Feeding the Demand: The Changing U.S. Infant Formula Industry

September 3, 2024

In 2016, new mom Lau­ra Modi was blind­ed by flu­o­res­cent lights in Aisle 3.

Car­ry­ing her new­born and bat­tling her first bout of mas­ti­tis, she sift­ed through for­mu­la labels filled with corn syrup, fillers, and palm oil – ingre­di­ents she would­n’t con­sume her­self.

“I was exhaust­ed and resent­ful that I failed at breast­feed­ing and had to resort to a sec­ond-best option, a for­mu­la with ingre­di­ents I wouldn’t want to con­sume myself,” Modi told CNN.

Through exten­sive research, Modi dis­cov­ered that clean­er ingre­di­ents were vir­tu­al­ly absent from U.S. for­mu­la shelves yet read­i­ly avail­able in the E.U.

In fact, many par­ents seek­ing health­i­er for­mu­la in the U.S. have been turn­ing to using ille­gal­ly import­ed grey-mar­ket Euro­pean for­mu­la for years, fre­quent­ly result­ing in opaque sup­ply chains and pric­ing and an awk­ward expe­ri­ence doing some­thing that is per­ceived to be best for your child yet banned by the U.S. FDA.

When Modi’s daugh­ter turned one, she left her role as an Airbnb exec and set out to cre­ate a baby for­mu­la that mim­ic­ked Euro­pean nutri­tion­al pro­files. Bob­bie, the first Euro­pean-style for­mu­la, was born.

With breast­feed­ing chal­lenges, for­mu­la short­ages, and height­ened aware­ness of nutri­tion­al needs, Amer­i­can for­mu­la is evolv­ing – cre­at­ing oppor­tu­ni­ties for inno­va­tions like Bob­bie.

Feeding into formula needs

While 90% of Amer­i­can moth­ers set out to ful­fill the Amer­i­can Acad­e­my of Pedi­atrics rec­om­mend­ed six months of breast­feed­ing, the real-time results are much dif­fer­ent:

• 47% of moth­ers start using for­mu­la ear­li­er than planned.
• Moth­ers begin using for­mu­la three to four months ear­li­er than expect­ed.
• 83% of new par­ents turn to for­mu­la to ensure their babies receive ade­quate nutri­tion.
• 45% of moth­ers are exclu­sive­ly breast­feed­ing at three months.
• Less than 30% are still breast­feed­ing at six months.

With 80% of Amer­i­can moth­ers breast­feed­ing ini­tial­ly, these num­bers point to a chal­lenge Modi shared – it’s not easy to sus­tain. Despite pub­lic health cam­paigns increas­ing the num­ber of breast­feed­ing moth­ers, the U.S. lags oth­er indus­tri­al­ized nations in breast­feed­ing edu­ca­tion, sup­port, and parental leave poli­cies.

In a sur­vey of 1,000 moth­ers, about 60% of moms cit­ed these rea­sons for end­ing their breast­feed­ing jour­neys soon­er than expect­ed:

• Dif­fi­cul­ties with milk sup­ply lead to for­mu­la sup­ple­men­ta­tion
• Con­cerns about the baby’s health, ill­ness, or the need to take med­ica­tion
• The effort required to pump milk

With­out a nation­al statu­to­ry paid mater­ni­ty, pater­ni­ty, or parental leave pol­i­cy, moth­ers are return­ing to work in droves, often to envi­ron­ments that don’t accom­mo­date breast­feed­ing.

In an Aeroflow Breast­pumps study:

• Only 47% of moms shared that their work had a mother’s room ade­quate for their needs.
• 12% said a room was avail­able, but inad­e­quate for pump­ing.

Despite this, there are no legal require­ments for mother’s rooms in the work­place.

The result?

Count­less sto­ries like Modi’s reluc­tant first-time for­mu­la pur­chase – and moms turn­ing to for­mu­la as a pri­ma­ry feed­ing source.

