The Evolution of the Baby Food Industry 2000-2008

Authors:
Viola Chen
Working Paper:
297
Eight years have elapsed since the Federal Trade Commission (FTC) prevented the merger of the formerly number two and number three baby food manufacturers in the U.S. Since the abandoned merger, the landscape of the baby food industry has significantly evolved. All of the major brands of jarred baby food have experienced changes in ownership. The product market may have slightly broadened beyond jarred baby food. And, market concentration has increased, but prices have not. Gerber increased its market share from 71 – 72% to 73 – 80%. Beech-Nut’s market share slightly declined from 13% to 11 – 12%, while Heinz’s former brand, Nature’s Goodness, declined from 13% to 2%. With no substantial entry, only Gerber and Beech-Nut enjoy double-digit market shares. Also, while the average price of baby food has fluctuated over the years, prices in 2008 are the same as prices in 2000, after adjusting for inflation and changes in the composition of consumption. By these measures, it appears that the market is not much different in 2008 than in 2000. No evaluative judgment on the merger decision is made in this paper because the paper does not attempt to predict the evolution of the hypothetical alternative.