Perrigo Co., a major manufacturer of private-label baby formula, is buying a formula plant from Nestlé and plans to expand its capacity.
Perrigo has bought the Nestlé Gateway plant in Eau Claire, Wis., as well as the North American rights to Nestlé’s Good Start formula brand. The price was not specified, but the transaction is part of a $170 million “strategic investment” to increase Perrigo’s production capacity for formula, according to a company statement. That upgrade will also include $60 million to expand the capacity of the Eau Claire facility by 24%, to 36 million pounds per year.
Like all other domestic producers of baby formula, Perrigo has struggled to fill demand in the wake of a shortage caused by problems at an Abbott Laboratories plant. It has 17 retail customers for store brands, and also does contract manufacturing for both new and established brands.
"Long before this year's infant formula shortage, we had been pursuing options to increase capacity to meet growing demand for our infant formula in the U.S.," CEO Murray Kessler said in the statement. "But this year's industry shortage galvanized our commitment to not only invest to meet the demand for our store brand and contract customers, but also to help prevent future infant formula shortages.”