The baby start-ups getting the giants in a lather
Heritage companies such as Johnson & Johnson are facing increasing competition from ‘natural’ rivals, finds Ashley Armstrong
When Teresa Queiros was growing up her mother would regularly bathe her in Johnson & Johnson’s baby lotions and shampoo. But now that Queiros has her own daughter, Johnson & Johnson is missing from the bathroom shelf.
“I look for chemical-free and natural ingredients or any products that my dermatologist friend recommends,” Queiros says.
The 33-year-old lawyer is one of a growing number of new parents eschewing the baby products familiar to their generation in favour of smaller, natural brands. The shift in tastes is causing teething pains for the world’s biggest consumer giants. While their sales slide, eco-friendly brands such as Childs Farm, Professor Scrubbingtons, Kokoso, Neal’s Yard and Burt’s Bees are booming as they jostle with the industry titans for space on shelves.
“Customers get older and no longer need your products, so brands have to fight hard over and over again to win the next generation of infants and young parents”, explains John Spayne at corporate financiers Spayne Lindsay.
The baby food industry has also been turned upside down, previously dominated by Nestle and Heinz, it now has a small army of challenger brands from Organix, Ella’s, Little Dish, Kiddylicious and Piccolo. Ella’s Kitchen became the UK’S market No FTSE 350 companies reporting Manufacturing PMI (UK, US and Eurozone)
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Interim results: leader in nine short years as parents snapped up its pouches of organic puréed fruit and vegetables as a healthier, more convenient option to what traditional brands, such as Cow & Gate, had been offering. The overwhelming success of Ella’s has lead to copycats, with Heinz and HIPP both launching similar products.
Meanwhile, parents are increasingly turning to supermarkets’ own brands of nappies or hunting environmentally friendly alternatives, at the expense of the big brands such as Pampers and Huggies. On average, a typical nappy takes 500 years to degrade but brands like Kit & Kin, which was launched by former Spice Girl Emma Bunton and business partner Christopher Money, uses more eco-friendly ingredients. “Parents nowadays are much more aware of the environmental impact of bringing children into the world,” says Mr Money.
Experts say parents give more consideration to their purchasing decisions when they are buying for their children. “Parents are looking for reassurance from a product, whether it’s to help their child sleep, grow or develop properly,” explains Will Hayllar at OC&C strategy consultants. “It’s an emotional purchase based on a positive desire, or there’s the fear
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that if they don’t buy that product their child could be put in danger,” he adds.
“People used to rely on their parents’ recommendation but that has changed with a lot more peer-to-peer recommendations on Mumsnet and social media,” Mr Hayllar adds.
After more than a century dominating the market for baby shampoos, lotions and talcum powders, Johnson & Johnson is rapidly losing share to newer rivals. Over the last seven years sales of its baby care brands have declined from $2.3bn (£1.7bn) to $1.9bn. Meanwhile its grip on the UK market has slipped from 29pc to 24.4pc, according to Euromonitor.
The company’s emergence as a major force was an accident; it started producing a talcum powder in response to customer complaints about the itchiness of its early medical plasters. The powder was soon seized upon as an effective way to relieve nappy rash, prompting the launch of its baby powder in 1894 before expanding to soap, oils, lotions and developing its famous “no more tears” shampoo in 1954.
But sales of its heritage products are sliding. Rosie Lovett, a 33-year old mother of two, said she had stopped buying Johnson & Johnson products in favour of Burt’s Bees and upmarket skincare Aurelia. “It’s more natural and it might be me falling for the marketing but it seems to be better for her dry skin. I care more about my baby’s products than mine,” she adds.
Bosses at the American giant have woken up to the problem and publicly admitted that Johnson & Johnson is losing out to parents buying “premium, natural-type brands”.
“It’s a massive issue for the whole industry and the way they respond to growing concern about what’s in their products,” said Neil Sutton at PWC. “The challenge the big brands face is how they can bring products to market as quickly.”
The backlash towards chemical-
‘Parents are looking for reassurance from a product, whether it’s to help their child sleep, grow or develop properly’
heavy products has prompted the consumer titan to reformulate its 124-year-old shampoo in a radical move to win back families. The new formulation, which will hit British shops in February, has stripped out 50pc of the ingredients that were previously used. It was only in 2014 that Johnson & Johnson removed formaldehyde – used to preserve dead animals – from its US range.
“It’s extremely difficult to reformulate,” explains David Mays, a senior spokesman at Johnson & Johnson. “We had a promise and history with families who have been using our baby shampoo since the Fifties. We had to meet or exceed their expectations of how it foams, and smells and looks.”
But while Johnson & Johnson openly acknowledges parents’ enthusiasm for natural products it is also attempting to sabotage its new rivals by fuelling distrust of natural products. The company recently used its connections with the Royal College of Midwives to give a presentation warning about the dangers of natural brands by arguing that of the 26 known allergens, 86pc of those are natural ingredients.
Johnson & Johnson has also begun targeting specific rivals, singling out the use of tangerine oil in products made by British brand Childs Farm’s, which Mays claims is made up of 27 different chemicals.
“Someone could gravitate to a more natural product but be exposing their child to an allergen,” he argues. Childs Farm founder Joanna Jensen, a former investment banker, isn’t impressed by its move to muscle out smaller rivals.
“It’s total b-------”, she says of the tactics. “They are not happy with us because we have stolen their market share. They are completely profit driven. But as a parent why would you choose to put chemicals on your baby’s skin?” she asks.
“I know they are going after us. We have been in this market for four years and now we account for 20pc of the retailer’s sales in baby care.”
The company, which has bagged shelf listings with all the supermarkets, Boots, Superdrug, and is about to launch in Australia, is on track to make £14m in sales this year. The new baby care brands will have to hope they are just as successful with the next generation too.
A publicity shot for Emma Bunton’s nappy company Kit and Kin, which claims to use more eco-friendly materials than the big brands