When one small-town factory closed in mid-February, the US baby formula market was thrown into chaos.
Abbott Nutrition, based in Sturgis, Michigan, is the largest of four domestic baby formula producers that between them control more than 90% of the US market. Its shutdown highlights multiple market and regulatory failures that have left American parents scrambling to feed their infants.
On the same day, Abbott issued a nationwide recall notice for several brands manufactured at the plant, including Similac, Alimentum and EleCare. That followed a Food and Drug Administration inspection prompted by the hospitalisation of five infants with bacterial infections after drinking Abbott’s products. Two of the babies later died.
In 2021, 3.7 million children were born in the US. Only one in four newborns are exclusively breastfed from birth. The rest are fed formula for some or all of their nutrition during their first six months, after which they can begin eating solid foods. With stock shortages exceeding 80% in some large cities and store shelves empty, parents have become increasingly desperate. Panic buying and stockpiling have exacerbated the problem prompting large retailers to implement rationing.
The Biden administration has secured emergency supplies from overseas; shipments have been flown in from Switzerland, Germany and the UK under “Operation Fly Formula”. A shipment from Bubs Australia is due to arrive in Pennsylvania and California this week.
Easing shortfalls with legislation
Biden has also invoked the Defense Production Act, ordering upstream suppliers to sell essential ingredients to baby formula manufacturers ahead of other buyers.
These measures will help ease inventory shortfalls in coming weeks. Meanwhile rival suppliers Mead Johnson Nutrition, Gerber and Perrigo have ramped their output with around-the-clock production schedules. Even so, with Abbott commanding 40% market share, sales won’t return to normal until it resumes full-scale operations. And with Abbott’s Sturgis plant restarting only this past Saturday, it will be several months before all Abbott’s product lines are back on shelves.
Several factors caused this market failure. First is the industry consolidation that gave four producers oligopoly control of the US$4 billion formula market. Such market concentration has been a recurring theme across the economy, in industries as varied as agriculture, transport, media, telecommunications, insurance and technology. Proponents tout consolidation as essential for innovation, business efficiencies and global competition. In practice, it also delivers pricing power and leverage over suppliers and customers — and leaves consumers vulnerable to disruptions. Management trends favouring just-in-time inventories, with little slack in the system, aggravate supply risk.
Second is the market structure for baby formula in the US. The largest purchaser is the US Department of Agriculture’s Special Supplemental Nutrition Program for Women, Infants, and Children, known as WIC. WIC feeds 1.7 million infants via federal grants to the states. Abbott, Mead Johnson and Gerber are the three accredited providers to WIC, which is why they are the biggest producers. In return for deep discounts, each state selects one of the three to be its monopoly provider to parents eligible for the program. With Abbott’s goods offline, this left parents in many states unable to access any supplies via WIC because they could not buy from any other firms. This roadblock persisted until Congress addressed this impediment with the Access to Baby Formula Act last month, allowing parents to switch brands regardless of their state’s chosen WIC seller.
Third is the downside of the push for domestic manufacturing and the erection of trade barriers: 98% of US formula is made in America, while the other 2% is imported from a handful of countries, including Mexico, Ireland, the Netherlands and Chile. Jingoistic championing of “Made in USA” and opposition to trade is all well and good until the system malfunctions. But protectionism does not guarantee supply.
Indeed when the Trump administration renegotiated the North American Free Trade Agreement in 2018, now the US-Mexico-Canada Agreement, it imposed quotas and tariffs against baby formula imports from Canada. This was believed to be in reaction to a proposed Chinese formula plant in Ontario that might seek to sell its products across the border. As a result of Trump’s revised pact, Canada exported no formula to its southern neighbour in 2021.
‘Hidebound and sluggish’ FDA
Fourth, the FDA compounded the fiasco in two crucial ways. It is an independent regulatory authority whose job is to safeguard public health. It maintains exacting standards for product ingredients and labels to protect consumers. For the most part, these serve the public well. However, it can be hidebound and sluggish when it comes to adapting its procedures.