The American formula market

Cer­tain med­ical con­di­tions, med­ica­tions, and even birth trau­ma make for­mu­la the only option for many Amer­i­cans. As aware­ness height­ens about wide­spread breast­feed­ing obsta­cles, the stig­ma against for­mu­la is chang­ing.

For­mu­la feed­ing con­tin­ues to become a neces­si­ty in Amer­i­can house­holds, mak­ing it a mar­ket worth $6 bil­lion. By 2032, the mar­ket val­u­a­tion is antic­i­pat­ed to reach $12.3 bil­lion.

Since 1980, Enfamil (Reckitt) and Sim­i­lac (Abbott) have dom­i­nat­ed 80% of the mar­ket share. Seem­ing­ly the only options avail­able, con­sumer loy­al­ty has been a byprod­uct. But in the wake of an unprece­dent­ed for­mu­la short­age, that began to shift.

In Novem­ber 2022, the FDA shut down an Abbott Nutri­tion facil­i­ty in Michi­gan due to bac­te­r­i­al con­t­a­m­i­na­tion from Cronobac­ter sakaza­kii or Sal­mo­nel­la. Cronobac­ter sakaza­kii, a dead­ly bac­te­ria linked to pow­dered for­mu­la, led to an out­break that result­ed in sev­er­al ill­ness­es and two infant deaths.

Sud­den­ly, a nec­es­sary life source for mil­lions of fam­i­lies was stripped from the shelves. By May 2022, 43% of for­mu­la prod­ucts were out of stock nation­wide, up from 2% to 8% in Jan­u­ary 2022. States like Iowa, the Dako­tas, Mis­souri, and Texas, had 50% out-of-stock rates.

The Cronobac­ter con­t­a­m­i­na­tion was just one part of a larg­er qual­i­ty con­trol issue. Add sup­ply chain bot­tle­necks caused by the pan­dem­ic, and it was clear poli­cies need­ed to change.

To address these gaps in the sys­tem, the Biden admin­is­tra­tion enact­ed for­mu­la sup­ply poli­cies:

• The Defense Pro­duc­tion Act (DPA) pri­or­i­tized orders for raw mate­ri­als and con­sum­ables for Abbott Nutri­tion and Reckitt, enabling them to boost pro­duc­tion.
• Oper­a­tion Fly For­mu­la aimed to alle­vi­ate short­ages by expe­dit­ing the import of infant for­mu­la to the Unit­ed States using mil­i­tary air­craft.

Despite strides to improve the state of Amer­i­can for­mu­la, con­sumers – par­ents feed­ing their babies – began look­ing to Euro­pean brands as safer alter­na­tives.

European formula standards

With dwin­dling con­fi­dence in Amer­i­can formula’s safe­ty and nutri­tion­al val­ue, many par­ents band­ed togeth­er in Face­book groups, group chats, and meet-ups to find alter­na­tives.

In addi­tion to hold­ing 90% of the glob­al for­mu­la mar­ket share at a cru­cial time in 2022, Euro­pean for­mu­la was not­ed for its nutri­tion­al pro­file. It start­ed gar­ner­ing atten­tion, and des­per­ate par­ents went as far as to import it ille­gal­ly to the U.S.

One Face­book group with more than 30,000 mem­bers was full of par­ents look­ing to “avoid ‘GMO ingre­di­ents’ and ‘added corn syrup.’” They shared spread­sheets rank­ing the Euro­pean for­mu­las they deemed “best” cit­ing the Swiss brand Holle, the Ger­man brand HiPP, and the U.K. brand Kendamil.

But were these Euro­pean for­mu­las nutri­tion­al­ly supe­ri­or?

