long ago, the toddler foods segment -- products geared specifically for children of ages from 12 to 30 months, and inviting a direct comparison with table foods -- was not much more than a glint in a few baby food marketers' eyes.
But since its birth about two years ago, the fledgling product niche of toddler foods has been taking some encouraging baby steps in the supermarket's center store aisles.
Last year alone, food store sales in dollars for Gerber Products Co.'s Gerber Graduates, the dominant toddler food line, grew 38.3% to reach about $40 million, according to scanning data reported by Nielsen Marketing Research, Northbrook, Ill.; unit growth for the year was almost 50%, the data shows.
Beechnut's smaller Table Time line, probably the closest thing to direct competition for Graduates in the baby food section, also saw growth, amounting to 30% in dollar sales for the same 12-month period ended Dec. 11, 1993.
That performance leaves Gerber, for one, feeling fairly satisfied and proud. Indeed, the baby food market leader last month began giving Graduates increased marketing support -- about one-fourth of a $30 million portfolio-wide campaign to include broadcast advertising and direct mail.
What's more, the toddler segment's development so far has managed to surprise some of the more skeptical supermarket baby food buyers and industry observers, who've maintained that the idea of extending the baby food market beyond 12 months is likely to stumble and fall.
One baby food category manager for a major East Coast chain told SN last fall that he expected Graduates to flop in fairly short order. By this spring, however, he said the line had established a firm, if small, foothold in his baby food set, and its long-term prospects had brightened notably.
That particular chain had about 30 stockkeeping units of food items that could be grouped under the "Junior" umbrella, including a substantial presence of Graduates items, Beechnut's Table Time items and a sprinkling of other products.
Other merchandisers had similar changes of heart to report. In calls to about a dozen retailers in different market areas, SN encountered varied reactions to the level of performance so far for toddler-type foods sold from within the baby food set, some more positive than others.
However, there was stronger agreement among retailers and others that the toddler segment has at least been proven as a viable niche. And it typically offers better price points and profit margins than strained foods, thus offering some relief in a highly competitive category.
"Gerber Graduates and other toddler-type baby foods are doing well," said Emily G. Holdstein, senior vice president of Wonder Market Cos., Worcester, Mass.
"Sales have been growing, and as a category for the past year, they are up over 15%. I think the growth in the Graduates is fueling that significantly," Holdstein added. Her chain, like all other retailers contacted, carries toddler foods right in the baby food section.
Also like many interviewed, the selection that she would specifically characterize as "toddler-oriented" is limited. "But we will be putting in some additional items as they become available. They are doing very well considering they don't have much space."
One buyer at a leading Midwestern chain said that not only were sales of toddler food items on a positive curve, but they do not appear to be taking sales away from other items.
"I think they are additional sales, and are developing into a segment all its own," the chain buyer said.
Current selections of the Graduates line alone at supermarkets ranged generally from 10 items to more than 20. Some said they are continuing to add items to the overall category, building an overall presentation, while others are swapping slow movers for new products.
"It will be interesting to see how the category reacts to more new products," said Richard Byrns, head grocery buyer for Harvest Foods, Little Rock, Ark., alluding to a new entry by American Home Products into the toddler arena, linking its Chef Boyardee name to new junior products using familiar Sesame Street characters.
"Up to this point, we have not added space or SKUs. When we have taken on new products, we just discontinued some of the old ones to make room," Byrns said.
A grocery buyer with a Midwestern chain, however, has been adding items and making room. "We started with three or four items. I don't know if these few items are a true indication of how the category will ultimately do, but people are buying them and asking for more. Thus, we've added SKUs and now have about 10 items in the category. So you could say we have dipped our toe in the water."
Big Y Foods, Springfield, Mass., carries a "small variety" of toddler foods, according to Alan Young, category manager.
"They comprise 1% to 2% of our total baby food sales," Young said. "We merchandise these items within our baby food section, and they are grouped together with two facings of each item. We carry several brands of toddler baby foods."
