How to Fix the US Baby Formula Shortage

The first batch of formula for infants and children with special needs landed in Plainfield, Indiana, on May 22; it came from Nestlé’s facilities in Switzerland and the Netherlands. British company Kendal Nutricare has also been quick to take advantage of the US Food and Drug Administration’s move to ease rules on foreign imports and will airlift tens of thousands of cans of cow’s milk formula from its stockpiles next month.

Typically, only 2 percent of infant formula is imported, mainly from Mexico, Ireland, and the Netherlands, because of high import tariffs and the FDA’s stringent regulations on nutritional values, labeling, and inspections. Kendal Nutricare also produces formula from goat’s milk, which, if shipped, would be a first for the US—goat’s milk is not approved for infants there.

While it’s difficult to predict how the federal government and industry will prevent a formula shortage from happening again, it is quite possible there will be a shake-up of the players involved. “It seems that more companies will be allowed to sell because of this emergency. And it is certainly possible they will be allowed to sell in the future,” says Ketels, adding that foreign suppliers who already meet the FDA’s nutritional standards (and who have significant production capacity) make ideal candidates.

But smaller domestic companies will also want a piece of the pie—and in a way, they already have it. In the past three months, ByHeart and Bobbie, two young companies that sell their products online directly to parents, have seen a surge in demand. New York–based ByHeart entered the market just a few weeks after the Abbott recalls; it has had 15 times the number of new customers it projected for the year.

Bobbie, which launched in 2021 and whose “European-style” formula is made with milk from Organic Valley farms, has doubled its subscriber base to over 70,000. European formulas are especially popular with parents who value organic ingredients (which tend to be more common in European formulas) and want to cut out added sugars, such as corn syrup; parents are willing to pay a premium to import them illegally.

However, due to limited production capacities, both Bobbie and ByHeart have made a tough call and have stopped accepting new customers. “Our only job right now is to give our own customers the peace of mind and reassurance that the supply we are making we can continue to serve to them,” says Modi.

But even if these young American companies managed to increase production further, they wouldn’t necessarily be able to grab a bigger share of the market in the long term. That’s because the “Big Three” of Abbott, Mead Johnson, and Gerber are tied to a welfare program known as Women, Infants, and Children (WIC), which provides low-income families with free formula. About half of all babies born in the US are eligible for it.

The program allows the Big Three to bid on the right to become the sole provider of infant formula for participating families by offering steep discounts to a state. “When a company controls the WIC program, it controls the entire marketplace in that state,” says Steven Abrams, a professor of pediatrics and nutrition science at the University of Texas. The families select WIC-approved infant formula from the store shelves and present their electronic benefit card at the register.