Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
UK consumers are paying “over the odds” for baby formula, the competition regulator said on Friday, as it proposed a series of measures designed to boost competition in the sector.
In an interim report setting out its concerns about the infant formula market, the Competition and Markets Authority found that prices for the product in the UK rose by up to 36 per cent between December 2021 and December 2023.
The CMA recommended incentivising competition by potentially allowing companies to market price reductions, as well as reinforcing existing regulation and improving education for parents.
It added that the government could introduce a price ceiling or profit margin cap to bring prices down faster, or offer baby formula under NHS branding, although it stopped short of recommending those measures.
Concentration in the formula market, which in the UK is dominated by global consumer goods groups Danone and Nestlé and UK manufacturer Kendal Nutricare, has driven up prices as parents picked the priciest formulas believing they were doing the best for their baby, the regulator added.
“We’re concerned that companies don’t compete strongly on price and many parents — who may be choosing infant formula in vulnerable circumstances and without clear information — opt for more expensive products, equating higher costs with better quality for their baby,” said Sarah Cardell, chief executive of the CMA.
Under existing advertising rules, promotions for baby formula, such as discounts, are banned in the same way as for tobacco, but the watchdog found that ban had unintended consequences.
The rules, which were designed to not discourage breastfeeding, meant that companies had turned to alternative marketing strategies that made it hard for parents to differentiate between the products on offer, it said.
For example, the watchdog found that “cross-marketing”, in which companies use similar packaging branding across their formula stages in order to build brand loyalty, was widespread.
The CMA also found that unlike in other grocery categories, in which inflation-hit shoppers traded down to cheaper, own label goods, supermarket label formulas made up less than 5 per cent of the market.
Danone, Nestlé and Kendal Nutricare account for more than 90 per cent of the country’s baby formula supply, with Danone dominating at 50-60 per cent share of the market with its Aptamil and Cow & Gate brands.
Kendal has overtaken Nestlé to become the country’s second-biggest manufacturer, growing between 10 and 20 per cent in market share of revenue in the first seven months of the year.
Danone UK & Ireland said it agreed that there should be a focus on the information parents receive in healthcare settings.
“In Danone’s experience the UK formula milks market is competitive and dynamic, and we will continue to work constructively on ways we can carry on delivering value to parents,” it said.
Nestlé said: “Our efforts are focused on supporting families on their infant feeding choices and contributing to the best possible nutrition for their children’s healthy growth and development.” It added those included “providing products that are affordable and accessible to consumers, while ensuring fair prices for our suppliers and farmers”.
Kendal did not immediately respond to a request for comment.
Read the full article here