'Fewer babies in each household means parents spend more per baby,' Procter & Gamble CFO says

P&G says it's found a winning strategy by playing up higher-end materials in its baby-care line.

Higher costs of living have led to lower birthrates in the U.S. - but for some companies, that trend has proven an opportunity to sell fancier diapers and other services to wealthier parents, who don't have as many children to pamper as older generations once did.

Procter & Gamble (PG) - known for diapers like Pampers and Luvs, as well as products like Tide, Bounty and Pantene - said Thursday that its new high-end Pampers Amore diaper line has been an early success in the U.S. Chief Financial Officer Andre Schulten said during P&G's quarterly earnings call that the gains were helped by "insights that fewer babies in each household means parents spend more per baby."

That trend, he said, is one of the biggest future growth drivers for the baby-care space writ large, and it's already taking shape worldwide.

"It holds true in the U.S., it holds true in China," Schulten said.

The CFO said that catering to "premium" customers via safer ingredients and higher-quality materials - P&G says the Amore diaper offers a "cashmere feel" - has been a winning formula for the company, as inflation makes customers more selective about what they buy. Amore, he said, is expected to bring in more than $100 million in sales within its first year.

In China, Pampers Prestige diapers, which are made with silk materials, have been growing at a midteens rate over the past eight quarters, according to P&G. Midtier diaper offerings are "effectively nonexistent" in the nation, Schulten noted.

P&G did not immediately respond to questions about inflation's role in the higher spending and whether the trend had emerged in its other businesses.

But the momentum helped lift the company's stock by 5.6% on Thursday, as investors cheered its better-than-expected first-quarter results. Organic sales in the P&G's baby-care segment rose by the "mid-single digits" over that period, driven by higher volumes - a measure of the amount of product sold - and "favorable premium product mix," it said.

The stock's move higher made P&G the best performer in the Dow Jones Industrial Average DJIA on Thursday, and marked its biggest percentage gain since March 26, 2020, when the stock rose 6.4%. P&G shares are up 15.6% so far this year, but off highs reached in 2024.

The U.S. birth rate continues to fall from previous decades. The nation's general fertility rate fell 1% last year when compared to 2024, and has fallen 23% since 2007, according to data from the Centers for Disease Control and Prevention.

Consumer-goods companies have tried to roll out higher-quality fare to stand out among increasingly cautious shoppers and compete with retailers' store brands. Serena Aboutboul, head of Nestle's (NSRGY) (CH:NESN) nutrition and health business, said in 2024 that premiumization of its early-childhood business - which includes Gerber baby food - would help growth.

"With less babies per household, we expect parents to spend more," Aboutboul said at an investor event.

During a conference in June of this year, Amanda Twede Crawford, CFO of infant-monitoring service Owlet $(OWLT)$, echoed those remarks.

"There's about 3.6 million births in the U.S. and it's been relatively flat for a while," she said. "But what's interesting, though, is parents are spending more per child than they ever have."

On the whole, falling birthrates could be a mixed bag for corporate America. Chris Cocks, CEO of toymaker Hasbro (HAS), said on a February earnings call that the traditional toy market was likely in a multiyear decline.

"The reality there is there's just less babies being born, and there's more substitution happening at earlier ages," Cocks said. "So if you ask me kind of what the overall toy industry is going to do, I'd probably give you an 'I don't know.'"

Crown Crafts $(CRWS)$ - which makes products geared toward infants under the Manhattan Toy and Sassy Baby brands - has cited the declining U.S. birth rate as a risk in regulatory disclosures. Once Upon a Farm $(OFRM)$, a baby-food maker co-founded by actress Jennifer Garner, has also said a declining birth rate could affect its sales.

But RoboStrategy (BOT), a fund that invests in the robotics industry, says fewer babies should eventually mean fewer humans on the job - and thus, more robots.

"Just the overall trends in society - where people are less excited to do these tough industrial, physical labor jobs and birth rates [are] declining - means there is a great opportunity for robots to help fill that gap," RoboStrategy CEO Andrew Kang said at the company's investor day in June.

-Bill Peters