaire sent to it, Amul MD R S Sodhi said his company used the same channels to push its products as those used for regular fast moving consumer goods (FMCG). “The practice of using doctor referrals is not ethical, since baby foods is an FMCG category. We do not indulge in it,” he said.
But, experts argue, the practice of pushing products through doctors is not new.
KPMG Associate Director Anand Ramanathan says: “Mothers in India tend to feed their young ones with what they prepare at home. The practice of feeding children with baby food through the day is not common here.” But this hasn’t deterred companies like Nestle from flooding the market with a plethora of flavours — both wheat-based (Cerelac) and rice-based (Nestum).
Cerelac, which is the most popular among Nestle’s baby food brands in India, is available in at least six-seven flavours. The case is similar with brands like Lactogen, which is available in three-four flavours.
Companies also segment products on the basis of age and need. Lactogen and Nan from Nestle, or Mama’s Best from Abbott Nutrition, are targeted at new-borns as a substitute for breast milk, while Cerelac and Farex are supplements for children of six months and above. Further, Cerelac is segmented into types for infants from six months to a year, for one-year-olds, two-year-olds, three-year-olds, and so on.
However, the baby foods category in the country is not as evolved as it is abroad, where companies have very specialised products targeting specific nutritional needs of children. There also are a plethora of brands available in other countries, unlike in India, where there are few market operators.
Pricing
Pricing remains a dampener in baby foods. A 350-g pack of Cerelac in Mumbai, for instance, costs Rs 139-150, depending on the variant. A 350-g pack of Lactogen starts from Rs 200, while Nan costs as much as Rs 340-345 a 450-g pack. A one-kg tin of Amulspray milk powder is priced at Rs 270, while a half-kg pack has a Rs 130-135 price tag. “These products are expensive,” says the proprietor of Royal Chemists, a Central Mumbai store that stocks baby food products. “Buyers are mostly from the upper middle class,” he says. “Who else can afford it?”
Experts argue the full potential of the baby food market in India could be exploited only when price points begin to fall. In China, for instance, the infant nutrition market is worth Rs 31,000 crore — constituting nearly 20 per cent of the Rs 156,000-crore global infant nutrition market.
While India is yet to see the rate of growth China has, experts like Harminder Sahni, founder & managing director of management consultancy Wazir Advisors, say growing affluence and awareness among Indian consumers, including the middle class, will help drive sales. “Most baby food makers are counting on that,” he says.
