Supply chains have been impacted by a number of shortages over the past two years, most recently the baby formula shortage. Out of stock rates have increased exponentially with formula companies unable to meet the demand. But why is there a formula shortage and how is it impacting families all over the US?
Breaking Down the Formula Shortage
Formula Cargo Theft
According to cargo security officials, baby formula has been the number one most targeted product for cargo thieves since 2010. After the financial crisis of 2008, household staples such as formula became hot commodities to steal because, like other food and beverage items, formula has a long shelf life, it can easily be resold, and it is hard to track down. With the shortage taking effect, this theft issue has only worsened. Because of this, carriers are going to extreme lengths, such as using specialized tracking technology and locks, to avoid any possibility of theft.
The formula shortage we are seeing now all started with the backlog of supply chain issues that resulted from the closed factories during the pandemic. However, this issue increased exponentially when there was a contamination case linked to two infant deaths at one of Abbott’s formula factories, causing them to voluntarily stop production and shut down. Because of the contamination, the FDA recalled many of Abbott’s brands and products.
The recalls and the shutdown of Abbott were devastating to the industry since Abbott is one out of the four companies that manufacture 90% of all baby formula.
The recalls and the shutdown of Abbott were devastating to the industry since Abbott is one out of the four companies that manufacture 90% of all baby formula. With Abbott closing, the other three manufacturing companies, Perrigo, Nestle SA, and Mead Johnson, have been unable to keep up with the increased demand, especially because of the shortage issues that already existed. According to Datasembly, out of stock rates have increased 70% in the US for the week ending May 21st, with experts saying that this is the worst formula shortage in decades. Currently 26 states are struggling with supply and ten states have out of stock rates at 90% or above.
Who Is Affected by the Formula Shortage?
Most families rely on formula to at least some degree. According to the CDC, 1 in 5 babies receive formula within their first two days of life, and over 50% of babies use formula by 3 months. However, the shortage affects marginalized people groups the most. Families with fewer resources are less likely to be able to afford the gouged prices that are erupting in the market. They are also less likely to have jobs that offer sufficient maternity leave, paid time off, or flexibility, forcing them to be dependent on formula for their children.
The federal WIC program currently provides formula for about 45% of all American babies, and up to 65% of all formula is purchased through the program.
The federal WIC program currently provides formula for about 45% of all American babies, and up to 65% of all formula is purchased through the program. However, because Abbott provided formula for nearly half of all the babies in the WIC program, these families are struggling to find formula they are eligible for due to the restrictions surrounding the WIC program. Many families are forced to turn to other sources and spend their own money. However, the government is currently working on waiving many of the formula restrictions imposed on the WIC program to alleviate some of the issues.
Overcoming the Formula Shortage
The Abbott factory plans to reopen in the next couple of weeks. However even once they begin manufacturing, it will take about 6 to 8 weeks before the formula will reach store shelves. Currently because of the monopolies in the market, startup formula companies have been unable to survive. However, a startup formula company called ByHeart was recently approved by the FDA to start production in Pennsylvania. This is the first new US formula company in over 15 years. However, until Abbott and ByHeart products start reaching store shelves, the shortages will most likely continue to worsen. Many people are challenging and questioning the US systems in place that have allowed for these monopolies, causing the current formula shortage crisis.