Powdered baby formula prices are up – way up; price increases for formula more than doubled the pace of inflation

The shortage began in February 2022 and still hasn’t ended

The baby formula shortage in the US got a lot of press at the outset when the largest formula maker, Abbott Nutrition, had to shut down one of their 2 plants due to contamination. The formula shortage was extremely alarming for parents and quickly got the attention of the US Congress.

Despite extra help from the federal government, Abbott, in particular, has been plagued by recalls, and supplies haven’t yet stabilized – a large part due to 2 companies. Abbott Nutrition and Mead Johnson (Enfamil) make up 80%+ of the US formula market; it’s over a billion-dollar industry for just these 2 companies. While Abbott seems to have the most operational issues and perhaps costs associated with rebuilding their supply chain, the makers of Enfamil Reckitt raised prices even more dramatically (25%+ in 1 year), which improved their immediate profitability.

Government intervenes to help formula makers

During 2022, the US government reduced red tape for formula manufacturers and made a concerted effort to drive down the cost of formula inputs domestically. However, despite this unprecedented intervention in the formula market, the availability of formula to this day is still spotty, with many supermarkets consistently sold out. The retail price of formula has risen between 23% and 25% depending on your brand, and this excludes price gouging outside of the MSRP.

The price of Similac Advanced still rose 23% in 2022

Over the same period in 2022, that formula rose by nearly 25% – inflation considered red hot at 7.5% for the year. The powdered formula market is proving too limited, and both companies involved have been content to raise their prices by more than 3X their costs to drive profit. The retailers are also likely taking a bigger cut as formula purchase sizes went up during the pandemic; parents bought hundreds of dollars of formula at once (enough for a few weeks) rather than a single can at a time.

Abbott Nutrition & Mead Johnson are making record profits on formula

Despite dealing with the plant closure, Abott Nutrition made a record 2B in Q1 2023 in their nutrition category by growing 10.3% organically. Worse yet Mead Johnson – the private British LLC that owns Enfamil, reported that they shipped 3.4% fewer units of formula while growing revenue by 22.6%! They cite price increases, particularly, as driving growth and their established market position as ensuring their prospects.

This is their statement for Q1 2023 on nutrition, where even by their estimates, they gained an additional 75-100 million of revenue by raising prices:

Enfamil and Similac account for more than 80% of the formula market – they admittly are gouging WIC benefits for corporate profit.