Kids are good for business

It is probably a paradox, but the youngest members in families with children attract the biggest expenses from the household budget. According to BUSINESS Magazin’s calculations, the market of goods and services aimed at those over 4 million kids and teens in Romania aged up to 18 exceeds 3 billion euros a year, which is more than the cumulated sales registered by Metro and Carrefour – the biggest store chains on the market, last year. Expenses made for kids are going up every year, stimulating the business of products and services aimed at them.

Two are the factors that lead to the growth of this market: on the one hand, the parents’ expenses increase as kids get older, while, on the other, consumer behaviour changes; as incomes increase, so do parents’ standards who choose better quality products, which are more expensive. It is hard to determine an exact value, because out of the 4 million kids and teens up to 18 years of age, one quarter are older than 12, and expenses can no longer be separated from those of their parents when it comes to cosmetics, computer games, clothing or food. “Regardless of age, most money go to food, clothing and footwear,” says Alecsandra Fulga, business development manager at market research company 360insights. Of course, whereas expenses for primary goods are the most important in the first few years of children’s lives, over the years education and leisure budgets are added, says Fulga, quoting the Omnibus-type survey conducted by 360insights.

For learning materials, clothing and footwear manufacturers, this is peak season; the same goes for private schools. As for many other segments, from food to cosmetics or care, which are not influenced by seasons as much – the autumn generates a constant flow to producers and sellers’ accounts. Moreover, while other fields are suffering from decline, stagnation is the worst piece of news in the industry of products targeting kids; for most categories, sales are still going up at a two-digit rate. There are two clear reasons, believes Diana Stoian, psychologist and psychotherapist: “First of all, the kid is seen as a complement to the idea of fulfilment and achievement in one’s life,” – as such, even though parents have had to cut expenses in the overall family budget, they will spare no expense when it comes to their children. “Second, the fast-paced living, which reduces the time allocated to family, makes parents see the material comfort of their kids as a compensation.”

Worth 60 million euros in 2008, the market of foods for young children aged up to three, will grow by 15% this year, estimates Andreia Stanciu, category manager CCSD of Nestle Romania, which is the leader of this market with a 46% share in terms of value, according to 2009 data of market research company Nielsen.

“Baby food products are a dynamic category, with growth from one year to another,” Stanciu says. The growth trend remains, even though at a slower pace than before. Infant and baby milk formulas are the most important segment, accounting for 71% in value in 2008 and having gone up by more than 30% last year compared with 2007, according to Nielsen data quoted by the Nestle representative.
Companies in this business expect 2010 to end with higher sales than this year, forecasting 10% growth, says Eric van der Hoeven, managing director of Milupa Hungary & Romania.