Exclusive: Reckitt expects U.S. infant formula shortage until spring

LONDON, Dec 2 (Reuters) – The nearly a year-long shortage of baby food in the United States, which led to the White House’s intervention, will likely “last” until spring, according to Reckitt Benckiser, now the manufacturer of the largest brand on the market, Enfamil.

Earlier this year, panicked parents emptied their baby food aisles in supermarkets after former top US manufacturer Abbott Laboratories (ABT.N) recalled dozens of Similac, Alimentum and EleCare formulas in February.

Products made at a factory in Michigan were pulled over complaints of bacterial infection.

Supermarkets like Target (TGT.N) and Walgreens Boots Alliance (WBA.O) had to limit sales, putting pressure on the Biden administration to address the crisis.

In May, the White House took steps to remedy the shortfall by invoking the Defense Production Act to help manufacturers obtain the necessary materials to speed up procurement.

Robert Cleveland, Reckitt Senior Vice President of Nutrition for North America and Europe, said that although the United States has made progress in replenishing stocks, supplies have yet to return to normal since the peak of the crisis in May and June.

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“I suspect this will continue to some extent until the spring resets,” he said. However, he said the situation has improved. “There’s a lot more on the shelves than a few months ago, and there’s more than enough volume to feed America’s babies.”

Competitor manufacturer Perrigo Company Plc (PRGO.N) declined to comment, while Aptamil’s manufacturer Danone did not immediately respond to a request for comment.

Since Abbott’s recall, Reckitt’s share of the baby food market has grown rapidly, making it the #1 supplier in the United States.

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While Cleveland says its market share of just over 50% has “remained relatively unchanged” since earlier this year, the British company has yet to see its newfound popularity wane.

The US’s statement that it will temporarily cover baby food expenses for low-income families due to government discounts in states that have contracted with the company further strengthened its position.

Companies normally bid on government contracts to be the sole provider of infant formula for low-income families under the Women, Babies and Children (WIC) program. They offer a “discount” in their offer in the form of a discount to the states.

Government intervention, aimed at encouraging firms to increase supplies, effectively counters this reduction.

Reckitt said the food factories operate 24/7 and feed more than 40% of all low-income WIC babies.

“We certainly hope that at some point in the future, they (the United States Department of Agriculture) will want to normalize the program,” Cleveland said.

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“What we’re telling them is that they give us enough notice – essentially putting a date on the calendar….don’t try to shock the system by making it happen too fast – give us time to adapt because we’re going to have to adjust our production, we’ll have to adjust our distribution,” he said.

Reported by Richa Naidu from London. additional reporting by Jessica DiNapoli in New York; Editing: Matt Scuffham, Arun Koyyur and Jan Harvey

Our Standards: Thomson Reuters Trust Principles.

Richa Naidu

Thomson Reuters

London-based correspondent covering retail and consumer goods, analyzing trends including the scope of supply chains, advertising strategies, corporate governance, sustainability, policy and regulation. He previously wrote about US-based retailers, major financial institutions and covered the Tokyo 2020 Olympic Games.


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