Asda and Tesco have joined Sainsbury’s and Iceland in reducing the cost of Aptamil baby formula after the brand owner announced that it would be cutting the wholesale price in the wake of the Competition and Markets Authority (CMA) launching an investigation into the category.
In November last year, the regulator noted that prices for baby formula in the UK had risen by 25% over the past two years and pointed to evidence which suggested that some branded suppliers had increased their prices by more than their input costs. The CMA also highlighted that the market was highly concentrated, with limited availability of cheaper own-label alternatives. It subsequently announced that it would undertake further work to better understand consumer behaviour and barriers to entry for baby formula manufacturers, with an update on its findings due to be published in the middle of this year.
Last week, Danone, which accounts for 71% of the baby formula market in the UK, announced that it would be cutting the wholesale price of its Aptamil infant powdered formula by 7% after production costs eased.
Iceland and Sainsbury’s subsequently stated that they would be cutting the price of some Aptamil powders. In recent months, Richard Walker, Iceland’s Executive Chairman, has been calling for action to bring down the cost of baby formula amid the cost of living crisis.
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.
Asda said yesterday that it would now cut the price of six Aptamil lines by an average of 7%, while letting customers pay for baby formula using vouchers from its loyalty scheme for the first time. It added that it would work with its manufacturing partners to ensure any further falls in production costs are passed on to its customers.
Kris Comerford, Asda’s Chief Commercial Officer, commented: “For many of Asda’s customers, and families nationwide, we understand that buying baby formula is a vital necessity in their weekly shop, which is why we’re taking swift action to pass on falling manufacturing costs to customers before any other retailer.
“At the same time, we’ve decided to remove exclusions on using Asda Rewards vouchers to pay for baby formula. Whilst we respect the regulations in place regarding the sale of baby formula, we want to do everything we can to help families manage their budget and keep their family fed.”
Tesco also announced that it was reducing the price of five Aptamil products by between 80p and £1 from today.
NAM Implications:
- Inevitable and way overdue.
- Clearly the market needs opening up in terms of more brand and own-label options.
- Together with flexibility re pricing and promos pointer for all…
