Baby food industry
According to Statista, the global baby food market has grown at a CAGR (compound annual growth rate) of 8.4% between 2010 and 2015, reaching approximately $55 billion in 2015.
Zenith International estimates that the infant nutrition market will be the fastest-growing packaged foods market over the next five years, with an annual growth rate of 7%, considering the higher birth rates in emerging markets.
Developed markets, with lower birth rates and older mothers, demand more organic and premium products, a trend that adds up to higher prices. However, the largest growth opportunity still comes from the regions with higher birth rates and younger mothers, even though that demographic holds lower spending capacity.
Abbott Laboratories (ABT) and Mead Johnson Nutrition (MJN) together account for about 80% of the sales in the US infant nutrition category, according to Zenith International. Nestlé (NSRGY) and Danone are the leading players in Western Europe, whose market size is equal to that of the US.
Trends driving category growth
The following trends have been driving Mead Johnson’s growth over the years:
- economic growth and job creation
- an increasing number of women in the workforce, causing increasing adoption of packaged food
- the rise of more middle class and dual-income families
- more spending on premium nutrition
Mergers and acquisitions
In Asia, companies have been opting for joint ventures and further development of local production, and for expansion and market share gains, companies have been focusing increasingly on mergers and acquisitions. Large companies have been to acquire baby food divisions of pharmaceutical companies and specialist baby food manufacturers. Nestlé, for example, gained strength in emerging markets from its acquisition of Pfizer’s (PFE) baby food brands in 2012.
Mead Johnson has a weight of 0.09% in the iShares Core S&P 500 ETF (IVV). IVV measures the performance of the large-cap sector of the US equities market that tracks the top 500 stocks.
Now let’s take a closer look at Mead Johnson’s specific categories.