Can the new force in the Austrian baby food market break the stranglehold of the two market leaders?
The Austrian market for baby food is extremely concentrated, with the two leaders supplying 82% of market value in 2016 and 79% of volume. Hipp has been market leader for many years in terms of volume, and in 2016 is thought to have inched ahead of Danone in value too. Hipp dominates in meals, juices and teas, and lies second in milks and cereals, where Danone leads.
BWK has acquired part of Nestlé’s business.
At the end of 2014, number three player Nestlé sold its Alete brand to a consortium led by the Stuttgart investment group BWK GmbH, leaving Nestlé weakened, represented only by its Beba brand.
BWK bought Nestlé’s Alete and Milasan brands in Austria and Germany, with effect from 1 January 2015. Nestlé agreed to support the consortium in various ways, including co-packing, IT-support and use of Nestlé’s export expertise. The new owners promised to invest in its brands, develop new segments, and find new markets abroad.
BWK has risen to the challenge
In Austria, BWK markets only the Alete brand, and it is now present in most sectors, though for a time in 2015 it was difficult to find some products. In the milk sector, a newly packaged range was launched at the start of 2016, including an adapted complementary (pre) milk, first and second stage milks, and a toddler milk, all positioned at the top-end of the low-priced segment. It also has a number of products in the cereals sector, although these are not currently widely available. The Alete portfolio is strongest in wet meals, where the brand had performed better in Austria than in Germany prior to the BWK acquisition. The product range is gradually being remodelled. Products currently available include a wide range of savoury and sweet jars, chocolate and vanilla puddings in plastic pots, and ready-to-feed milk / cereal mixes (known as Trinkmahlzeiten). Alete has also recently launched a range of desserts and fruit purées in pouches. A number of juices, as well as finger foods, notably fruit bars, are also marketed.
BWK is currently marginally behind Nestlé in fourth place. However, its recent programme of new product development positions it well to shake up the status quo, especially in the meals sector, which is expected to be the fastest growing sector over the next five years. It is unlikely to succeed in threatening the pre-eminence of the existing leaders, but certainly has the potential to clinch the number three spot, and to disrupt Hipp’s almost unchallenged position in the meals sector.