By now, everyone’s heard about the shortage of baby formula in the United States. It stems from the fact that over 90% of U.S. infant formula is made by only 4 companies: Abbot, Mead Johnson, Nestle, and Perrigo. But, how did this happen? There are three, primary causative factors:
- There has been a lot of consolidation across the food industry over the past few years, with big corporations buying-up other companies.
- The governmental food safety regulations for infant formula are extremely strict. Only companies with access to money and resources can produce these types of products. In addition, the FDA placed strict restrictions on imported formula, despite the fact that many countries have food safety standards that meet or exceed domestic standards. Because of this, the U.S. now manufactures 98% of our formula supply.
- About 50% of infant formula sales go through the federal Women, Infants, and Children (WIC) program, which equates to about 1.2 million infants. WIC contracts utilize a sole-supplier methodology, so two companies (Abbot and Mead Johnson) account for about 90% of WIC contracts in the US.
Beyond the reasons listed above, baby formula manufacturers are currently facing the same supply chain and workforce issues faced by manufacturers across the world. Interruptions in the baby formula supply chain, coupled with the fact that the FDA shut down a major producer earlier this year due to an extensive recall, created a perfect storm for the shortage.
Read more about reasons for the baby formula shortage and what actions have been taken to help alleviate the problem, in this recent article that I contributed to in the Washington Post: US safety, savings rules set stage for baby formula shortage.
What can manufacturers learn from this and what actions can be taken by companies to guard against future shortages of other products?
- Food manufacturers can take steps to put food safety and quality first, to avoid consequences such as recalls or shutdowns. Learn more about the food safety training and implementation services provided by GaMEP at our food and beverage industry page.
- All manufacturing companies can review their supply chain and use strategies to diversify and mitigate risk. Contact us for more information on how GaMEP can help.
By: Wendy White, GaMEP Food Industry Manager