The baby formula shortage in America

A policy wake-up call

About a year into the Covid-19 pandemic, my first baby was born. I was lucky enough to give birth in Utah during a brief pause in the pandemic when relatively few restrictions on hospitals were in place. When we finally got to bring our little one home, my husband and I began our journey like so many parents before us—stumbling through the sleepless nights as we tried to figure out how to care for this precious, tiny new human.

My plan all along was to breastfeed my baby. But he had different plans. After eight weeks of trying to make it work, my husband and I decided that formula was the right choice for our baby and our family. 

Little did we know that we were making that decision at the beginning of a major formula shortage.

What created the shortage?

After living through more than a year of the pandemic, I was used to shortages in toilet paper and canned tuna. But I never expected to find empty shelves when I went to my local grocery store to buy food for my baby. 

The pandemic led to major supply chain disruptions in all sorts of industries, and baby formula was no exception. But the baby formula shortage could have been prevented or alleviated through simple policy changes. Facilitating more competition in domestic manufacturing and allowing American families to purchase high-quality baby formula made in other countries would have kept formula on our shelves. Learning these lessons now will prevent future shortages. 

By late 2021, news outlets reported the out-of-stock rate for formula across the US was 31 percent. Stores limited the number of cans you could buy as desperate parents tried to stock up on what is often the sole food source for babies through their first six months of life. 

Things went from bad to worse when one of the nation’s largest formula manufacturing plants was shut down in February of this year after the FDA found strains of a bacteria that can be fatal to babies who consume it. Abbott’s Sturgis plant was especially important because it produced specialty formulas for babies with specific nutritional needs. By April 2022, the average out-of-stock rate rose to 40 percent. At my local grocery store, as of September 2022, most formula is still out of stock. 

Why couldn’t other manufacturers just pick up the slack and make more formula? Infant formula is highly regulated in the US. The FDA’s rules set out specific requirements for how many calories must come from protein and fat and which vitamins and minerals must be present in what quantities. Gaining approval for a new facility, let alone an entirely new formula brand, is no easy task. 

As a result, the formula industry in the US is concentrated. Four manufacturers make up 90 percent of the US market, with Abbott controlling a 40% market share. 

Other government programs have also contributed to high market concentration. The USDA’s Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) provides vouchers to low-income families to purchase formula and food until a child is five years old. The USDA’s website reports that 53 percent of all infants in the US are supported by WIC. 

While providing support to low-income families is crucial, the WIC program functions in a way that further concentrates market share, making the ongoing formula shortage worse. Each state selects a single manufacturer to provide its formula to WIC families. And because WIC is the single largest purchaser of formula in the US, the company gains a large market share. For example, when California switched its WIC contract from Abbott to Mead Johnson in 2007, Abbott’s market share in the state fell from 90 percent to 5 percent, while Mead’s increased from 5 percent to 95 percent. 

A 2011 report from the USDA’s Economic Research Service found that the benefits of being selected as the sole WIC provider also spill over into non-WIC purchases. WIC formula is sold in smaller cans—typically 12–16 oz containers. But even for non-WIC-sized cans, manufacturers that received the state’s WIC contract saw an average 18 percent increase in market share.

The structure of the WIC program results in one manufacturer gaining a large market share in each state. If that manufacturer has a major supply shortage (like when Abbott’s factory was shut down for several months this year), that leaves parents like me reaching for the last can on nearly empty shelves.

Labeling requirements keep international formula out

If we can’t quickly ramp up domestic production, why not import it from our neighbors? In addition to strict nutritional requirements, the USDA also has strict labeling requirements that stop many formulas produced in other countries from ever crossing US borders. 

Most international formulas don’t meet USDA labeling requirements, but they do meet our nutritional standards. A 2019 study found that 15 of 16 international formulas met the FDA’s nutritional requirements. However, none of the formulas met FDA’s labeling requirements. 

Many American parents have even expressed their preference for European baby formula but have had to turn to the black market to access it. European formula brands include options that aren’t available in the US, like more organic options and formula made from goat’s milk or pasture-raised cows. 

As the shortage worsened, the Biden Administration launched “Operation Fly Formula,” to import large quantities of specialty formulas from Europe for babies with dietary restrictions. Over time, flights have expanded to include standard infant formula as well. The FDA has also said it will “exercise enforcement discretion, on a case-by-case basis” to make it easier for foreign manufacturers to export their formulas to the US. But these changes are temporary, lasting only through November of this year. 

Finally, the Department of Agriculture has issued waivers to ensure WIC participants can access imported formulas that aren’t usually eligible through the program.

These are positive steps, but they are acts of desperation. Long-term changes are needed to expand competition in US formula markets and allow Americans to access high-quality formula made abroad. A first step would be to permanently allow international formula that meets FDA’s nutritional standards to be sold in the US. Permanent changes to the WIC program are also needed to expand choices for American families and reduce reliance on a single brand.

In August my son turned one and moved on from formula to the great big world of food. We no longer have to worry about where we will find our next can of formula. But there are new parents all across the country who are still finding mostly empty shelves when they go to buy formula. Becoming a new parent is stressful enough. It shouldn’t take a global supply chain crisis or a major recall to allow American parents to buy formula from Canada or Europe. But that’s exactly what has happened over the last year. 

The formula shortage is a wake-up call. We need to reevaluate our policies to give Americans confidence that the essential products they rely on to feed their babies will be available when they need them. America is one of the richest and most innovative countries in the world. None of that matters if we can’t feed our babies.

CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.