Young was among those retailers still exhibiting skepticism over how far the toddler subcategory can grow. He noted, as did most other retailers and industry analysts contacted, that the Graduates line and other products in the section face a primary obstacle -- price -- lurking both inside and outside the baby food aisle.
First, the inside challenge: convincing parents who've been paying significantly less for infant foods to abruptly trade up. "One of the concerns I have is that baby food is sold at very competitive prices in our market," said the merchandiser at a large Midwestern wholesaler. "As the mother has gone through the stages of baby food, it's been a relatively low-ticket item. Then, moving into the toddler area, the products are significantly higher priced."
The price challenge from outside the baby aisle is competition from a large and diverse grouping of table foods that in most instances can be had for low retail price points.
"In terms of margins, in the baby food section, the toddler foods have better growth; but the problem is, when you compare the retails to items outside the section, they are very expensive," said Young of Big Y Foods. "We find they directly compete with items such as Franco-American's Spaghetti-O's, and Minute Maid three-pack aseptic juice boxes."
"The primary competition for Gerber Graduates is the shelf-stable prepared foods, like Chef Boyardee microwavable cups," said Holdstein.
"These tend to compete against canned prepared foods, which are cheaper," said Judy Lane, Camellia Food Stores, Norfolk, Va. "Now, the toddler baby foods may be more nutritious [than some of the competing foods], but I think it comes down to economics."
Roger Spencer, a packaged foods analyst with PaineWebber in Chicago, agreed that the parents' option of simply giving their toddlers table food was an inherent obstacle that items such as Gerber Graduates need to overcome.
"If a family gets to the point where they feel they can basically feed the kid off their own plate, they would not feel any incremental expense doing that," Spencer said. "But if you buy toddler foods, you are spending more money. There will be some percentage willing to pay up for the toddler foods, and others not willing to pay for it."
Spencer and other analysts did acknowledge that, strategically speaking, the emphasis on shaping a new, definable toddler segment within baby foods made a lot of sense for an industry otherwise faced with shrinking domestic birth rates and declining consumption trends.
"Practically speaking, you are trying to change consumer buying patterns, and encouraging more spending at the same time, and that's a tough row to hoe," said Spencer.
"I applaud them for trying to expand the market," said Ellen Baras, analyst with Duff & Phelps, Chicago. "There will be a niche for this type of food, but I don't think it will ever mean to Gerber what the jarred infant food market does."
Even Gerber apparently does not expect that kind of performance out of the toddler segment. However, in a sprawling market that Gerber measures at about $1 billion -- one that includes Graduates as well as everything from Cheerios to hot dogs -- it would be happy to capture one in 10 toddler feeding opportunities, or $100 million. Industry estimates indicated Gerber is probably halfway there.
Industry sources said Graduates and other toddler items could get a helpful nudge from increased communication to consumers about their benefits against the cheaper table-food competition.
"Possibly, there could benefits from a more extensive advertising campaign," said Lane from Camellia Food Stores. "It may be that they have not been advertised enough."
"As far as what the future will bring, I think it will have a lot to do with how the manufacturers position these and how much advertising," said the merchandiser from a leading national grocery wholesaler. "The nutrition message about toddler foods also has to move through the medical community, where a lot of communication is channeled directly to young mothers through the pediatricians. Progress up to this point has not been astounding, but a lot of potential is there."
Retailers also credited the brand equity of Gerber and others as a plus for the longer-term prospects of toddler foods.
"One thing you have to give Gerber credit for is the way they've built an overwhelming loyalty," said Paul Duckworth, grocery buyer with Thrifty Food Stores, Burlington, Wash.
"Remember, they're seeing the names Gerber, or Beechnut or Heinz, and figuring it has to be good," said the grocery buyer from a Midwest chain. "Some people will feed their children these foods rather then regular foods because of the name."
Big Names in the Game
Gerber and Beechnut dominate the toddler foods category.
1993 MARKET SHARE OF CATEGORY LEADERS
Beechnut Table Time 2.5%
Gerber Graduates 20.2%
Beechnut Stages 8.5%
The Margins' Edge
While overall unit volume in toddler foods declined, dollar volume in the higher-margin category rose.