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More pain for companies that make baby products as US births hit low

More pain for companies that make baby products as US births hit low

For the second year in a row the fertility rate in the U.S. hit a record low, extending a decline in the number of American births that started in 2008.

The rate fell to 60.2 births per 1,000 women of childbearing age in 2017, down 3 percent from the year prior, according to a report by the National Center for Health Statistics.

As would-be parents push back parenthood and birth rates continue to decline companies that provide baby products are feeling the pinch.

Kimberly-Clark, the maker of Huggies diapers, has been vocal about the hit it’s taking from declining birth rates.

In January, the company announced it would cut about 13 percent of its workforce globally, or at least 5,000 jobs, in a bid to reduce costs as sales fell.

“I’d say, certainly in 2017 we had some factors like the birthrate in the U.S. and Korea being more negative than expected, that you can’t encourage moms to use more diapers in a developed market where the babies aren’t being born in those markets,” Thomas Falk, CEO of Kimberly-Clark, said in an earnings call in January.

Pampers-maker Procter & Gamble and Edgewell Personal Care, the maker of Playtex baby bottles, have also reported sales declines in its baby businesses this year.

“The declining birth rates sweeping across America are going to have a profound affect on many businesses — some in the immediate term and others 5 to 10 years out,” Jason Dorsey, president of the Center for Generational Kinetics, told CNBC via email. “The reason is that declining birth rates hit the obvious group of businesses first: diaper makers, toy makers, kids meals at restaurants, car seat manufacturers and the like.”

With a shrinking market, it becomes even more important to perfect your pitch. Baby care heavy weight Johnson & Johnson’s has seen a 20 percent sales decline in its Baby Care unit since 2011 and plans to redesign its Johnson’s Baby products to appeal more to modern day moms.

The new line emphasizes more natural ingredients.

“Perhaps because of our success, we became a bit complacent and did not want to mess with success, for lack of a better expression,” Jorge Mesquita, worldwide chairman and executive vice president for J&J’s global consumer unit, said in an interview with CNBC’s Meg Tirrell Wednesday. “Frankly, we failed to see evolving needs from millennial consumers, millennial moms, and we failed to evolve our model.”

The U.S. has experienced birth rate declines before. The longest period of continuous decline on record happened between 1958 and 1968, according to a NCHS report.

However, generational changes could exacerbate this decline. Women are postponing marriage in favor of their careers and waiting to have children until later in life, if at all.

“The big question we’re exploring at our generational research center is if this is a temporary generational delay or a new normal,” Dorsey said. “At this point, our research appears to show this is heavily generational driven by millennials who are now well into their late 30s. We consistently hear millennials tell us that they’re delaying having kids until they feel ready —financially and otherwise — yet they also tell us they still intend to have kids.”

“What will be telling to us is how Generation Z reaches traditional markers of adulthood, such as having children, and if they swing the pendulum back the other way as they emerge,” he said. “They are now up to age 22. This is a trend business leaders need to watch closely whether it impacts them now or will in the future.”

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