UNIVERSITY OF LUCKNOW

Department of Business Administration

Business Policy & Strategic Analysis
ASSIGNMENT ON
Baby Food Industry
Submitted To: Prof. J.K. Sharma

Submitted By:
Pragati Bharti
MBA IIISemester
Roll No-17001000024

1
ACKNOWLEDGEMENT

The words put on paper are mere ink marks but when they have a purpose,
there exist a thought behind them. I too have a purpose to express my
gratitude towards the individuals without which the project would not have
been possible.

I owe a deep sense of gratitude to Dr. JK Sharma, for his active guidance and
constant supervision together with time to time providing of necessary
information connected with the project following active support in the
completion of project.

Finally I would also like to express my earnest gratitude to my friends and

family members for their constant support and encouragement without which
the assignment would not have been completed besides the constant blessings
of Almighty.

Pragati Bharti

2
Table of Content:

S.no Topic Page No.

1. Title Page 1

2. Acknowledgement 2

3. Table of content 3

4. Introduction: Baby food industry 4-5

5. Infant Food Act, 1992 5-6

6. Baby Food market overview 6-7

7. Impacting factors of baby food industry 7-9

8. Segmentation 9

9. Baby food market in India 10-11

10. Available products 11-12

11. Baby food: is it good for babies? 13-14

12.Distribution channels 14-15

13.Top baby food industry in India 16

14.Conclusion 17

15. Reference 18

3
Introduction: The business of feeding the smallest among us has
developed into a multibillion dollar industry in recent years. Due to
increasing numbers of working women, growing parental concerns about
nutrition and modern day time constraints, industry-processed baby
food plays an ever more significant role in meeting the nutritional
demands of infants and toddlers worldwide. In recent years, the industry
saw several transformations, primarily fuelled by parents’ lifestyles as
well as their growing interest in food, especially organics. Professionally
designed foods fill the kitchen shelves of parents, in various flavours of
liquid and solid forms for customers from as young as six months to two
years. The consumption of baby food is more prevalent in urban cities
like, Mumbai, Delhi and Bangalore. And since the majority of the
consumers continue to perceive home cooked food as healthier than
packaged baby food, the manufacturers have been introducing more
variants, like Cerelac Shishu Aahar, in local flavours. The launch of local
flavours would allow manufacturers to reach out to tier II and tier III
consumers who prefer to feed their babies with home cooked food.
Additionally, the introduction of such products in smaller pack sizes and
its increased availability at lower prices is likely to facilitate the uptake of
baby food, especially by consumers in tier III cities. For the past few
years, Nestle India Ltd has been maintaining the lead with a value share
of 69 percent in 2014. The Company has continued to leverage on its
leading brands including Lactogen, Cerelac, Nan, Nestum and Nestogen.
In addition, the company has expanded its Cerelac portfolio by
introducing new variants like Wheat Mixed Vegetable which are
perceived to provide complete nutrition for babies and infants. The
launch of new variants also helped the company to offer more choices to
consumers. According to figures by a market research and consulting
company, Markets and Markets (M & M), baby food generated revenue
of $25bn in 2008 and is expected to grow to $37.6bn by 2014. The
Mintel report notes that almost half of new launches between 2007-
2012 touted the organic claim and sales in natural supermarket channels
saw a 63 percent increase during 2011–2013. While US and Europe still
account for a major revenue share, developing economies such as China,
Vietnam and India provide fast-growing markets for industry-processed
infant food. Although hygiene and safety regulations are often stricter in
the baby nutrition sector, new products and technologies as well as the

4
changing profile of its end customers forecast a bright future for
companies specializing in baby food.
INFANT MILK SUBSTITUTES, FEEDING BOTTLES
AND INFANT FOODS ACT, 1992

More than 2.4 million child deaths occur in India each year and two-
thirds of these deaths are related to inappropriate infant feeding
practices. To protect infant health, India became one of the few countries
in Asia to fully implement the International Code of Marketing of
Breastmilk Substitutes with the enactment of the Infant Milk
Substitutes, Feeding Bottles and Infant Foods (Regulation of Production,
Supply and Distribution) Act (hereinafter referred to as “the IMS Act”).
The objective of the IMS Act is to protect breastfeeding from commercial
promotion, and thereby prevent malnutrition and deaths in infants and
young children. The IMS Act controls marketing practices of baby food
manufacturers.

