Already a Bloomberg.com user?
Sign in with the same account.
Most parents have spent at least one night frantically searching for a clean bottle, mixing and heating formula, and then waiting for the liquid meal to cool to the proper temperature—all while trying to soothe a hungry infant. Nestlé, the company that’s built its Nespresso home espresso makers into a $3.9 billion business, thinks it has a way to help: a little Nespresso just for junior.
The Swiss company’s new BabyNes machine heats capsules of Nestlé formula, eliminating the clumps that can form when mixing powdered formula, and then dispenses a precise amount into a waiting bottle. It can be operated with one hand, leaving the other free to deal with a fretting child.
Such convenience doesn’t come cheap. The BabyNes—which went on sale to Swiss shoppers in May and will roll out globally starting in 2012—costs $300. The capsules of Nestlé formula that go into the machine cost triple the price of its pre-sealed espresso. Using BabyNes daily tacks an extra $650 on to the annual cost of a new mouth to feed, compared with traditional powdered formula, according to Bloomberg calculations.
Susanne Seibel, an analyst at Barclays Capital (BCS), figures BabyNes is a product for families without budget constraints and won’t immediately go mainstream. That may explain why Nestlé—the world’s largest food company—is starting in Switzerland, where 1 in 10 households is worth more than $1 million, according to Boston Consulting Group. “There is no price sensitivity when it comes to babies,” Seibel says. “People tend to go slightly overboard.”
BabyNes joins the ranks of high-end baby products ranging from $979 all-terrain Bugaboo strollers to a $29.95 device that warms up wet wipes before they touch baby’s bottom. Top-selling infant gear on Amazon.com (AMZN) include a $139 color video monitor and the $14.54 NoseFrida Snotsucker Nasal Aspirator.
Annual sales of BabyNes machines may reach 500 million Swiss francs ($600 million) within two years, estimates Jon Cox, an analyst at Kepler Capital Markets in Zurich. The hassle-free system also may help prolong the time parents use infant formula before starting children on solid food, he says.
Eager to repeat Nespresso’s annual sales growth rates of as much as 40 percent, Nestlé is rolling out machines that make tea, soluble coffee, and even smoothies. By getting consumers hooked on the machines and selling proprietary capsules online, the Swiss company locks customers into its brands and eliminates middlemen.
Nestlé competes with Béaba, a French maker of the Bib’expresso, which costs about half as much as BabyNes and doesn’t tether parents to a single formula brand. Advertising could be a bigger challenge, however, since the World Health Organization’s marketing code on infant formula recommends countries ban promoting breast milk substitutes. Nestlé has been the target of boycotts since 1977, when a group called Infant Feeding Action Coalition said babies were dying in developing countries where some mothers watered the powder down to make it last longer or mixed it with contaminated water.
Martin Grieder, who was at Nespresso for eight years before heading the formula venture, says Nestlé embraces the WHO code. A spokeswoman says Nestlé follows the guidelines in 152 “high-risk” markets, including China, India, and Russia. In low-risk nations such as the U.S., it follows national laws, which can be looser. BabyNes’s website and brochures tell consumers breastfeedingis best.
To help push sales, Nestlé lets buyers return a BabyNes unit within 30 days if they don’t like it. In a bid to address cost concerns, Nestlé also plans to allow consumers to rent the machines or return them for about 30 Swiss francs (about $36) once baby outgrows them. Still, not all parents are convinced the BabyNes is a must-have. “It’s unnecessary spending,” says Andrea Pantoja, a mother of a 21-month-old girl in Geneva. “For powdered formula, all you need to do is heat water.”
The bottom line: Nestlé, which invented baby formula in 1867, hopes to repeat the success of its Nespresso machines with its $300 BabyNes formula dispenser.