After raising concerns last year, the Competition and Markets Authority (CMA) has today announced the launch of a market study into the supply of infant formula in the UK.
The regulator’s initial findings published in November highlighted that prices for baby formula had risen by 25% over the past two years, with evidence suggesting that some branded suppliers had increased their prices by more than their input costs. It also highlighted that the market was highly concentrated, with limited availability of cheaper options.
The CMA stated today that by launching a market study, it will be able to use its compulsory information-gathering powers, rather than rely on firms providing information voluntarily. Any recommendations to government resulting from its work will also now have a formal status.
The probe will gather additional evidence on consumer behaviour, the drivers of choice, and the information and advice available to consumers to support their purchasing decisions. It will also look at the role of the regulatory framework and its enforcement in influencing market outcomes and the supply-side features of the market (such as barriers to entry and expansion).
The competition watchdog said it intends to conduct the study as swiftly as possible and plans to publish a final report in September this year.
Once completed, the CMA will then consider whether there are problems in the market and, if so, what actions could or should be taken to address these. This could include making recommendations to government – for example, on the regulations governing how infant formula is marketed, or on the information provided to parents to help them choose an infant formula brand.
Weeks after the CMA’s initial findings at the end of last year, a string of supermarkets cut the cost of powdered formula Aptamil after brand owner Danone agreed to reduce the wholesale price by 7%.
Danone, which accounts for 71% of the baby formula market in the UK, stated at the time that it recognised the challenges faced by parents due to inflation and had “worked very hard to absorb the significant cost increases we have faced, make savings, and minimise any price increases.”
Richard Walker, the Executive Chairman of Iceland, has been calling for action to bring down the cost of baby formula amid the cost of living crisis. As well as a cap on prices, he wants changes to the law to enable retailers to promote discounted formula and to allow shoppers to buy it with loyalty points, gift cards or food bank vouchers.
Current legislation prevents manufacturers and retailers from including infant formulas in price promotions or other activities aimed at increasing sales. It also limits how retailers can advertise the formula products in-store. The Infant Formula, Follow-on Formula Regulations 2007 are aimed at ensuring the marketing of formula milk does not discourage breastfeeding by new mothers.
Speaking today, Sarah Cardell, CEO of the CMA, said: “Infant formula is a key part of the weekly shop for many parents across the UK, who rely on these products to ensure their baby gets all the essential nutrients they need.
“Whilst it’s a positive sign that prices of some products have fallen since our update last November, the cost of infant milk remains at historically high levels. 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. That’s why we’ve now decided to take forward our work on infant formula as a market study, using our formal legal powers.”
