A LOSING BATTLE

LISA SAXTON

Retailers and baby food -- a give-and-take relationship. Retailers give away baby food to draw young mothers; baby food takes away from the retailer's bottom line.

Although there are chains that do manage to make a profit, many retailers sell the strained products at, or dishearteningly below, cost. In some markets competition for the young parent has turned so fierce, the price of baby food has dropped to below 20 cents a jar. Here that crying? It ain't the baby.

Then, on top of this, the Center for Science in the Public Interest released a 27-page report last month stating that many of the baby food products on store shelves aren't worth the prices consumers are paying for them.

Tell that to the retailer who sells it for 17 cents a jar.

"It's a highly competitive category," said Calvin Dale, a grocery buyer at H.G. Hill Stores, Nashville, Tenn., "because the mother shopping with children is the most desirable customer. So baby food is always low-margin."

"The whole category -- baby food, diapers and formula -- is a major league loss," said Bob Downum, president of Acme Markets of Virginia, North Tazewell, Va. "It's not a profit maker for the stores -- that's for sure," said Rod Cummings, a grocery buyer for Holiday Cos., Minneapolis.

"Baby food's always been one of those items where you want to be as low as possible, so you can bring in those parents; they're the ones that spent a lot of money on groceries," he added.

In 1994, consumer spending on strained baby food held steady at $393.5 million, according to scan data provided by A.C. Nielsen, Schaumburg, Ill.

That dollar volume remained steady in spite of retailers in the Pacific Northwest lowering their prices.

Last year, Spokane, Wash.-based Rosauers Supermarkets sold a jar of baby food for around 30 cents, generally the industry norm. But Pat Redmond, grocery merchandiser, has seen that figure drop dramatically.

"Now it's down to 19 cents, due to competition," he said. "It's not a good picture."

Redmond explained that "the Fred Meyers of the world came to town with low baby food prices and drove the category down some more. It was already low enough."

Not according to the CSPI study, which concluded that "many popular baby foods are greatly overpriced -- and often diluted 50% or more with water and starchy fillers."

As an example, Michael Jacobson, CSPI's executive director, reported that Gerber's bananas-with-tapioca product had a "retail price of about 45 or 50 cents per 4-ounce jar -- and replaced half the bananas with water, chemically modified tapioca starch and sucrose" to lower its costs.

However, the A.C. Nielsen data shows a jar of supermarket baby food has an average price of 37 cents, with Gerber's average at 38 cents.

Gerber's giant share of the market has made the Fremont, Mich.-based company the target of much of CSPI's criticism.

As part of its statement on the study, Gerber responded that "the characterizations by CSPI on the value of our products are incorrect. Starch is not used to reduce cost. When we develop a recipe, we do extensive research on the acceptability by infants, as well as the developmental appropriateness of the texture, consistency and taste."

Because the CSPI report was just announced when SN contacted retailers, none reported any consumer backlash, although as one California retailer stated, "It should be interesting to see if it has any effect."

Any kind of negative effect on baby food would have retailers more than a little concerned because of the integral part the category plays in overall store sales.

Holiday's Cummings said retailers have historically used the category to prop up slumping store sales.

"When they see slow sales in their stores," he said, "most retailers feel that one way to turn it around is by having lower retails on baby food.

"Gerber or someone will come out with promotions once in a while where the retailer can select a lower price for a short period of time," said Cummings. "You put it on promotion, work up some sort of display on it and that will generate business for your store."

But in markets like Columbus, Ohio, retailers work on everyday low prices -- real low.

"We're selling it for 17 cents a jar. It's a loss deal," said Doug Meadows, manager of Johnson's Supermarkets, Gallipolis, Ohio.

Meadows said Johnson's been losing money on baby food for the last couple of years because of larger competitors like Big Bear Stores, whose prices on baby food range from 15 cents to 17 cents per jar.

Retailers in other areas of the country are thankful their prices haven't dropped to those extremes.

Chuck Moore, a buyer for Minyard Food Stores, Coppell, Texas, said his baby food prices "have remained in the 30 cents to 40 cents range."

"We're selling baby food right at cost, in the 30-cents-a-jar range," said H.G. Hill's Dale. "We price by zone and some stores may vary in price, depending on what the competition is doing."

"We're just basically giving it away," said Acme of Virginia's Downum. "We sell it for something like 29 cents a jar to stay very competitive. We do the same with formula."

Rick VanKlaveren, grocery buyer at Harding's Markets West, Plainwell, Mich., noted that his market is not seeing any unusual downward pressure on baby food prices due to increased competition, but that prices have remained steady in the 30-cents-a-jar bracket.

Cummings of Holiday was one of the few retailers contacted by SN who reported a regular baby food price of more than 40 cents a jar, although he does run three-for-$1 specials on occasion.

Prices are stable at Norfolk, Va.-based Camellia Food Stores as well, according to Judy Lane, a buyer.

Lane displays jars of baby food by stacking them on a shelf, one of two schools of thought on merchandising baby food. The other is to display them in bins.

Minyard's Moore said his company stacks products such as juices, but puts the standard baby food jars in bins. "The bins save on labor and also make rotating the product easier" by moving the existing jars toward the front of the bin and placing the new arrivals behind them.

H.G. Hill Stores is a baby food stacker, while Rosauers is a bin business.

"We like to put them in bins and save labor," said Acme of Virginia's Downum. "They're just so hard to stack because they're so little."

"We just take them out of their cartons, stack them on the shelves and try to make them look attractive," said Johnson's Supermarkets' Meadows.

Some chains, like Raley's, West Sacramento, Calif., employ both methods for merchandising, as was noted during an SN visit to the chain's Elk Grove store.

However, according to Holiday's Cummings, manufacturers prefer that retailers stack their products.

"I asked the Gerber [representatives] about that and they've said they've had too much damage by putting them in the bin. The problem is, if one breaks, it soaks all the other jars and it's a mess to clean up. And it's not cleaned up to their satisfaction."