Makers of diapers and baby formula brace for lower sales as pandemic leads to decline in births

KEY POINTS

• Procter & Gamble, Nestle and Reckitt Benckiser are among the companies that could be negatively affected by shrinking birth rates this year.
• Experts predict that the birth rate will fall this year because of the coronavirus pandemic.
• In recent years, as the birth rate has lagged, consumer giants have turned to making premium products to appeal to wealthier parents.

Boxes of Huggies brand diapers move along a conveyor belt at the Kimberly-Clark manufacturing facility in Paris, Texas.

Laura Buckman | Bloomberg | Getty Images

Call it the Covid baby bust.

Experts are forecasting declining birth rates this year as a result of the coronavirus pandemic, putting pressure on the consumer giants that manufacture infant formula, baby food and diapers, The Wall Street Journal reported Monday.

Barclays is predicting that births in China will fall 8% this year, while the Brookings Institute is estimating that U.S. births could shrink by as much as half a million, citing the impact of an economic recession, according to the Journal. This comes as birthrates in the U.S. and China are already at their lowest levels on record.

And the births may not just be delayed. The Brookings report forecast that the permanent loss of income stemming from the pandemic will keep some people from having any children even after the crisis subsides.

A sharp decline in the number of births this year means that Nestle's Gerber and Reckitt Benckiser's Enfamil will have fewer parents buying their baby formula. Pampers owner Procter & Gamble and Huggies owner Kimberly-Clark could also see lower sales for their baby segment as a result.

In recent years, as births in the U.S. and China have slowed, consumer giants have turned their attention to selling premium baby items. Procter & Gamble, for example, is making diapers that don't use tape or that mimic the fit of pants. Last year, Huggies introduced Special Delivery, a premium diaper that is made from plant-based materials and is free of parabens, fragrance and elemental chlorine.

Kimberly-Clark CEO Michael Hsu told analysts on the company's latest earnings call that it would be focusing on growing its baby sales in developing markets where the birth rates are higher, such as Indonesia.

Lower birth rates haven't deterred some retailers from trying to gain a foothold in the category. Walmart is betting that its baby aisles will still drive traffic. And if parents are having fewer children, they might be more willing to spend more money on them.

Read more about the predictions for falling birth rates here.