The President has, as usual, called on the manufacturers to solve this crisis. But, the causes are less precise than most media articles will show and include Government issues that could be solved quickly by a crisis manager - of which we have none in the government. My past companies would assign a war room to attack a crisis head-on - why can’t we do this anymore? It seems we instead head to the media room and start spinning.
Causes affecting this issue are:
Abbott Laboratories in February recalled several brands and shut down a plant in Michigan after complaints that four infants fell severely ill with a dangerous bacteria after ingesting its powdered formula. The Food and Drug Administration launched an investigation and onsite inspection, noting earlier findings that had detected the bacteria at the plant.
It’s not clear when the FDA was made aware of the problems at the plant and why it didn’t take action sooner. Abbott said this week that “after a thorough review of all available data, there is no evidence to link our formulas to these infant illnesses.” The FDA said Friday the Centers for Disease Control and Prevention closed its investigation after finding no more cases of infant illness.
There are only four manufacturers of baby formula in the US. 95% of it is manufactured in the US.
Imports are restricted due to a 17.5% tariff, FDA labeling, and ingredient requirements. A reminder to the readers that the Dairy Industry in the US is one of the most influential groups.
Canada's imports are restricted due to the Trump-era USMCA trade deal.
Further limiting competition is the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) for low-income mothers. By the Department of Agriculture’s estimate, WIC accounted for between 57% and 68% of all infant formula sold in the U.S.
Think about this data for a minute, absent the formula issue; this would imply that over half of all births in the US are to mothers in poverty (185% of poverty level)
I made an assumption with the data that I shouldn’t have. I assumed all parents (poor and non-poor) use baby formula at the same rate and thus deduced that half of babies are born into poverty. 13-17% of births are born into poverty (but this measure is the base poverty measure - not the formula that WIC uses which is at 185% of poverty. Other stats show that 41% of births are covered by Medicaid which would support the fact that many US births are born into poverty.
An interesting question to answer is whether WIC parents use formula more than non-WIP parents - makes sense that they do since formula insures all nutrition is met versus breastfeeding by a malnourished mother may not. One study I read did conclude that poor mothers used formula versus breastfeeding at a higher rate. BTW, WIC does provide an expanded food program for breastfeeding mothers.
Under the welfare program, each state awards an exclusive formula contract to a manufacturer. Companies compete for the contracts by offering states huge rebates on the formula women can buy. The rebates equal about 85% of the wholesale cost. Women can only use WIC vouchers to purchase formula from the winning manufacturer. Stores give WIC brands more shelf space. Single sourcing - is the devil in this formula…
Why would anyone invest in a new formula plant when the latest WIC contract winner controls 50% of sales?
The US Department of Agriculture on Friday outlined the steps it has already taken to help low-income families, mainly by providing waivers to states to give parents using WIC benefits a wider array of options –if they can find other brands on the shelves and their babies can easily switch formulas. Notice they worked on the WIC issue but not the issue the other 50% of parents are facing - in some cases it will be worse because WIC buyers are now taking stock that was produced for non-WIC buyers. (banging head on table as unintended consequences pile up)
Retailers are rationing supplies while some panic buy. Please read my previous post on using market prices to counter-attack panic buying. Raising prices works if you can hold off the accusations of gouging. Due to WIC volume, this may not even work here.
Alternatives for baby formula are rare. Any Facebook post of a panicked mom can cause a run on grocery shelves.
The current overall logistics issues are contributing to the problem. Any government action on that front is strangely quiet.
Parents spend between $1200-2,000 per year on formula.
A friend also noted the controversy around the US government stockpiling formula at the border for an expected influx of migrants upon the ceasing of Title 42 regulations. While most people say this stockpile should be used - he stated the real interesting observation was that the government planned for this! Where was the same planning when they shut down the US formula plant?
It also illustrates that global trade has its uses, and there are costs to the faddish drive to produce everything in America. Members of both parties in Congress want to subsidize domestic production, but this can create its own supply-chain vulnerabilities. Globalization nowadays may be a dirty word, but having diverse suppliers is an economic strength.
WOW, WIC accounted for between 57% and 68% of all infant formula sold in the U.S? We subsidize the manufacturers, we subsidize the users, and we subsidize the doctors who probably write the Rx. When are WE going to stop paying for all this?
I don’t understand why Biden hasn’t stepped up to push manufacturing harder!!! Why they didn’t get a plan going when the FDA closed the plant down (I live very close to Sturgis, and am very disappointed in Abbott Industries and the government!!
I’m also concerned that over the past 50+ years we as a society have become very dependent on supplemental formula as replacement.
I do understand all the issues of momma’s who are unable to breastfeed do to many different issues from no milk production, baby unable to suckle and infant allergies!! But, I feel that some momma’s (yes and daddy’s too can help), can maybe do a little more, but it does take some choices.
WOW, WIC accounted for between 57% and 68% of all infant formula sold in the U.S? We subsidize the manufacturers, we subsidize the users, and we subsidize the doctors who probably write the Rx. When are WE going to stop paying for all this?
I don’t understand why Biden hasn’t stepped up to push manufacturing harder!!! Why they didn’t get a plan going when the FDA closed the plant down (I live very close to Sturgis, and am very disappointed in Abbott Industries and the government!!
I’m also concerned that over the past 50+ years we as a society have become very dependent on supplemental formula as replacement.
I do understand all the issues of momma’s who are unable to breastfeed do to many different issues from no milk production, baby unable to suckle and infant allergies!! But, I feel that some momma’s (yes and daddy’s too can help), can maybe do a little more, but it does take some choices.