Baby formula market not working for parents, says watchdog | Money News

The baby formula market needs a shake-up to help parents struggling to afford it, according to the UK’s competition watchdog.

There are “limited incentives” for the industry to compete on price and parents have suffered the consequences of high prices, said an interim report by the Competition and Markets Authority (CMA).

The watchdog has previously reported a 25% increase in prices over the past two years, with just three companies, Nestle, Kendamil, and Danone, controlling 90% of the market.

Among its recommendations is a call for better public health messaging and clarity for parents trying to choose between different brands.

The CMA also confirmed it is examining the effect a price cap would have, but said it is not currently recommending one.

The report said: “The CMA has provisionally found that – unlike in many other grocery categories – there is little pressure on manufacturers or retailers to shelter customers from increases in manufacturing costs, which have largely been passed on quickly and in full.”

Sarah Cardell, the CMA’s chief executive, said: “This is a very important and unique market.

“We’re concerned that companies don’t compete strongly on price and many parents – who may be choosing infant formula in vulnerable circumstances and without clear information – opt for more expensive products, equating higher costs with better quality for their baby.

“We have identified options for change, but now want to work closely with governments in all parts of the UK, as well as other stakeholders, as we develop our final recommendations.”

The CMA expects to publish a final report in February. Earlier this year, the regulator announced that it would inspect baby formula prices amid concerns that they remain “historically high.”

Its decision to launch a market study gave it the authority to require suppliers to disclose detailed information on pricing and other practices.

Previously, the CMA relied on voluntary submissions from suppliers.

Responding to the findings of the interim report, a Danone UK spokesperson said: “We are carefully considering the CMA’s interim report and will engage with the CMA as it develops its final findings and recommendations. In Danone’s experience the UK formula milk market is competitive and dynamic, and we will continue to work constructively on ways we can carry on delivering value to parents, backed by continued investment in world-leading research and innovation.”

In 2023, the World Health Organization (WHO) urged governments to act over soaring baby formula prices, which it said was “exploiting” families in the UK.

In an interview with Sky News, WHO criticised multinational manufacturers for “manipulating prices” to boost profits on baby formula.

Research at the time showed that formula prices in the UK had risen by 24% over the previous two years, with the lowest-cost brands seeing a 45% increase during that period.

WHO is calling on governments to step in and help ease the burden on struggling families by finding ways to lower prices in stores.

In a statement, the head of infant feeding charity Feed said that the CMA’s latest study was a welcome intervention.

“The rising costs of infant formula in recent years has hit those who can least afford it hardest. We know some mothers make sacrifices to purchase premium brands on the grounds they believe these are best for their babies, and guilt over not breastfeeding can play a key role in these purchasing decisions,” said Clare Murphy.

“This has to end.”

Ultimately, Ms Murphy added, these proposals alone “cannot fix what is a broken system which lets down both women and their babies”.

“We need an infant feeding framework that reflects the actual experience of families…We call on the government to act.”

Sky News has previously reported on the extreme measures some parents are taking to feed their infants, including stealing formula, purchasing it on the black market, diluting bottles, or using condensed milk as a substitute. Former prime minister Rishi Sunak described the situation as “sad” at the time.

Laurence Grummer-Strawn, WHO technical officer, told Sky News, “It’s shocking to see a high-income country like the UK facing situations where mothers can’t afford to feed their babies.”

When asked if this situation constituted exploitation, Grummer-Strawn said: “Yes, I think we can say that when you see that these prices are being driven down to the consumers and having to pay extremely high prices.”

A number of supermarkets and brands have already cut prices for their baby milk products in response to growing outrage.

In January 2024, Asda and Tesco joined Sainsbury’s and Iceland in reducing the cost of Aptamil baby formula.

Asda also said it would let customers pay for baby formula using their rewards scheme vouchers for the first time.

Richard Walker, executive chairman of Iceland Foods, said: “We have a moral obligation to take action.”