Iceland boss hits out at parent ‘exploitation’ in baby milk market | Food & drink industry

The boss of Iceland has hit out at “exploitation” of new parents and joined calls for a price cap on baby formula after the competition watchdog found evidence of greedflation by leading manufacturers.

The Competition and Markets Authority (CMA) on Wednesday revealed manufacturers had increased prices by more than their costs during the inflation crisis, fattening profit margins and imposing an average 25% increase on shoppers in two years. It warned competition could be hampered because the market is dominated by two companies, Danone and Nestlé, which between them account for 85% of sales.

Richard Walker, the executive chair of Iceland, said: “This is exploitation. We need this to stop immediately.

“There is a cost of living crisis. Some people cannot afford to feed their babies. This is a real issue with real consequences and we need to do something about it. It now costs £14.50 for a week’s supply of infant formula. It’s crazy and I don’t know how some people can afford it. It’s a myth to say people should rely on breast milk which many can’t do.”

Walker said the government should convene a roundtable of brands and retailers and agree price controls. “It seems an obvious thing to do,” he said

The First Steps Nutrition Trust also called for a price cap alongside other measures including a public health campaign that would highlight the nutritional equivalence of all first infant formula – the contents of which is strictly regulated no matter the price or brand.

Its own research, which was published in August, found significant price differences between brands. The price per 100ml of cow’s milk-based formula varied from 13p per 100ml for the cheapest product, Cow & Gate First Infant Milk (1,200g pack), to 35p per 100ml for the most expensive, Aptamil’s 1 First Milk Tab (552g pack).

A graphic showing the price of 100ml of infant formula by selected brand

The speed of price rises also varied, with an 800g pack of Danone’s Aptamil formula up 26% to about £14.50 between March 2021 and April 2023. The same size pack of Cow & Gate 1 rose 31% to about £10.50 during the same period, while a 900g pack of Aldi’s Mamia brand rose 45% to about £9.40.

Brands currently get around the limits on advertising infant formula by promoting “follow-on milk” – a type of formula targeted at toddlers who do not need a special drink to remain healthy.

Walker argued that the burden on parents could be eased by loosening restrictions on marketing so that retailers could enable shoppers to buy infant formula using loyalty scheme points or food bank vouchers and to allow promotions.

Walker said Iceland was now accepting loyalty scheme points and had slashed its prices by 20%, in effect selling infant formula at the cost price. He said Iceland had done this despite the risk of breaking rules on promoting formula by highlighting the price cut in stores this summer.

“There should be fewer restrictions, I can promote vapes or chocolate but not formula,” he said.

Other high-profile figures are also calling for action on the price of formula. The shadow health secretary, Wes Streeting, last month said the marketing regulations were “no longer fit for purpose”.

He said: “With Labour, retailers will be able to accept loyalty cards and vouchers as payment for infant formula to help families feed their children.”

The CMA is to investigate the baby formula market further after finding it was vulnerable to higher-than-inflation price rises because there was only one UK retailer – Aldi – that sold own-label. It found competition was hampered because shoppers were very reluctant to switch brands, either because they were recommended by friends and family or because their baby would only drink one type.

The watchdog found those who do switch could save as much as £500 a year by doing so. It added that annual costs could also be pushed up by manufacturers’ feeding volume guides, which were “systematically higher” than those recommended by the Scientific Advisory Committee on Nutrition.

Walker said Iceland had experimented with an own-label formula some years ago but it didn’t sell as shoppers preferred to stick to well-known brands.

A spokesperson for the British brand Kendamil, which accounts for just 9% of the UK market, welcomed the CMA inquiry, which is due to report back early next year. It said the “concentration of supplier power” on Danone and Nestlé promoted “monopolistic market dynamics, a concerning lack of supply diversification and, in our view, unjustifiable pricing strategies”.

“Competing against dominant multinational conglomerates [with combined annual profits of over £15bn] is a challenging and often hostile endeavour and we support the CMA’s view that a lack of competition is working against parents struggling during a cost of living crisis,” the Kendamil spokesperson added.

A spokesperson for Danone UK & Ireland, by far the biggest player in the UK baby formula market, and which makes Cow & Gate and Aptamil, said it believed the UK market to be competitive: “We recognise the challenges faced by parents due to inflation. During this difficult period, we have worked very hard to absorb the significant cost increases we have faced, make savings, and minimising any price increases.”

Nestlé said it welcomed the CMA review and that it was open to “all constructive dialogue to help parents in the most effective way possible”.

Source: theguardian.com

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