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The Food Innovation That’s Quietly Taking the Market by Storm

Think of the baby food market and you probably think of something as bland, predictable and boring as… well, baby food!

Until now, that is.

One small innovation is quietly changing that outlook.

Not only that, it’s influencing adult food trends, too.

The answer lies in a simple pouch…

Baby Steps for This Growing Market

It’s good food for babies on the go.

“Chicken Casserole” and “Carrots, Apples + Parsnips” are just two of the food pouch recipes on the market for little ones.

These portable packets are typically four ounces and come with a top spout and oversized cap (to prevent choking).

Now, these pouches – or “squeezies,” as they’re also known – are pricey compared to the jars of baby food. Whereas a four-ounce jar might cost 99¢, the same sized pouch is $2.

No matter.

Despite paying twice as much, parents like the convenience, neatness and perceived health benefit of the pouches.

In turn, baby food makers are catering to health-conscious parents who want to expose their kids to a more diverse palette…

An Organic Innovation

While organic food only accounts for about 4% of total U.S. food sales, it represents a growing 21% of the baby food market.

And in food pouches, organic baby food has found the perfect partner.

The link between the two goes back to 2008, when the founder of Nest Collective, Neil Grimmer, saw the pouch design being used in Japan and adapted it for the U.S. baby food market by launching the company’s Plum Organics baby food line.

It worked.

Nest Collective’s sales ballooned by more than 3,000% between 2007 and 2010, making it among the fastest-growing private companies in America. A conservative estimate puts its 2012 sales at $53 million.

Recognizing the success of the food pouch innovation, other organic baby food startups like Ella’s Kitchen and Sprout have jumped into the space, too. These brands are now widely available on the shelves of Whole Foods (WFM), Target (TGT) and Wal-Mart (WMT), among others.

These startups face some stiff competition from the big boys, though. For example…

~ Nestle (NSRGY): The company’s Gerber brand is growing sales of its new pouches for babies and toddlers at double-digit rates. “We’re excited about pouches, we’re No. 1 in the segment, and we want to continue to grow it,” says Aileen Stocks, Gerber’s head of integrated marketing. Right now, it holds a hefty 30% share of the pouch market.

~ Hain Celestial Group (HAIN): The company makes Earth’s Best baby food and Hain’s Chief Marketing Officer, Maureen Putman, points to behavioral reasons for the pouch’s success: “As a child becomes more independent and wants to self-feed, [pouches] definitely give the child a little bit of control and confidence.”

Case in point: Even as the U.S. birth rate declines, pouches have helped fuel 11% growth at Earth’s Best. “It’s allowing us to age up,” says Putnam. “The pouches have really helped extend the shelf life of baby food. We see growth for a long time to come.”

What kind of growth? Well, the popularity of pouches is behind Earth’s Best organic baby food sales grew by 41% in the last three months of 2012, even as baby food sales in general have remained flat. Annual sales are exploding at triple-digit rates, with Hain reporting a 372% jump in grocery store revenue last year.

There’s a clear trend: About 40% of new baby food products or flavors came in pouches – and babies and toddlers can’t get enough of them.

But as it turns out, these pouches aren’t just for babies – the innovation is stretching to other age ranges.

Kids are taking pouches to pre-school, kindergarten, first grade and beyond. Not that everyone is happy about it…

Convenience Breeds Controversy

As food pouches make their way into the grade school years, you can almost hear the hand-wringing on the mommy message boards.

“Pouches?! You can’t have a pouch for lunch!”

Doctors and dentists are also dismayed about the prevalence of pouches. Writing in the Chicago Tribune, Dr. Sue Hubbard believes children are supposed to learn to feed themselves by feeling textures between their fingers, as well as in their mouths.

In addition, eating too many pouches per day could lead to cavities, as the puree sits on the teeth, rather than being swallowed in small bites when food is eaten normally.

Pouches are also extending to us adults, too…

A New Snacking Solution for on-the-Go Adults

Companies including Happy Family, Buddy Fruits and GoGo squeeZ are experimenting with larger pouch portion sizes, simpler designs and sophisticated flavors like cranberry or açaí.

The obvious target market is athletes, runners and cyclists, already used to sucking down energy gels and other quick snacks during long runs or rides.

But companies also expect pouches to succeed with adults for some of the same reasons they do in the baby market. For example, people are snacking more instead of cooking meals and they want healthy, exciting food that still tastes good.

In the next five years, chances are good you’ll be picking up a pouch to make it through your day, too.

Ahead of the tape,

Elizabeth Carney