Parents are paying up to £500 “over the odds” for infant formula during a baby’s first year of life because of lack of competition and “unintended consequences” of regulations, a report found today.
The Competition and Markets Authority (CMA) said a “deep dive” into the sector found a range of concerns about the market for an essential weekly purchase for millions of families.
It concluded that prices for baby formula in the UK rose by between 18% and 36% over the 2 years between December 2021 and December 2023, far higher than inflation.
The infant formula market is highly concentrated with just 3 manufacturers - Danone, Kendal, and Nestle - accounting for over 90% of supply.
But evidence reviewed by the CMA shows that parents could make a saving of up to £300 to £500 over a baby’s first year of life by switching to a lower priced brand.
The interim report also suggested a number of potential solutions including giving parents better information earlier and updating regulations.
One suggestions is that the Government could procure infant formula from a manufacturer and sell it as NHS branded “or invest in establishing a new brand for infant formula.”
The CMA is seeking feedback on these options ahead of a its final report in February.
The report highlighted how rules that ban manufacturers from promoting infant formula through price cuts or deals so as not to discourage breastfeeding results in them having to rely on other claims such as branding their product “advanced”.
Because of the limited price competition, the CMA found that there is little pressure on manufacturers or retailers to shelter customers from increases in costs, which have largely been passed on quickly and in full.
This means that “parents have been shouldering the increasing price of formula for several years.”
The CMA’s consumer research found that parents often choose a formula for the first time in vulnerable situations – usually in hospital immediately after birth – and frequently without access to clear, accurate and impartial information needed to make an informed decision.
The report said “parents naturally want to do what is best for their baby. This can lead to parents actively choosing a more expensive product – assuming a higher price means better quality. “
This is despite NHS advice that “It does not matter which brand you choose, they’ll all meet your baby’s nutritional needs, regardless of price”.
The CMA added: “Parents often rely on shortcuts – such as recommendations from friends and family – when choosing a formula, and brand reputation plays an outsized role in decision-making. “
The CMA also found that similar branding and labelling – including similar colour palettes, fonts and imagery – are frequently used across ranges of infant and follow-on formulas, the products look very similar.
CMA chief executive Sarah Cardell said: “This is a very important and unique market. 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.
“We have identified options for change, but now want to work closely with governments in all parts of the UK, as well as other stakeholders, as we develop our final recommendations. Importantly, any changes must continue to support regulation that ensures all formula gives babies the nutrition they need to thrive – as well as supporting governments’ aims on breastfeeding.
“We’ll now be consulting on our provisional findings and the options we’ve put forward to get important insight from government and stakeholders – all of which will feed into our final recommendations early next year.”
