Supermarket profits and sales continue to slip in the baby aisle because of stiff competition from other classes of trade battling for the young parents' dollar.
Important categories are hurting in the aisle, according to the most recent scanning data available. Dollar sales of diapers, for example, dropped 3.5% from $2.29 billion to $2.21 billion in the 52-week period ended March 1994, according to scan data collected by Nielsen North America. Supermarket baby food sales in the same period dipped 0.8% to $390.7 million from $393.9 million, while unit sales dropped 3%.
Whether it's in sales of diapers, food or formula, operators such as Wal-Mart and Toys R Us are continuing to erode the supermarkets' performance, said grocery retailers and wholesalers.
Supermarket executives said they will continue to fight back. Some said they are stepping up merchandising of private-label products, as well as branded baby accessory items, to recover some lost margins and defend market share.
"The competition is as strong as ever," said Ned Meara, corporate merchandising manager for Grand Union Co., Wayne, N.J. "You're constantly looking behind you because there's always someone snipping at your heels."
"The Toys R Us's and Wal-Marts have sold baby items below cost and that has always been a thorn in the side for supermarkets because we can't afford to take that big a hit," said Jim Key, the nonfood buyer for Community Cash, based in Spartanburg, S.C.
"We're as competitive as we can be," said Charlie Lane, a buyer with Coppell, Texas-based Minyard Food Stores. "We basically sell diapers at cost anyway, and that's about the best we can do. They sell them below cost; and we really don't try to compete with that degree."
The same can be said for baby food and formula.
"Baby food has been steady, although we occasionally get knocked around on price. But if a Wal-Mart Supercenter comes in, I'm sure we're going to be forced to adjust our pricing down one way or another," said Randy Williams, a buyer for Fleming's Malone & Hyde division, based in Miami.
As far as baby formula goes, retailers said the state governments' Women, Infants and Children program plays a big role in helping mitigate the impact of competition from other classes of trade. They said their participation in the WIC program, a government subsidy that assists lower income mothers in buying formula, gives supermarkets an edge in attracting that business.
"Baby formula sales have been picking up a bit; we're a little more competitive in our pricing," said Community Cash's Key. "The WIC voucher is certainly a plus for supermarkets."
In the diaper category, a buyer with Associated Grocers in Seattle said manufacturers have helped the supermarket cause with price cuts, which make shopping for diapers at grocery stores easier on the wallet. Nonetheless, mass merchandisers and Toys R Us continue to go a step further and take a loss on diapers, just to get people in their stores, he said.
The pressure from alternative trade classes is also increasing competition between supermarkets. Malone & Hyde's Williams, for example, said although other trade formats operate in the Miami area, the more immediate challenge is from major multistore supermarket operators such as Publix and Winn-Dixie.
Williams added, however, that being part of a large company like Fleming helps his operation face up to the competition.
Baby aisle competition is hot not only among classes of trade and within the supermarket trade, but is changing things on the shelves themselves. Private-label continues to gain share, said retailers.
"Private-label vendors seem to be reacting [to national brands] with a vengeance and are not allowing them to interfere with their sales," said Grand Union's Meara. He acknowledged that in his stores brands such as Pampers and Huggies are "alive and well," with sales that remain strong, but the Luvs brand is treading on thin ice, in part due to private-label successes.
"We've changed our line and we've also changed our counts to stay with the branded people, who have essentially changed their packs by downcounting," he said. "We've gone from 32s to 27s where they have right across the board. And that's done to reduce price points.
"Customers have come to learn, especially in the last few years, that private label has strengthened and has eaten away at [brands]. They're recognizing private label as quality products."
Meara credits private-label diaper manufacturers for this change in attitude and consumer shopping patterns.
Another area that has drawn retail attention in the baby aisle is accessories -- a section where supermarket retailers can maintain healthy margins.
"With baby formula and food, you're losing money or barely breaking even," said Community Cash's Key. "But, by aggressively merchandising baby needs and baby products, you can certainly bring some of your profits back [to the aisle]."
Key said his company is currently looking at how it can adjust its baby needs mix to make the most of the section.
