Fewer Babies, Pricier Diapers: P&G's $100 Million Bet on Premium Parenting

P&G's new high-end Pampers Amore diaper line is on track to bring in more than $100 million in sales within its first year, as shrinking households push parents to spend more per child. The company's stock jumped 5.6% on Thursday, making P&G the best performer in the Dow Jones Industrial Average and marking its biggest percentage gain since March 26, 2020, when shares rose 6.4%.

The gain came on better-than-expected first-quarter results. Organic sales in P&G's baby-care segment rose by the "mid-single digits," driven by higher volumes and what the company called "favorable premium product mix." P&G shares are up 15.6% so far this year, though they remain below highs reached in 2024.

CFO Andre Schulten told analysts on the quarterly earnings call that Amore's early U.S. success rests on a simple demographic insight: "insights that fewer babies in each household means parents spend more per baby." He called that trend one of the biggest future growth drivers for baby care worldwide.

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

How does premiumization work in practice?

P&G is courting "premium" customers with safer ingredients and higher-quality materials. The company says the Amore diaper offers a "cashmere feel." In China, its silk-made Pampers Prestige line has grown at a midteens rate over the past eight quarters, according to P&G. Schulten noted that midtier diaper offerings are "effectively nonexistent" in that market.

Inflation has made customers more selective, and the premium formula has been a winning one for P&G. The company did not immediately respond to questions about inflation's role in the higher spending or whether the trend had surfaced in its other businesses.

What do the birthrate numbers say?

The backdrop is a long demographic slide. The U.S. general fertility rate fell 1% last year compared to 2024 and has dropped 23% since 2007, according to Centers for Disease Control and Prevention data.

Consumer-goods companies are responding by selling up rather than selling more. Serena Aboutboul, head of Nestle's nutrition and health business, said at an investor event 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.

Amanda Twede Crawford, CFO of infant-monitoring service Owlet, echoed the point at a conference in June.

"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."

Is a shrinking customer base good or bad for business?

For some companies, fewer babies is a direct threat. Crown Crafts — which makes infant products 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, a baby-food maker co-founded by actress Jennifer Garner, has also flagged falling birthrates as a potential drag on sales.

Hasbro CEO Chris Cocks was blunt about the toy side. He 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.'"

Others see opportunity further out on the curve. RoboStrategy, a fund investing in the robotics industry, argues that fewer babies eventually means fewer workers — and 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.

For P&G, at least, the math already works: fewer births, fatter margins per child, and a stock riding its best day in more than five years.