The statement of objectives presented in Parliament during the

enactment of the IMS Act clearly stated: “Inappropriate feeding practices
lead to infant malnutrition, morbidity and mortality in our children.
Promotion of infant milk substitutes and related products like feeding
bottles and teats do constitute a health hazard. Promotion of infant milk
substitutes and related products has been more extensive and pervasive
than the dissemination of information concerning the advantages of
mother’s milk and breastfeeding and contributes to decline in
breastfeeding. In the absence of strong interventions designed to protect,
promote and support breastfeeding, this decline can assume dangerous
proportions subjecting millions of infants to greater risks of infections,
malnutrition and death…………”

Thus, the IMS Act had a clear intent; the saving of millions of children’s
lives and improving their nutritional status by preventing the baby food
industry from enticing mothers and the health system to give infants
breastmilk substitutes. Enactment of the Act has been seen as an
example of an innovative and progressive legislation and India was
heralded as a global leader in the area of legislation on infant and young
child health. Realizing the importance of breastfeeding for promotion of
child health and the need to curb industry’s influence towards erosion of
breastfeeding practices in India, the Indian Academy of Pediatrics
5
voluntarily discontinued sponsorship from all manufacturers and
marketers covered under the IMS Act. In 2003, following increasing
information on the benefits of exclusive breastfeeding and the subtle
promotional techniques adopted by some manufacturers to circumvent
the IMS Act, the Act was amended to include complementary foods and
banned all forms of promotion of baby foods. The Act also banned
sponsorship of the medical profession by baby food companies. India
was again appreciated globally to raise the bar of protection of children
from commercial exploitation of baby food industry. India also took
pride in reporting the enactment at the Convention of the Rights of the
Child Committee (CRC) as a means to reduce child malnutrition.

The strong commitment from various quarters including legislature,

government, non-governmental organizations, academia, and
professionals has yielded dividends. The IMS Act proved effective in
curbing the promotional activities of baby food companies. The National
Family Health Survey reports of 1992 and 1999 documented a positive,
albeit small, improvement in the practice of breastfeeding.

Baby Food Market Overview:

Baby Food Market size in 2014 was valued at $50.7 billion and is
expected to garner $72.7 billion by 2020, registering a CAGR of 6.4%
during the forecast period 2015-2020. Traditionally, babies are fed with
soft home cooked food, a practice that is still popular in underdeveloped
and developing countries. However, growing urbanization and changing
lifestyles have increased the demand for packaged baby foods in different
societies and cultures. These foods are fed to babies between the ages of
four to six months and two years. Growing awareness for nutrition, rise
in organized retail marketing, urbanization paired with a significant
increase in the count of working women population are key factors that
boost the baby food industry growth. Concerns related to food safety,
falling birth rates, and the practice of feeding home cooked food to
babies are the key restraints in this market.
The world baby food market is segmented based on product type,
distribution channel and geography. Based on product type, the market
is segregated into dried baby food, milk formula, prepared baby food,
and other baby food. Presently, milk formula occupies the largest market
share followed by the product segment of prepared baby food. However,
over the forecast period, product segment of prepared baby food would
gain prominent adoption in the global market. Sale of milk formula baby

