Infant Formula: CMA identifies concerns and potential solutions.

Following an in-depth investigation into the sector, the Competition and Markets Authority (CMA) has published an interim report detailing a number of concerns. This relates to:

Unintended Consequences of Regulations Designed to Support Important Public Health Goals Lack of timely, clear, and fair information about formula companies for parents and guardians Response to marketing-related regulations and their impact on prices of in-store formula limited competition for

The report also outlines several potential options for addressing these issues, including providing parents with better information earlier and restructuring regulations. The CMA is seeking feedback on these options and the issues outlined in the CMA interim report before publishing its final report in February 2025.

Interim Findings Regulation and Pricing

Regulation plays an important role in markets and supports important public health goals, including ensuring that breastfeeding is not disrupted. This includes strict rules for advertising and labeling of infant formula. However, the CMA is concerned that some aspects of the regulation are having unintended consequences and contributing to consumers paying higher prices.

For example, regulations state that companies cannot promote infant formula, including through price reductions or deals, to avoid discouraging breastfeeding. Therefore, companies rely heavily on brand building, marketing, and other methods to differentiate their products.

Manufacturers appear to communicate the superiority of their products in ways that are difficult for parents to meaningfully evaluate. For example, they call their formula advanced or say it is based on scientific research. This comes in the context of regulations that make it difficult for manufacturers to differentiate their products, including regulations that prohibit health and nutrition claims on infant formula and restrict advertising. It also risks diluting the important public health message that all infant formula meets nutritional needs.

Because incentives to compete on price are limited, the CMA tentatively finds that, unlike many other grocery categories, there is little pressure on manufacturers or retailers to protect customers from increased manufacturing costs, which are largely passed on quickly and in full. The combination of brand loyalty and the inherent nature of the product for many families has left parents burdened with rising baby formula prices for years.

Choosing infant formula

CMA's consumer research shows that parents often choose formula for the first time in vulnerable situations in hospital immediately after birth, often without access to the clear, accurate and impartial information they need to make informed decisions. It happened.

Parents naturally want to do what's best for their baby, so decisions about infant formula come with a lot of pressure. This can lead parents to actively choose more expensive products, assuming a higher price means better quality. This is despite advice from the NHS that no matter which brand you choose, they will all meet your baby's nutritional requirements, regardless of price.

Parents often rely on shortcuts like recommendations from friends and family when choosing a formula, and brand reputation plays a big role in their decision-making.

Regulation and Advertising

According to the regulations, the labeling and labeling of infant formula and subsequent formula must be clearly distinguishable from each other. This is to prevent confusion between products and to ensure that infant formula is not sold indirectly through successor products.

However, evidence reviewed by the CMA to date suggests that similar branding and labeling, including similar color palettes, fonts and images, are often used across a range of infant and subsequent formulas, making the branded products appear very similar.

As a result, it appears that advertising and promotion of follow-up formula have supported sales of infant formula. Manufacturers' promotional and marketing costs for follow-on formula and growth milk are high. This allows brands to differentiate themselves from their competitors as advertising restrictions do not apply to infant formula.

Sarah Cardell, CEO of CMA, said:

This is a very important and unique market. We were concerned that companies do not compete strongly on price, and that many parents who choose infant formula in vulnerable situations and without clear information choose more expensive products, equating higher costs with better baby quality. .

We have identified options for change, but we now want to work closely with government and other stakeholders across the UK as we develop final recommendations. Importantly, any changes must ensure that all formulas provide babies with the nutrition they need to grow and continue to support regulations that support government targets for breastfeeding.

We now discuss our preliminary findings and the options we have presented to gain important insights from governments and stakeholders. All of this information will be reflected in our final recommendations early next year.