Antho­ny Por­to, a pedi­atric gas­troen­terol­o­gist and pedi­atrics pro­fes­sor at Yale Uni­ver­si­ty, con­duct­ed a study to answer that cru­cial ques­tion. His research found that most Euro­pean for­mu­las do meet FDA nutri­tion­al guide­lines, even though they aren’t offi­cial­ly approved by the FDA. How­ev­er, as Brid­get Young, Ph.D., a pro­fes­sor of pedi­atrics at the Uni­ver­si­ty of Rochester, points out, Amer­i­can for­mu­las don’t always meet the same strin­gent stan­dards.

Here’s what makes Euro­pean for­mu­las dif­fer­ent:

• They fol­low strict guide­lines for nutri­ents like DHA, an impor­tant omega‑3 fat­ty acid, and lim­it harm­ful sub­stances like pes­ti­cide residues.
• They use lac­tose, sim­i­lar to breast milk, as the main car­bo­hy­drate instead of oth­er sweet­en­ers found in Amer­i­can for­mu­las.
• Many Euro­pean for­mu­las are organ­ic and non-GMO, which is still uncom­mon in the U.S.
• Some are made from goat’s milk or milk from pas­ture-raised cows, offer­ing options not avail­able in the U.S.
• Euro­pean brands often use hydrolyzed pro­teins that are eas­i­er for babies to digest.

With nutri­tion­al pro­files more close­ly mim­ic­k­ing breast milk and free from sug­ary ingre­di­ents in Amer­i­can for­mu­la, con­sumer pref­er­ences toward Euro­pean for­mu­la grew.

At the same time, Amer­i­can access to Euro­pean for­mu­la became scarcer.

Accessibility barriers

Dr. Porto’s study also revealed sev­er­al chal­lenges that U.S. par­ents face when try­ing to use Euro­pean for­mu­las:

• The instruc­tions are often in Dutch or Ger­man, not Eng­lish.
• Euro­pean for­mu­las are mixed dif­fer­ent­ly, poten­tial­ly caus­ing par­ents to dilute their baby’s for­mu­la.
• The FDA doesn’t reg­u­late the tem­per­a­ture or qual­i­ty of import­ed Euro­pean for­mu­las, which rais­es con­cerns about their safe­ty.

With these tan­gi­ble safe­ty and qual­i­ty con­cerns, the Depart­ment of Agriculture’s Dietary Guide­lines for Amer­i­cans made the call:

“Home­made infant for­mu­las and those that are improp­er­ly and ille­gal­ly import­ed into the Unit­ed States with­out man­dat­ed FDA review and super­vi­sion should not be used.”

Bridging the formula gap

One way for­ward was to make Euro­pean nutri­tion­al stan­dards acces­si­ble to Amer­i­can par­ents.

Bob­bie, one of Ground­Force Capital’s port­fo­lio com­pa­nies, led the charge and is cur­rent­ly the only U.S. for­mu­la ful­fill­ing the EU’s nutri­tion­al guide­lines.

Coin­ing the term “Euro­pean-style” for­mu­la, Bob­bie meets FDA’s reg­u­la­to­ry stan­dards while check­ing the EFSA box­es:

•     Lac­tose as the car­bo­hy­drate source
•     Organ­ic and non-GMO
•     Meets EU stan­dards for DHA
•     Milk sourced from pas­ture-raised cows

Tak­ing infant nutri­tion a step fur­ther, Bob­bie expand­ed into pedi­atric sup­ple­ments in April 2024. Remov­ing the uncer­tain­ties that come with sup­ple­ment selec­tion, Bob­bie offers Vit­a­min D and Pro­bi­ot­ic drops to sup­port immu­ni­ty and diges­tion for lit­tle ones.

Like Bob­bie’s for­mu­la, these are craft­ed with­out addi­tives or chem­i­cals. They with­stand rig­or­ous qual­i­ty and safe­ty test­ing to ensure their sup­ple­ments meet the high­est stan­dards.

The grow­ing demand for clean­er infant prod­ucts, dri­ven by the needs of new par­ents and beyond, presents an oppor­tu­ni­ty that Bob­bie is ded­i­cat­ed to pur­su­ing.