6
food is highly concentrated in the APAC region. Alternatively, demand
for prepared baby food is largely limited to developed regions. However,
market for prepared baby food, in developing regions would pick pace
over the forecast period, subsequently leading to the dynamic growth of
the baby food market in the APAC region.
Supermarkets, hypermarkets, small grocery retailers, and health &
beauty retailers are the key distribution channels in the baby food
industry. Supermarkets are the primarily preferred distribution channel
among consumers, followed by health and beauty retailers. However,
considering the scenario in few Asian developing countries such as India,
small grocery retailers and health & beauty retailers hold significant
share considering sales in the region. Small grocery retailers account for
a comparatively smaller share in the baby food market but would witness
rapid growth over the forecast period. Other distribution channels
include discounters, non-grocery retailers, and non-store retailing.
The world baby food market has been analyzed on the basis of four
geographical regions, which include North America, Europe, Asia-Pacific
and LAMEA. Asia-Pacific is leading the market in terms of adoption of
new and innovative baby food products launched by various companies,
followed by the European region. Asia Pacific is the largest market for
milk formula and occupies more than half of the overall world baby food
market share. Larger demand would be observed in the LAMEA region
over the forecast period. The population of infants and toddlers in the
age group of 0-4 years increased by 53 million in 2010, which showed
high potential in baby food market. Declining poverty rates and rising
disposal income of some of the countries in Latin America have boosted
the adoption of baby food products.
Key players operating in baby food market are, Nestle, Danone, Mead
Johnson, Abbott laboratories, Hero-Group, Perrigo Company, Bellamy
Organics, Hain Celestial Group, Campbell soups, Friesland Campina.
Market players have adopted various strategies such as product launch,
acquisition, collaboration, and partnership, thereby enhancing their
baby food market share.
Top Impacting Factors of Baby Food Market
Baby food market trends include increasing awareness on adequate
nutrition, growing population of women professionals, food safety
concerns, and rising urbanization. However, declining birth rates,
popularizing breastfeeding through government initiatives and home
cooking are the factors responsible for restraining the growth of the baby
food market. Use of advanced technologies, innovations in baby food
products and heavy investments in the emerging economies would drive

7
the growth of the market. The top factors affecting the growth of the
baby food market are as follows:

1. Awareness on adequate nutrition

Infants and toddlers require adequate amount of nutrition in their daily
diet. Hence, there is an increase in the demand of packaged baby foods
with balanced nutrition value. The key market players launch innovative
food products offer products with minimal preservatives and adequate
nutritional content. In addition, these products are prepared with utmost
care and hygiene to prevent contamination and ensure safety of the
infants. Baby food manufacturers in the market need to adhere to the
guidelines laid by the competent authorities to manufacture optimal
quality products.
2. Increasing number of working women
Mother’s milk is the best source of nutrition for infants until the age of 6
months. However, increasing population of women professionals has led
to time-constraints for breast-feeding and preparing homemade food for
infants. Lactating problem among working women has also led to the
adoption of baby food products.
3. Increased breastfeeding activity due to government
initiatives

8
Governments and other health organizations in various countries have
launched campaigns to promote the advantages of breastfeeding in
infants. Breastfeeding is generally considered as the best source of
nutrition for infants up to the age of 6 months. Growing population of
female professionals and lactating problems in women have fostered the
adoption of baby food products.

Baby Food Market Key Segmentation

The market is segmented on the basis of product type, distribution
channel and geography.

By Product Type

 Dried baby food

 Milk formula
 Prepared baby food
 Other Baby Food

By Distribution Channel

 Super markets
 Hyper markets
 Small grocery retailers
 Health and beauty retailers
 Others

By Geography

 North America
 Europe
 Asia Pacific
 LAMEA

Key Players

 Nestle
 Danone
 Mead Johnson
 Abbott laboratories
 Hero-Group
 Perrigo Company
 Bellamy Organics
 Hain Celestial Group

9
 Campbell soups
 Friesland Campina

About the Market

The baby food market in India is witnessing a rapid growth of

about 10-12% per annum. India has the largest population of 0-4-
year-olds in Asia. Adding to it, rapid urbanization, mounting
population, increasing disposable income and growing number of
women workforce has led to the fast-paced expansion of this
industry. The availability of good quality food is gradually
increasing with innovation in product variant. The usage of novel
packaging techniques has given rise to investments and R&D by
major companies, to offer better quality products. There is an
emphasis on developing foods that are more organic and include
enhanced ingredients for higher nutrition for babies, who move
beyond basic homemade foods. A growing trend of mergers and
acquisitions has been witnessed in the Indian food industry over
last few years. Nestlé’s acquisition of Gerber Food and Pfizer
Nutrition is a prime example of increasing market consolidation
and intensifying competition. Nestle India Ltd., Nutricia
International Pvt. Ltd., Raptakos Brett & Co Ltd. are few of the key
players in the market.

