A decidedly supply-side solution is shaping up to solve the infant formula shortage that’s been plaguing the United States for the past eight months or so. Perhaps sooner, rather than later, the shortages are going to be erased when enough new capacity hits the market.
The fact that it’s happening may have as much to do with the Biden administration’s recognizing that the shortages exist, which is prompting these market responses:
— Grand Rapids-based Perrigo Company has committed $170 million to expand and strengthen its U.S. infant formula manufacturing to expand its supply of affordable infant formula. Its investment includes the purchase of Nestle’s Gateway infant formula plant in Eau Claire, WI, along with the U.S. and Canadian rights to the Good Start infant formula brand.
— New Zealand’s a2 Milk Company has obtained FDA approvals to supply its a2 Platinum infant milk formula to the U.S market. It’s the first company to receive FDA authorization to sell its infant formula in the U.S. since July despite the continued shortage. The New Zealand company plans to sell 1 million cans or the equivalent of 30 million bottles through June 2023.
— And last month, Abbott Nutrition’s Chairman and Chief Executive Officer, Robert Ford, committed his company to put up $500 million for a new infant formula manufacturing facility at a location yet to be determined.
Such developments are likely to add new infant formula sources and capacity to make the shortages go away. Included in Perrigo’s $170 million investment is a $60 million expansion of Gateway’s 29 million pounds per year production capacity by 7 million pounds.
The a2 Milk Company has sold fresh milk in the U.S. since 2015 with a 30 percent revenue increase making it one of the country’s fastest-growing premium milk brands in 27,000 stores. It is a major international supplier of infant formula. To meet FDA requirements, it’s met “different scoops, mixing instructions and labeling requirements.” It provides a new option for infants with digestive issues. Its a2 Platinum is free of the a1 protein known for causing gastric distress.
When market indicators were already showing signs of shortage, Abbott’s Michigan plant shut down last February and recalled its production, setting off a shortage that even Biden administration officials had to acknowledge. The shortage has since eased but it has not been eliminated.
Biden officials, led by FDA Commissioner Robert Califf, are taking responsibility for infant formulas being hard to get, while also blaming hoarding, supply chain bottlenecks, and fewer varieties being produced. Califf, who is the highest official charged with health with the shortage, sees supplies improving but not back to normal.
Abbott is again producing the popular Similac formula out of its Michigan plant, which was responsible for one-fifth of U.S formula production before the shortage.
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