Baby food has long been considered a not particularly “sexy” food category. Alete and Hipp dominated the market, innovations were barely visible. Recently, the so far conservative market shows movement, because the new food start-up culture is also triggering changes in the baby food segment. Another driver: the Millennials. These consumers are distancing themselves from big food brands, have less brand loyalty, and prefer small, individual manufacturers which better and faster tailor products to their needs. Start-ups are much more in favour of the Millennials’ desire for transparency, ethics and sustainability. Millennials are willing to spend more money on better food, thus higher production costs of start-up food and therefore high product prices are not a big issue. This development is now also fuelling a boom in high-quality and special baby and kids food.
Differences between baby food start-ups and traditional manufacturers
Start-ups mostly bet on
Baby Food Market
The baby food market accounts for 2% of global food profits, at 0% (rounded) of volume sales in 2016. Currently, most of the revenues are generated in China.
Worldwide sales: USD 40bn. in 2017. Growth to USD 50bn. expected until 2021.
Revenue related to Europe: EUR 4.8M in 2018. CAGR of 2.6% (2018-2021).
In Germany: wet baby food EUR 400M / + 8% p.a.; baby food pouches: + 60% p.a. 
After the end of the one-child policy in 2016, demand for baby food in China increased dramatically. Danone, for example, has growth rates of 30% in the baby food segment. However, according to ex-pats stationed in China, it is still difficult to get high-quality and trustworthy baby food in China. Also foreign imports can not be trusted, as suppliers and traders often sell the foreign commodity on the black market and in the trade instead land cheap copies of inferior quality.
Cost: New baby food up to five times more expensive
The new baby food brands are also many times more expensive than traditional brands. An example: The fresh baby food of Yamo from Switzerland costs in Austria about EUR 2.40 for a 125g cup – and that’s about three and a half times more than a comparable Hipp glass (Yamo: EUR 1.95/100g; Hipp: EUR 0.55/100g). US start-ups demand even more: up to USD 7 per meal (e. g. Yumi). That’s about five times more expensive than a glass of Hipp.
The biggest challenges in the baby food category are the strict regulations:
Responsible & healthy snacks for kids 
Next to new baby food, new and healthy snack options for kids are entering the market. This food category – which is called „Responsible Snacking“ – is characterized by gentle manufacturing processes in order to preserve vitamins, minerals and fibres. The biggest challenge is though, according to Robert de Weert, founder of the Dutch startup Fruitfunk (*2014, www.fruitfunk.com), to communicate these added values well to consumers, so that they are willing to pay a higher price.
Responsible Snacking is also characterised by good growth opportunities: among the 1,000 Europe’s fasted growing companies (2012-2015) two out of 54 food & beverage companies are focused on kids food:
In particular, baby food pouches („Quetschies“ in German) show high growth rates (Germany: + 60% p.a.; in UK pouches account for 25% of baby food sales). Baby food pouches have been launched around 10 years ago and enjoy great popularity with parents, because the child can quickly and easily suck fruit and vegetable puree out of the pouch. However, medical scientists and nutritionists are advising against pouches: kids unlearn to eat and chew properly, the communicative aspect of eating is lost and kids become used to snack constantly. It seems, babies and kids are already getting conditioned to „food-on-the-go“.
Road to success? – High capital need, but retail embraces the new concepts
A new, healthy baby food or kids-snack is not necessarily a success story – a fact that babyvidiual, a startup from German Nürnberg (founded 2010, frozen baby food, www.facebook.com/babyviduals) had to experience. In 2018 the startup closed down due to high capital requirements for advertising and distribution, which was necessary to popularise the new brand and make it profitable.
Nevertheless, retail seems to appreciate the new baby-food products. Löwenzahn Organics (www.loewenzahnorganics.com) for instance, has been listed at DM Germany and BIPA Austria. Now Yamo from Switzerland (chilled baby food, www.yamo.ch), is listed in 48 German DM stores – which is a special „honour“ from DM, because the drugstore did not sell any chilled products so far.
The diversification of the baby food market is well appreciated. The new and healthy alternatives next to traditional brands make it a lot easier for parents to provide their kids with the proper nutrition – without having to spend hours in the kitchen themselves. Certainly, one has to pay the price for it. However, after Millennials are ready to spend more money on better food, pay more attention to ingredients and origin, but at the same time appreciate convenience and delivery-options due to constant lack of time, they will apply this food-attitude to their kids’ nutrition and therefore go for the new baby food brands. Investors and similarly retailers recognized this fact und are investing in promising baby food concepts, or adding them to their product range.