A COVID baby bust is bad news for these businesses

Manufacturers of baby formula and diapers are gearing up for another potential COVID-19 challenge: fewer children.

Births have been declining for years in the US and China, and new estimates suggest that the coronovirus epidemic may lead to hundreds of thousands of fewer births in the coming months. The decline in new arrivals may add to the trouble for baby products manufacturers, who are developing new lines and shifting their focus to other products, analysts and executives.

Our economic situation has increased

“What we have seen in the epidemic, especially in the US, is its decline in production,” said Lakshman Narasimhan, chief executive officer of Enfamil’s company Reckitt Benckiser Group plc. To increase sales, Mr. Narasimhan said Reckitt is expanding its nutritional category to focus on the health of elderly people.

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The company, which also makes milk supplement Sustagen, warned last month that the US could affect its baby feeding business next year, along with fewer births in China – about half the global baby-formula market.

US government figures for 2020 births will not be available until next summer. Mr. Narasimhan said in an interview that Reckitt had estimates of his date of birth and also noted figures from the Brookings Institution.

The think tank has forecast between 300,000 and 500,000 fewer births in the US next year, compared to a drop of 44,172 last year. Its analysis, partly based on what happened after the recession of 2007–2009, is that the probability of a weak job is equal to fewer births. A June report said, “Women will have many fewer children in the short term, and some of them will have fewer children.”

Barclays expects China’s birth date to decline by 8% this year, doubling last year’s decline.

How is it like a child?

Barclays analyst Warren Ackerman said, “Concerns about the transition and a pending economic downturn are a powerful cocktail that could hasten China’s declining births.” He thinks the trend may further drive consolidation among the big players in China’s infant formula market.

With its lowest birth date already on record in the US and China, there has been pressure from formula makers including Reckitt, Nestle SA and Danone SA. Parents and some others in these countries have fewer children, but are spending more money on them, prompting companies to make premier baby food. Nestle launched an upscale baby milk powder brand called Balsol for the Chinese market in June and recently started selling a new formula for infants allergic to cow’s milk protein.

The anchor Security The last Change Change %
NSRGY NESTLÉ SA 115.16 -1.53 -1.31%
DANOY DANON SA 12.96 0.02 + 0.15%

Nestlé is also rapidly manufacturing products for the first 1,000 days of a child’s life, developing supplements for both mother and child. Last year it opened a $ 32 million research center in Ireland. Nestle CEO Mark Schneider said last month that the Gerber owner is making sluggish baby formula development in areas such as baby grains and vitamins.

Reckitt has also expanded its nutritional offerings, as well as using its expertise in child-related products to launch supplements for adults. Mr. Narasimhan said, “We see a real tailwind in seniors, and the growth rate there is not really small.”

The infant formula is particularly important for Reckitt, which made a big stake in the category three years ago with its $ 16.6 billion baby-food maker Mead Johnson Nutrition Company Growth, which has continued to rise since China’s birth since 2016. Slow growing with decline. The government relaxed its one-child policy. The company took a write-down equal to more than $ 6 billion in trade in February, citing a low birth date and increased competition in China.

Pcters Owner Procter & Gamble Co. Have also seen an increase in sales due to declines in births and are developing more sophisticated products that can justify higher prices. Earlier this year, it said sales of more-elaborate diapers that use tape or fit like pants are growing strongly. A P&G spokesman said that it is too early to know what effect Kovid-19 will have on birthplaces.

The anchor Security The last Change Change %
PG Procter & Gamble Company 142.48 -1.66 -1.15%
KMB Kimberly-clark 142.17 1.82 + 1.30%

Other people are also on the fence.

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“I don’t have a great view at this time of the long-term impact of Kovid,” said Kimberly-Clark Corp. CEO Michael Hsu on an investor call last month. “There are all kinds of projections, including baby booms, because it is infrequent to do so.”

The owner of Huggies has introduced new diapers, including a line called Special Delivery, which is made from plant-based materials and is about five times more expensive than the cheapest diapers on the market.

Mr Hsu said Kimberly-Clarke would continue to expand in emerging markets, where the population is growing, for example highlighting the $ 1.2 billion acquisition of the Indonesian diaper manufacturer in September. He said that Kimberly-Clarke is now closely watching birth rate trends.

The predictions of Barclays births in China are unlikely to be corrected next year, but will pick up after that, according to the Chinese zodiac, the coming years are considered auspicious for childbirth.

Brookings says rates in the US will depend on the strength of the labor market. However, the think tank predicts that the recession will persist for a long time, “we expect many of these births to not be delayed — but will never happen.”

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