About the Geography

 India is the seventh largest country in the world and has the
second highest population. It has a parliamentary democratic form
of government and has abundant natural resources and sufficient
oil reserves. The country has a huge skilled, English-speaking, and
inexpensive labor force. Its young population and current
economic policies have made it one of the largest recipients of FDI
in the world.

 Huge investment promises from different countries predict a

bright future for India. It has a well-developed administration and
an independent judicial system with an ever-growing consumer
base. It has a huge pool of hard-working skilled workers in all
fields. The government has set up tax and non-tax incentives to
establish new industrial entities in specific sectors, which include

10
 energy, ports, highways, electronics, and software. The Make in
India initiative was launched by the government in 2014 and
received an excellent response from the developed nations. The
government has also created special areas dedicated to export,
called export-processing zones (EPZs) or special economic zones
(SEZs), to encourage foreign investment. The strong financial
sector and dynamic banking along with huge infrastructure
development opportunities have made it one of the largest markets
for manufactured goods and services. Due to its huge market and
population, it has become one of the most competitive markets in
the world. Conducting business in India has been difficult because
of corruption, lack of infrastructure, and inadequate security.

Available products:
 Aptamil: Aptamil Preterm contains ingredients that meet the
specific needs of premature/low birth weight babies
 Dexolac: Dexolac is powdered milk substitute. It is specially
designed for the baby’s overall growth & development. Dexolac is
suitable for babies in the 0 to 24 months age group.
 Neocate: Neocate LCP Infant formula powder is based on
hypoallergenic amino acids, formulated without Cow’s milk protein. It
is suitable as a sole source of Nutrition, for Infants from birth till 12
months of age

 Farex:Farex Formula with PreciNutri(TM) is a powdered Infant milk

substitute suitable for babies in the 0 to 24 months age group, Whey
predominant formula – supports easy digestion
 100% Lactose – Supports growth of good bacteria which help maintain a
healthy digestive system
 Nucleotides – Help-support immune function

 Farex Baby Food: FAREX Baby Food is Iron fortified milk cereal
based complementary food suitable for babies in the 6-24 months age
group. It contains Omega 3, Omega 6 and 21 essential Vitamins and
minerals.

Nutritional Facts
After 6 months babies nutritional requirements increase. At the same
time the baby also requires variety of foods to develop healthy eating
11
 habits. The right nutrition at this age impacts on not just immediate
health and growth but also health in later life.

 Physical Growth & Brain Development

 To support height & weight gain: Provides 21 essential Vitamins &
Minerals in addition to Energy & Proteins
 To support brain development: Contains Iron, Choline, Taurine, Iodine,
Omega 3 & 6 fatty acids (helps formation of DHA),Goodness of Grains &
Fruits
 Contains grains & fruits,Adapted Texture
 Offers variety of textures by age to help support baby’s developing mouth
& jaw muscles
 EXAMPLE; Farex Wheat Apple, Farex Ragi Rice
Nusobee Casein Stage 1 Lactose Free Formulais specially designed with
Nutricia science for infants with lactose intolerance and diarrhoea.

 Easy Digestion: With maltodextrins and MCTs. Free of lactose for

better tolerance during diarrhoea
 Electrolyte Replenishment: With Sodium, Potassium and Chloride
 Immune Function: With Vitamin A, C, E, Selenium and Zinc.
Contains Nucleotides known to support immune function
 Growth: Energy levels of 68 kcal/100ml, Protein – 1.8g/100ml
 Strong Bones: With Calcium, Phosphorus, Magnesium and Vitamin D
 Brain Development: With Omega 3 and 6 fatty acids (precursors of
DHA and ARA), Taurine, Choline, Iron and Iodine.

