Infant Plurality (Part I)

Baby food can be big business, but where's the market pull?

The Indian baby food market, though at a nascent stage, is among the fastest growing baby food markets in the world. In the last few years, it has grown at 10-12 percent per annum. However, lack of product awareness among consumers, ban on advertisement of baby food products and strict government regulations are limiting the scope of its growth.

The joy of parenthood comes with the much bigger responsibility of raising a healthy baby - inculcating right values and providing proper nutrition, among other things. Proper nutrition to infants and children becomes significant because poor feeding practices in infancy and early childhood, as the guidelines issued by the Ministry of Women & Child Development also highlight, result in impaired cognitive and social development of the child.

In Indian homes, where traditionally it is grandparents and the extended family who take on the role of providing advice on correct baby food to new parents, the use of infant formula (a food manufactured to support the great adequate growth of infants under six months of age when fed as a sole source of nutrition) in baby diet during the neonatal period is neither recommended nor considered acceptable by parents, unless, of course, medically advised. Thereafter, infant formula is used as a top-up or a replacement for breastfeeding. The Indian baby diet, therefore, is dominated by traditional home-made items, such as porridge of semolina, wheat flour, ground rice, khichdi, dalia and other similar grain or fruit- and vegetable-based products. These foods serve the purpose of providing essential vitamins and minerals needed during the growing years, as well as acclimatising the baby to the family eating habits. Given the importance accorded to breastfeeding as well as home-made food over purchased food, Indian parents are still not used to the idea of packaged baby food. Therefore, packaged baby food consumption in India remains largely restricted to urban areas.

A Market with Immense Scope

India has the largest baby population in the world with over 75 million babies up to the age of three. With the per capita expenditure on babies being one of the lowest, the Indian baby foods market offers immense scope.

Currently, the Indian baby food market is pegged at over Rs.1,500 crore, growing at an average rate of 10-12 percent in the last five years. Infant formula and baby cereals form a major chunk of the total baby food market, followed by snacks and bottled baby food. Currently, Nestle has the monopoly in the Indian baby food market. It commands more than 75 percent market share in the infant formula category with strong brands such as Lactogen and Nan.

Nestle also dominates the Indian baby cereal market with an equivalent market share and popular brands such as Cerelac and Nestum. Farex from Abbott Laboratories (earlier owned by Wockhardt) is a distant second in the baby cereals category.

Parents in the U.S. and the U.K. annually spend approximately $500 and $400, respectively, on baby foods, including infant formula. At around $4 per capita expenditure on babies, India lags way behind western countries and even among the emerging economies such as Brazil and China. In fact, per capita expenditure on babies in India is almost one-twentieth of the Chinese per capita spending on babies. In terms of growth rates, though, China and India are one of the fastest growing markets with annual growth rates of around 17 percent and 11 percent, respectively.

Strict guidelines regarding infant foods make it difficult for companies to operate in the Indian baby food market.

Read: part II