The current debacle underscores both those flaws, because formula that could have been sourced from overseas months ago was deemed not suitable for US distribution, even though supplies in other developed countries are also closely regulated and considered by many to be superior to their US equivalents.
More concerning is that reports of Abbott’s safety lapses date back to 2019. Multiple inspections found traces of the cronobacter bacteria that eventually led to the plant shutdown. Last September FDA inspectors found sanitation issues and temperature problems, but failed to halt production. A whistleblower also alerted the FDA to contamination concerns in October, months before the two babies died, informing them that Abbott allegedly doctored records and knowingly put a contaminated product on the market. Yet it took until February this year for the FDA to act.
Investigators will look closely at these decisions, and how they contributed to the mess. Regulatory capture and agency underfunding are likely to be two contributing factors. The FDA has only nine inspectors to monitor the entire baby formula industry.
Amid the chaos, Republican politicians are attempting to blame the Biden administration for the formula shortage. They claim the president has failed to ensure American parents can feed their babies. It’s an attack tailor-made for TV ads and soundbites. They remain silent on the failings of a dominant company to maintain supply in a captive market. They have issued no criticisms or demands of Abbott’s executives for their neglect.
As if that weren’t bad enough, last month 192 House Republicans voted against a US$28 million emergency spending bill, the Infant Formula Supplemental Appropriations Act, intended to expedite production and prevent future shortages. True to form, they would rather lob rhetorical grenades than help solve actual problems.
Meanwhile American parents and those expecting new family members just want the crisis to end. Fast.
Sounds like a need for a big campaign to encourage breast feeding. I realise that’s of no use to those who have already stopped breast feeding and no longer have a milk supply, but it will make what formula there is go further
Sounds like some one somewhere has successfully spread the message that breast feeding isnt the way to go and formula is. Who would benefit from that I wonder. I suspect a decades long campaign to promote formula over breastfeeding is now coming home roost. All those complicit in it, starting at maternity hospitals, should hang their heads in shame.
And they ridicule the Russians over brainwashing and propaganda LOL…
There’s also a convenience factor in bottle feeding, to be fair.
Debatable if there is a convenience factor Woop Woop. A common misconception.
Difficult to breastfeed while working in many jobs.
Yes, the mother can go out without the child, sometimes.
It is people’s mindsets which can cause the most enormous amount of damage.
Have you heard of “Stunting”?
Australia spends millions in aid in the islands of Indonesia to prevent this from occurring, meanwhile in Australia we have the “Breast only” brainwashing midwives and others causing the stunting of Australian babies by their mothers.
In one case I know of, the baby was 3 kilos born, at 12 weeks was 3 kilos&100gms (Baby was screaming to be fed on the hour and the mother was advised to maintain this program supposedly her milk would build up)……..
At aged 2 years this child weighed 7 kilo’s, having started solids at 6 months.
His height was 40cm which means that his completed adult height will make him not quite 1 meter tall.
His mother is 1.65 m, his father is 1.89m and his sister who was formula bottle fed is 11 years old and 1.62m.
Sounds like a wet nurse was needed if his mother had insufficient milk – a vital and honourable profession which seems to have been in abeyance for far too long.
“Market Forces” never seem to have quality control as part of their market strategy.
The raw profit motive without a legal responsibility for safety and quality is a dangerous place.
This is why food producers need regulation and oversight.
In Australia we have in the past had quality assurance at the heart of food production, overseen by regulation which could ensure that QA was maintained.This was dismantled by the vandal Abbott, whilst he was “cutting red tape”.
Unless something is done, and QA put back under regulations we may lose our reputation for clean and green products.
That would be a shame as obviously we have a market developing in the US for our baby formula.
One of the reasons so few babies are exclusively breastfed is the very poor maternity leave provisions for so many mothers, particularly those in insecure and poorly paid jobs. They are in a vicious circle of pain, they must work to provide for their families but formula eats up a large chunk of their salaries. Babies and families both lose while big business wins.
Shocking stat. 1 in 4 exclusively breastfed.