US should follow EU model for infant formula

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Startup Bobbie introduced its infant formula product in January 2021, the first new brand to be approved for sale in nearly a decade. It was a small operator representing a tiny fraction of the $4 billion U.S. formula market, but when shortages began to rock the industry in recent months, Bobbie offered at least one other option for parents to turn to. shaken. The story of this young company – and this critical moment of disruption – illustrates why innovation is desperately needed in a critical food industry that is both antiquated and crippled by consolidation.

Bobbie was created in 2018 when Laura Modi, an executive at Airbnb Inc. who had just given birth, found herself dissatisfied with the plan options available in U.S. grocery stores. Born in Ireland and living in San Francisco, Modi has found that many of her friends buy European products on what she calls ‘the infant formula black market’ – through third-party distributors such as EBay and through direct sales. between mothers meeting in an online parent forums. The EU formula had higher nutritional standards and healthier ingredients, and well-heeled mothers were willing to pay a hefty premium for it – even if it was contraband. Preparations produced in the EU are not subject to oversight by the Food and Drug Administration and therefore cannot be legally sold in the United States.

Modi dove into the research and found that US infant formula standards hadn’t (and still haven’t) been significantly updated since the Infant Formula Act of 1980. Over time, European infant formula standards have been updated regularly as the science of child health has evolved. Modi was convinced that the rising generation of young mothers would prefer innovative products to the Similac, Enfamil and Gerber brands which dominate 90% of the market. She quit her job, raised capital ($72 million to date) from investors including Goop CEO Gwyneth Paltrow and actress Laura Dern, and co-founded Bobbie with her Airbnb colleague. , Sarah Hardy, COO of the startup.

Modi and Hardy entered a market struggling with a contradiction: on the one hand, it needs improved nutritional standards and better FDA oversight; on the other hand, the market needs new players and more competition. Not only is the US infant formula industry – aka “Big Bottle” – heavily dominated by three aging brands, but only seven production facilities have been approved by the FDA to manufacture all powdered and liquid formulas sold worldwide. country.

These products are essential to the survival of millions of infants, but the supply chain is extremely consolidated and therefore vulnerable. In February, predictably, the industry was thrown into chaos when Abbott Laboratories recalled some of its formula brands, including Similac, and shut down its production facility in Michigan to investigate contamination. . In one fell swoop, a third of all infant formula disappeared from store shelves.

The challenge ahead for the Biden administration’s FDA is to simultaneously raise its quality standards for infant formula while encouraging new, young players to enter the market. This can be done. The evidence is clear in the European market, particularly in Germany, which not only has the world’s highest nutritional standards for infant formula, but also more available brands and more and more distributed production facilities.

The Biden FDA has made significant progress in bolstering formula production over the past week, after first reaching an agreement with Abbott on a plan to safely reopen its production facility, which is expected to restore the volume of products significantly over the next two months. The administration also eased restrictions on foreign imports of infant formula that until now were not allowed on U.S. shelves. On Wednesday, Biden invoked the Defense Production Act to help jump-start the infant formula ingredient supply chain and authorized the use of military aircraft to transport foreign-made products. President Biden’s decision to increase funding for the FDA, a notoriously understaffed agency with just nine people working to alleviate the shortage of infant formula, was also crucial. With the new funding, he was able to hire four more.

But these are palliative strategies. The agency must develop long-term solutions to ensure the safety of infant formula production in the future. The administration should permanently allow the sale of approved foreign-made infant formula in the US market. It should also require any company controlling more than 20% of the infant formula market to maintain a backup supply in the event of a recall.

When the House Agriculture Appropriations Committee this week discussed FDA Commissioner Robert Califf’s fiscal year 2023 budget, members should have pushed for larger long-term increases in FDA funding that can help usher in industry-wide reforms. There is no doubt that raising nutritional standards while guiding new producers through the product approval process will require a substantially funded, better staffed, and more nimble FDA.

Infant formula sits right in the middle of drugs and foods on the regulatory spectrum, which means it requires rigorous testing not only for nutritional quality, but also for bacterial and heavy metal contamination, as well as for shelf stability. Additionally, with the exception of Biden’s emergency measures, all infant formula sold in the United States must be produced domestically.

Modi learned this the hard way: with such limited production capacity in the United States, it produced its first series of products in 2018 in Germany, which it then had to recall. She spent another two years revamping her supply chain and working with her manufacturer to produce the formula in Vermont.

Over the past 40 years, scientists have identified the fatty acid DHA as an essential ingredient in infant formula to support infant brain development. In the United States, infant formula manufacturers are not required to include DHA. Some include it, but in the EU you can’t buy infant formula without a high level of DHA. The EU also imposes a cap on the use of sugars, such as corn syrup, and the US does not. All American products should be held to higher standards.

There will be a price to pay. Since Bobbie has based its products on the latest 2019 European standards and built a resilient supply chain, its production cost is higher than that of major players, and even smaller brands: $1.84 per ounce compared to other premium organic products such as Earth’s. Best, which sells for $1.48.

The company’s rapid growth so far should reduce these costs through economies of scale. Bobbie’s sales hit $18 million in her first year, up from Modi’s original forecast of $4 million, just by selling directly to consumers online. In 2022, Modi expects to quadruple this growth.

Bobbie shows that there is a way forward in this nearly impenetrable American industry, while revealing the challenges inherent in redefining an essential food. The Biden administration and its critics can learn from this young company to build a strategy to protect child health while creating the conditions for new industry players to succeed.

More other writers at Bloomberg Opinion:

• Running out of formula? Blaming Bad Politics and Bureaucracy: Editorial

• The tricky politics of anti-ESG investing: Liam Denning

• The world’s food baskets need a better safety net: David Fickling

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Amanda Little is a Bloomberg Opinion columnist covering agriculture and climate. She’s a professor of journalism and science writing at Vanderbilt University and author of “The Fate of Food: What We’ll Eat in a Bigger, Hotter, Smarter World.”

More stories like this are available at bloomberg.com/opinion

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