The baby formula shortage is upending that notoriously difficult-to-enter market, although it’s hard to say how long the effect will last.
As the nation continues to grapple with a shortage caused by interrupted production at an Abbott Laboratories plant, it’s opening the door for new players in a market long dominated Abbott’s Similac. The stoppage of Similac production has cut its usual market share of almost 40% in half. Infamil from Reckitt Benckiser has seen its market share rise from 38% to more than 50%, while Nestlé had its Gerber formula line go from 10% to nearly 15%, according to data cited in the Wall Street Journal.
One of the biggest barriers to market entry is being lifted, at least temporarily. The federal Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) requires states to specify a single brand formula that can be purchased with program benefits at discounted rates; the USDA recently said it would allow the purchase of formula from other manufacturers under WIC.
New entrants are also finding an extra-welcoming market. ByHeart, a startup in Pennsylvania that launched earlier this year, has gone from five days of week of processing to seven to keep up with demand. The problems is that new entry into the highly regulated baby formula market is very challenging and expensive. ByHeart spent $40 million on a factory and millions more on formulation and required studies.
“We spent years trying to study and understand FDA regulations,” the company’s CEO told the Journal. “We also heard a lot of ‘you guys are nuts.’”
