Competition watchdog to probe baby formula market as costs soar

Britain’s competition watchdog is conducting a market study into the infant formula market after discovering consumers could save money by choosing cheaper brands.

A Competition and Markets Authority report released last November on the grocery sector found Britons could save more than £500 in the first year of a baby’s life by switching from a ‘premium’ brand to alternative options.

In addition, the investigation learned that the price of baby formula had jumped by a quarter between March 2021 and April 2023.

Formula milk manufacturers have blamed the price hikes on higher ingredients, energy and transportation costs, and climate change’s impact on farming.

Some supermarkets, including Asda, Tesco, and Sainsbury’s, cut prices of Aptamil last month, yet Sarah Cardell, the CMA’s chief executive, noted prices remain at ‘historically high’ levels.

The CMA will now examine formulas sold without a prescription to consumers, such as ‘anti-reflux’ and ‘comfort’ formulas, as well as ‘follow-on’ formula, and ‘growing up’ and ‘toddler’ milks that are marketed at children of at least 12 months old.

Regulators will also look at the baby formula market’s supply-side features, such as barriers to entry and growth, and the effect regulations have on market outcomes.

They can oblige companies to hand over information as part of their market study instead of depending on them to provide it voluntarily.

Aptamil owner Danone currently dominates the UK market with a 71 per cent share, followed by Nestle, which produces SMA and Little Steps, with 14 per cent of overall sales.

Other formula makers, Kendamil and HiPP, hold single-digit percentage market shares, while own-label brands constitute a tiny proportion of sales.

The CMA plans to collect information on how consumers behave, what drives their choices, and the facts and advice used to support those decisions.

Cardell said: ‘We’re concerned that parents don’t always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices.

‘We are determined to ensure this market is working well for the many new parents who depend on infant formula, and it’s essential that any changes we propose are based on evidence and a strong understanding of the market.’

The CMA hopes to publish a final report on the issue sometime in September, which could include recommending the government change policy or taking competition law enforcement against certain firms.