The news of the UK Competition and Markets Authority (CMA) launching an investigation into the country’s infant formula market comes after evidence of price increases exceeding input costs by branded formula suppliers. This increase in profit margins at consumers’ expense, leading to a 25% rise in UK formula prices over the past two years. The CMA report “Price inflation and competition in food and grocery manufacturing and supply” found little evidence of parents switching to lower-priced options in the infant formula market.
The CMA’s findings underscore the need for suppliers to offer competitive pricing and ensure that consumers have access to the necessary information to make informed buying choices. This is significant because the infant formula market in the UK is highly concentrated, with two brands owning 85% of the market share. The largest market share is held by Danone, which accounts for around 71%, and other key players include Nestle, Kendamil, and HiPP Organic.
The UK regulations limit the way consumers receive information about formula, ultimately affecting buying decisions. Unlike in the US, direct marketing of infant formula brands to consumers is restricted in the UK. CMA’s report highlighted that an overwhelming majority of consumers choose a formula product before or during birth, amplifying the need for timely information and awareness of available product choices.
Despite significant price differences and low consumer awareness about the nutritional equality of all infant formula products, price was not a significant factor in consumer decision-making. The survey data showed that only 5% of parents make decisions based on pricing, and limited brand switching was observed. The need for well-informed choices and competitive pricing in the infant formula market is crucial for consumer welfare and supplier accountability.
Looking into further work in the infant formula market, CMA plans to examine consumer behavior, market competition, the regulatory framework, and the drivers of choice. CMA is ready to gather additional evidence to better understand market outcomes and consumer trends in a comprehensive review to be concluded in mid-2024.
The investigation into the infant formula market by the UK CMA reflects significant trends in the food and beverage industry, particularly in food manufacturing, distribution, and consumer behavior, indicating the need for innovation, sustainability, and regulations in the food and drink sector. This underscores the need for companies to maintain transparency and consumer welfare in their market practices.
