Grocers are using direct mail and coupons linked to frequent shopper cards, in addition to low price, to regain sales of baby food, which have declined in supermarkets as supercenters, club stores and the mass merchants arrived.
Sales-by-outlet tracked by Information Resources Inc., Chicago, for the year ended Dec. 31, 2000, show that mass merchants have less than one-seventh of the total baby food sales of the food channel. But, while the food channel is growing by less than 2% per year in dollars, and actually losing ground in unit sales [down 3.5%], the mass channel is picking up by 30% in dollars and 22% in units of baby food and baby snacks.
"It started with the mass merchants selling baby formula, then diapers, then all the baby products," said a Midwestern wholesale executive who has been active in combatting the shift.
"That's why we put our program together," said the executive, who asked not to be named as a matter of corporate policy. A mom-centered direct-mail piece and manufacturers coupons that kick in when the frequent shopper card is used are the chief ammunition.
By choosing to link benefits to the card rather than instituting a baby club, the wholesaler hopes to drive consumers in the trading area to sign up for the card. Partnering with a manufacturer such as Gerber also saves the retailer the expense of keeping the file current, since the manufacturer will gladly invest in it to keep its market share up.
When this was done in the pet category, coupon redemption rates jumped from the usual 1% or 2% to between 5% and 7%, the wholesaler said. All member stores that had shopper cards were given the chance to try it with baby products and none opted out, according to the wholesaler, because "they are all looking for additional value to place on their card."
Some compete on price.
Ross Nixon, vice president of merchandising, Dahl's Food Markets, Des Moines, Iowa, said, "For years we have sold baby food well below cost, even 15 years before the supercenters came. Super Targets, Super Wal-Marts, Super K's started coming to this market two years ago. But I have been with this company 30 years, and I don't think we've ever made money on baby food."
It's a lot of shelf space for a category you don't make money on, he added. Ninety-five percent of the market share in Des Moines is controlled by Gerber, with Heinz taking the other 5%, Nixon said. Gerber probably has 125 to 150 stockkeeping units.
"It's been a loss leader. Even at that, you're not beating the supercenters. I think the attitude they take is to beat you by a penny. There's no sense in our lowering it by a penny, then they'll lower it two cents. For a penny, there's a lot more services offered in a conventional store, than in a mass merchant. We are a non-advertiser, so we do little direct mail; some, but it's hit and miss, nothing structured," Nixon said.
The shoppers looking for baby food are young, with one, two or more kids, "so you're catering to a basket that is larger than most of your average shoppers'. You don't want baby food to be the deciding factor" in their shifting somewhere else to shop, Nixon said.
The second and third foods are the most popular, he added, since children eat those for the longest time. Those are also the most competitively priced. Up to a year ago, he said, Dahl's was selling all second foods for 29 cents; now it's either two for 89 or 49 cents apiece, with some drastic discounts periodically, like 3 for $1 promotional sales. "It's a category that doesn't pay too many bills," Nixon said.
The Midwestern wholesaler said that its traditional approach was to advertise occasionally in the store circulars, "but since both [pet and baby foods] appeal to only limited segments of our consumers, we created targeted direct mail pieces," he said, knowing that mass merchants would not copy it. "Specifically Wal-Mart -- they don't advertise baby food, although they do advertise diapers," the source said.
The supermarket supplier responded by making the mail piece value-added, with baby care tips, and take-care tips for mothers -- more of a newsletter than an ad. Called "Mom's Minute," it devotes half its space to things like advice on diet, ads for aromatherapy items, bath and beauty items, and relaxing teas, all to give the reader the message that she is worth caring for.
Following what was done in the pet category, the wholesale company purchased baby food Spectra data overlaid by a syndicated file from Gerber, the manufacturer with the largest market share in baby food, about 75% nationally. So far, two mailings have gone out, one last fall and one in the first quarter of this year, with a goal of four to six per year. It's too soon to see long-term results, the source said, but manufacturer participation indicates enough support for at least four such pieces, he said.
Wendy Melton, spokeswoman for Food Lion, Salisbury, N.C., said that chain is planning to run special ads when Gerber's new baby food items arrive, such as the new 4-ounce single juices in plastic bottles, 4-pack second food items in plastic containers, first food Tender Harvest organic, third food Tender Harvest and a new finger food segment, between baby food and toddler.
"Food Lion has always stood for low prices," Melton said. "Wal-Mart offers low prices, too, but we still try to stick to our convenience and everyday low prices concept." Clements' Marketplace, Portsmouth, R.I., a one-store independent that was recently expanded and remodeled, visited by SN on Feb. 17, had an attractive, if small, baby food assortment. For a different touch, there were fresh bananas in the baby aisle on a yellow stand that said: "Go Bananas."
Freshness is the branding element at Clements', even in baby food. Store manager Bob MacFarlane said his basic strategy in the baby food aisle is "just pack it out and keep it neat. It pays to rotate it. It's a dated, perishable item. The jars are dated, and the cans and powders of formula are, too. We do rotate it, put the new stuff behind to make sure it stays fresh all the time."
Felpausch Food Centers, Hastings, Mich., has had a Baby Club for a year in all 20 stores. The Priority Card keeps track of purchases of baby food, diapers, wipes and so forth, explained Janine Dalman, spokeswoman and manager of consumer affairs. Customers earn points toward a certificate, so that when they reach $100 in baby purchases, they get a $10 certificate that can be used on the next trip, and they don't need to sign up for the club separately.
"Our customers really like it because they don't have to go out to a big discount store to get some benefits."