Key Investment Themes in the Baby & Toddler Category
Baird's Juvenile & Toy Products team recently attended Kind + Jugend, the leading international trade fair for baby and toddler, in Cologne, Germany. This year’s event welcomed 974 exhibitors from 46 countries, drawing approximately 15,000 trade visitors from 113 countries to the world's largest industry gathering.
Several key themes about the future of the category dominated our conversations with companies and investors at the event. Highlights include:
The Winds of Change
- The trade fair looked very different than past years. The lineup has contracted from ~1,500 exhibitors pre-pandemic.
- Some of the largest retailers in the world were absent this year, but the likes of Amazon, John Lewis, El Corte Ingles and many local German chains were in attendance.
- The consolidation of scalable, branded juvenile product businesses, long discussed, is now underway.
- Despite challenging macro conditions, inventory at retail and supply chain costs have largely normalized – and premium baby brands remain stable or growing year on year, with the U.S. largely outpacing Europe and Asia.
Specialty Brick-and-Mortar is Making a Comeback
- Several baby wholesalers are looking to showcase their products at the new Babies “R” Us store now open in East Rutherford, New Jersey, especially given the Buy Buy Baby bankruptcy announcement.
- Since Dream on Me has come onboard, it is anticipated that somewhere between 9-13 Buy Buy Baby brick-and-mortar stores will come back online in relatively short order.
- Several brands plan to distribute a selection of their portfolio in the forthcoming store-in-a-store Babies “R” Us concept, set to launch in approximately 50 Macy's locations.
Travel is a Bright Spot
- The travel category is seeing increased innovation in wheeled goods, car seats and carriers for the more scaled businesses.
- Name brands continue to reign supreme in this category as the numerous undifferentiated stroller and car seat businesses will likely struggle to compete for market share.
Pivoting on Models and Product Development
- Due to declining birth rates globally, baby businesses are implementing new product development (NPD), design and key innovation initiatives such as 'Grow with Me' to elongate the customer journey within a company’s portfolio.
- A crucial growth lever for large brands is investing in a sophisticated DTC channel in order to increase brand authenticity and build long-term connections with consumers.