12
BABY FOOD: IS IT FIT FOR BABIES?
Infants and young children are particularly vulnerable to food borne
illness because their immune systems are not developed enough to fight
off infections. That’s why extra care should be taken when handling and
preparing their food and formula. There are laws and legislations in
place to regulate the quality and nutritional content of baby food
products. However, it is noticeable that when we come to examine legal
regulation, the food industry is not dictated to by the Government;
rather, it is merely courted. The Government tries to steer the food
industry in the right direction, making recommendations and offering
incentives. However, it does not impose rigid commands for fear of
interfering with the economy. Manufacturers are able to exploit
loopholes, mislead consumers, and even blatantly lie, sometimes with
tragic consequences, all because piecemeal legal regulation has no teeth.

In many commercial baby food products, the manufacturers add extra

ingredients which affect the quality of the product. At best, these extra
ingredients are nutritionally empty, and at worst, they are nutritionally
dangerous, particularly when consumed by infants. For instance, many
commercial baby foods (including organic brands), are high in sodium,
sugar, or both. Every calorie taken up by these ingredients is a lost
opportunity for baby to eat a nutrient rich food that will facilitate proper
growth and development. It is significant to understand that the
implications can last a lifetime. For example, extra salt; Children can
develop a liking for excessively salty foods in infancy, leading them to
perceive unsalted foods as being flavorless. When comparing commercial
baby foods to similar adult versions, they don’t prove healthier, and are
sometimes even worse. In one study, baby yogurts, for example,
contained about 63 mg of sodium, while the adult sample only contained
50 mg. Another study revealed the same conclusion (Journal of Public
Health 2010). Again, this is a case of adults giving babies the nutritional
debris that they themselves would reject.

Moreover, a lot of these extra ingredients aren’t even declared on the

label. Studies have found a significant amount of commercial baby food
contains undeclared additives; for instance, sweeteners. Another
undesirable ingredient commonly found in commercial baby food yet not
declared on the label is trans-fat. Manufacturers use trans-fat instead of
oil because it improves flavour and texture, reduces cost, and extends the
storage life of products. Each of these would ensure more profit to the
manufacturer. Unfortunately trans-fat is known to increase LDL, also
13
known as “bad” cholesterol, while lowering levels of HDL, or “good”
cholesterol. Transfats are a particularly unhealthy type of fat for anyone
to consume, adults, children and babies alike, as it can cause clogging of
arteries, type 2 diabetes and other serious health problems, and can
increase the risk of heart disease. By law, trans-fats do not have to be
included in the nutritional information provided on a food label unless a
specific trans-fats claim has been made (for example, ‘low in trans-fats’),
and they do not have to be listed in the ingredients.

Distributuion channels of Baby Food Industry:

Super Market: Supermarkets are large self-service grocery stores
that offer customers a variety of foods and household supplies. The
merchandise is organized into an organized aisle format, where each
aisle is numbered or labeled and has only similar goods placed
together. Supermarkets are grocery stores that also provide household
items. Supermarkets have a special format where it allows consumers to
pass through aisles using shopping carts or baskets and pick up whatever
they require. Although, the early supermarkets did not house fresh
grocery or meat, modern supermarkets have meats, poultry, bread, dairy
products and fresh fruits and vegetables. In addition to fresh and canned
food, supermarkets also keep household products such as cleaning
supplies, baby goods, pet needs, medicine, kitchen appliances, crockery,
etc. Supermarkets offer low prices and many deals or discounts on their
products to attract consumers. Some even operate on negative profit
margins sometimes to bring in customers. Supermarkets usually receive
goods and merchandise in bulk from either manufacturers or large
distributors in order to avail economies of scale. The profit margin is
usually very small and the discounts are forwarded to the customers.
Supermarkets may also be part of a huge chain system and may be closer
to other supermarkets. Supermarkets closer together can save even more
on costs by sharing distributors and slashing their transportation costs.
Supermarkets are usually one-level brick and mortar store but may also
include two floors depending on the amount of supplies that are kept.

