MIAMI -- The potential for selling lots of baby food in Latin American supermarkets is nothing to weep about.
There are four times as many babies there as in the United States, for instance, and the birth rate continues to be much higher than in the United States or Europe.
That alone makes mouths water at food marketing companies such as Gerber Products, headquartered in Fremont, Mich. Additionally, rapid rates of development in many countries are giving birth to larger, more modern supermarkets and hypermarkets and that will make the baby food business boom in coming years, according to Frank Kelly.
Kelly, based here as Gerber's general manager for Latin America and the Caribbean, has a window seat on the unfolding market in Latin America.
"One of the reasons we are so bullish on Latin America is that supermarket chains are so bullish on Latin America," Kelly said. "We are seeing more of the social strata in supermarkets in Latin America than ever before. We are talking about demographics here. The supermarket is becoming more of a central place in many Latin American societies, and we are seeing different groups of people shopping there," he said.
That's good news for the category, since, Kelly added, baby food is a bellwether category for the industry.
"We have done simple surveys on Latin American markets that show that the shoppers who buy baby food are spending two or three times more money in the store than those that don't buy baby food."
The message to retailers is that attracting younger families with the wherewithal to buy jarred baby foods means the store is attracting the most desirable supermarket shoppers overall.
It's textbook symbiosis: "Our target market is increasingly going to be found in the stores, and stores need more of our target market to be drawn into their stores. This is a real synergy with supermarkets," Kelly said.
Jarred baby food is for the most part still a very young and largely undeveloped category in Latin America. Kelly said there are two important exceptions, Mexico and Venezuela, where strong U.S. and European influences, respectively, ushered in the category about 30 years ago.
The potential at large in Central America and South America is enormous, however. Kelly estimated that in 10 years, the market for baby food in Latin America could be as large as it is in the United States, or about $1 billion.
As is happening in other developing markets around the world, in Latin America a middle class is growing where two-income families and working mothers are a crucial component. This bodes well for baby food, Kelly said, since as a "bellwether" it epitomizes the supermarket attractions of variety and convenience.
As segments of mothers increasingly run short on time, they will be mashing fewer bananas and potatoes on their own and turning to the supermarket shelves instead. That is where the marketing task for baby foods must be met.
"Once there, they'll see a lot of variety. A mother can always grind a banana, but doing turkey and vegetable at home is not so easy," Kelly said. Baby food is currently marketed through pediatricians, tied to the product's advantage in nutritional makeup and hygiene. But the future depends on distribution in stores, and a perceptive link between the little jars and convenience.
That makes the in-store real estate crucial. "We offer more than 200 varieties in the United States. In Mexico, it is more in the 80 to 85 range; in Central America, it is down to the 60 range; Venezuela drops to about 40, and that is typically where the bottom settles for variety," he added.
"Getting shelf space is very difficult. You can get in the top-20 selling products usually, and another 20 varieties. We are lucky to get 4 feet of shelf in most cases."
Future growth will depend on continued demographic shifts, but ultimately it will depend as well on a shift in the way retailers position the category, Kelly said.
"Supermarkets are feeling their way along with what is basically a new category for them. They are willing to allocate beginning space, but as it grows, then the negotiating begins about expanding space."
Kelly said a major obstacle, particularly outside Mexico, is a tendency to treat baby food more like "caviar" than like a staple.
"They are not exactly willing to invest in the category, to take a hit until the volume gets better. What they are saying is, 'Well, the stuff does not turn, so I am going to take 25% to 35% margins.' We are saying to them that it will never turn at those margins. We want to position it not as a specialty food, but as a nutritional item that offers variety and convenience.
"We have got to work down the cost curve with retailers. It is a real tough challenge, but otherwise, we are not likely to penetrate below the top 10% of the population."
