Baby food: a formula for high margins
The more something costs, the less of it people buy. That holds true for most consumer goods — and is the reason why inflation is such a bugbear for the likes of Nestlé and Danone. But parents will skimp on most things before they trade down on baby food. That makes infant nutrition a good place to be when price hikes bite.
Making money out of baby food is not child’s play, of course. Falling birth rates make for skimpy volume growth — as Reckitt Benckiser found to its cost. The UK group took a £5bn writedown on its Mead Johnson baby food acquisition in 2020, on lower than expected birth rates in China.
Rules and regulations abound, too. In the US — which suffered disastrous supply shortages in 2022 — almost half of all infants receive formula through the contractors selected by a subsidised state programme.
This story originally appeared on: Financial Times - Author:Faqs of Insurances