Recommendation

The CMA is setting out a number of potential options that could help improve this area and reduce costs for parents. These include:

Information and provision in healthcare settings: Provide parents with clear, accurate and fair information, including nutritional sufficiency of all infant formula products and possible steps to reduce brand influence. Hospitals select or use standardized infant formula packaging. Information and price promotions in retail environments: Providing clear, accurate and fair information, including nutritional sufficiency at the point of sale Encouraging price competition by potentially allowing prices and price reductions to be made public. Clarifying, monitoring and enforcing existing regulations. We need to clarify how existing regulations apply online and strengthen the role of relevant authorities to approve the packaging of all infant formula products before they are placed on the market. The relevant national authorities are the Department of Health and Social Care, the Scottish Government, the Welsh Government and the Food Standards Agency in Northern Ireland. Strengthening labeling and advertising rules: Includes measures to relax the role of brand awareness in decision-making in highly regulated markets. This can be achieved by reducing the incentives and ability of manufacturers to engage in brand-building activities. This could be done, for example, by requiring completely different brands for infant and follow-up formula or by implementing more stringent standards for messaging within certain types of packaging. Backstop measures (not currently recommended) Price controls and public supply: Reflecting on the serious challenges faced by some parents due to high prices of baby formula, the interim report recommends, in principle, a number of more important interventions that the government could aim to: Present. Directly reduce prices, such as through price caps.

Please see section 8 of the CMA interim report for a full list of potential remedies. Interested parties, including stakeholders, consumers and the industry at large, can make submissions to the CMA regarding potential remedies outlined in the interim report.

Feedback can be provided until 29 November 2024 and will be factored into the CMA's ongoing review as it moves towards a final report expected in February 2025.

More information can be found on the CMA Infant Formula Market Research Stories page.

Statistics The price of infant formula in the UK rose by 18-36% depending on the brand over the two years from December 2021 to December 2023. The infant formula market is highly concentrated. Just three companies account for more than 90% of the supply. Evidence reviewed by the CMA shows parents can save up to $300 to $500 in their baby's first year by switching to a cheaper brand. Notes to editors The CMA has specified that interim reports can be submitted over a three-week period. Final submission is due by November 29, 2024. During this period, the CMA will invite feedback on its interim findings and the options outlined. Address these new concerns. Infant formula is suitable from birth and is the focus of the CMA market research. The study also considers follow-up formula as a replacement for infant formula for infants aged 6 to 12 months, and milk marketed for children aged 3 years and older to the extent that this impacts how the infant and follow-up formula market operates. I'm doing it. 12 months or more. The CMA's role is to examine how markets work, including the roles of consumers, industry and government, and look at all aspects of how markets can function better for the people who use them. The CMA survey does not focus on which feeding method parents choose. Regulations for the infant formula sector are made by governments and are mainly monitored and enforced by local authorities. The Advertising Standards Authority is also responsible for enforcing the UK Advertising Code (known as the CAP and BCAP codes). Nutrition law is a devolved area, and legislative responsibility in relation to infant formula lies with each of the UK's devolved countries. Statistics relating to infant formula price increases are based on CMA analysis of average monthly price changes for Tesco's leading brands of 800g powdered infant formula products from December 2021 to December 2023. Switching to less expensive infant formula is a CMA analysis based on babies fed exclusively on formula from birth to 12 months, based on the feeding rate recommended on the package. We compare the latest prices of 800g Powdered Milk from the lowest and highest priced brands. When talking about retailers, CMAs refer to supermarkets and stores that sell baby formula. When talking about manufacturers, CMA refers to the company that makes the baby formula. When talking about brands, CMA refers to a family of infant formula produced by a specific manufacturer and bearing a specific brand name. Market research examines why a particular market is not performing well for consumers. This can lead to a variety of outcomes, including recommendations to governments to change regulations or public policies. The CMA will work closely with the UK and devolved governments as it conducts its market research. For more information about the CMA market research process, visit Market Research and Surveys – A Guide to the CMA Approach. All inquiries from the public should be sent to the CMA General Enquiries team: [email protected] or 020 3738 6000. All media inquiries should be sent to the CMA Press Office via email at [email protected]. From the UK or call 020 3738 6460.

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