14
Hyper Market: Hypermarkets are large retail establishments that
are a combination of supermarket and department stores. They are
considered as a one-stop shop for all of the customer’s needs.
Hypermarkets basically have all the merchandise that could be required
by a person on a daily basis. Hypermarkets are a combination of grocery
stores, department stores and discount stores Hypermarkets are large
retail establishments that are a combination of supermarket and
department stores. They are considered as a one-stop shop for all of the
customer’s needs. Hypermarkets basically have all the merchandise that
could be required by a person on a daily basis such as clothes, grocery,
medicine, etc. under one roof. The purpose of the hypermarket is to
allow the consumers to purchase all the goods they would need under the
same roof, eliminating having to visit various different stores to purchase
them. Hypermarkets also offer products such as appliances, hardware,
beauty supplies, photos, crockery, electronics, etc. They are also known
as superstores. Hypermarkets may also have a specialty store layout, in
which they also include specialty stores such as salons, banks, eye glass
stores, etc. It is not necessary for all the hypermarkets to have them, but
some do.
Small Grocery Retailer: A grocery store is a retail store that
primarily sells food. A grocer is a bulk seller of food. Grocery stores often
offer non-perishable food that is packaged in bottles, boxes, and cans;
some also have bakeries, butchers, delis, and fresh produce. Large
grocery stores that stock significant amounts of non-food products, such
as clothing and household items, are called supermarkets. Some large
supermarkets also include a pharmacy, and customer service,
redemption, and electronics sections.

15
 Top Baby Food industries in India:
1. Nestle: Nestle India Ltd maintained the lead with a value share of
54% in 2016. The company continued to leverage the popularity of its
leading brand including Lactogen, Cerelac, Nan, Nestum and Nestogen.

2. Amul: The GCMMF (Gujarat Co-operative Milk Marketing

Federation Ltd) is the largest food products marketing organization of
India. It is the apex organization of the dairy cooperatives of Gujrat. It is
the exclusive marketing organization for products under the brand name
of Amul and sagar. Amul has annual turnover of USD 3.4 billions.

3. Danone Nutricia: Nutricia is a part of the Danone group specialised

in baby food and clinical nutrition. Product ranges from infant formula
to specialised nutrition for babies and spevific needs for breastfeeding
mothers.

4. Abbott India: Abbott India is healthcare company that discovers,

develops, manufactures and markets innovative products and services.
The company has in–house development and medical teams to
undertake product and clinical development tailored to the needs of the
Indian market. Abbott provides quality health care worldwide by
creating healthcare solutions, which directly affects the life of the
common man. Products: Pediasure, Similac Infant Formula, Similac
Advance.

5. Manna Food Pvt Ltd: Manna Foods Private Limited is a Private

incorporated on 27 May 1994. It is classified as Non-govt company and is
registered at Registrar of Companies, Bangalore. Products: Ragi Rich,
Rice Rich etc.

16
Conclusion:
Babies are tender and sensitive. They respond differently to every
stimulus. It is highly advised that a baby should be breastfed for the first
six months and solid food should be introduced later. A baby gives clear
signs when he is ready to move beyond liquid-only nourishment and it is
only then that he should be introduced to solid food. The period may be
anywhere between 4-6 months or sometimes even beyond that.

It is a child’s birthright to be provided with healthy and wholesome food

to aid optimum growth and development. Yet parents who assume that
the food industry share this view are naive wishful thinkers. Jarred baby
foods exploit parents’ trust in terms of cost, value, nutrition, quality and
safety. Pouched, potted and boxed baby foods are not immune either.

Reliance on baby food manufacturers to show social responsibility is

ineffective because companies are legally obliged to act in the best
interest of their shareholders, not consumers. Asking baby food
manufacturers to change merely serve as a distraction from perusing
more effective initiatives. For instance, there is an urgent need for
adequate Government regulation of the baby food industry. One cannot
rely on manufacturers’ goodwill and there is a need for the Government
to enforce effective regulation.

17
Reference:
1. Wikipedia
2. Google
3. http://www.marketresearch.com/food-beverage-
c84/food-c167/baby-Food-c478/
4. http://www.consumerreports.org
5. http://www.consumerreports.org/cro/health/food-
and-drink-product-reviews-andratings/index.htm

18