A government watchdog has proposed lifting the ban on baby formula price promotions to prevent parents from “overpaying” for it. The Competition and Markets Authority’s (CMA) interim report on the baby formula market called for changes to ease the financial burden on parents.
Among its recommendations were issuing NHS-branded formula and eliminating branding on baby formula in hospitals. The report did not go as far as to suggest price controls but noted they could still be considered. It added that parents have been “bearing the burden” of price hikes in the baby formula market for years.
The Challenge and Potential Exploitation of Parents
CMA Chief Executive Sarah Cardell expressed concern that companies aren’t competing effectively on price, leading many parents – often making choices under vulnerable circumstances and lacking clear information – to select more expensive infant formula, assuming that a higher price means better quality for their baby.
In the UK, just three companies—Danone (which produces Aptamil and Cow & Gate), Nestle (which produces SMA), and Kendamil—dominate over 90% of the baby formula market.
Between December 2021 and December 2023, baby formula prices in the UK rose between 18% and 36%, depending on the brand. A recent report found that parents could save up to £500 in their baby’s first year by opting for a lower-priced formula.
Maxine Palmer, from the parenting charity NCT, expressed concern that companies are taking advantage of parents who rely on formula to feed their babies.
She highlighted that rising prices, along with minimal regulation and guidance for formula manufacturers, are forcing parents to balance feeding their babies with managing essential living expenses.
Formula marketing in the UK is strictly regulated, banning discounts or loyalty points, similar to restrictions on tobacco and lottery promotions. This policy aims to promote breastfeeding, which the NHS advises as a healthier option for infants. However, the Competition and Markets Authority (CMA) noted that these rules might inadvertently prevent price competition, which could keep prices high. Allowing publicized discounts, the CMA argued, might encourage companies to compete on price.
The CMA found limited pressure on companies to absorb manufacturing cost increases, with most of these costs being passed on to consumers in full. Despite these restrictions, Asda began permitting loyalty points for baby milk purchases in January, and Iceland has also challenged the rule.
Additionally, regulations require baby formula brands, including store brands, to maintain similar core ingredients. Yet the CMA raised concerns that marketing terms like “advanced” make it difficult for parents to assess product quality, potentially weakening the public health message that all infant formulas meet babies’ nutritional needs regardless of brand.
Proposed Solution
The Competition and Markets Authority (CMA) has issued several recommendations aimed at addressing concerns in the baby milk market. It suggested that companies should distinctly separate their infant formula brands from follow-on milk brands, which are intended for babies over six months, due to concerns that brand reputation may unduly influence purchasing decisions.
One recommendation is that the government could consider sourcing formula from third-party suppliers and offering it at a reduced cost under NHS branding. Additionally, the CMA recommended strengthening existing regulations to ensure they cover online sales and called for parents to receive clear, accurate, and unbiased information about nutritional adequacy at the point of purchase.
The NHS should also improve the timeliness of information provided to parents, including guidance that follow-on milk is not a necessity. The CMA suggested using standardized formula packaging in hospitals to prevent people from associating certain brands with the authority of hospital care.
While the CMA did not endorse price controls like caps, which could directly reduce prices, it indicated that these could be effective if implemented. However, the CMA reportedly chose not to recommend price caps due to the risk of creating shortages, which it believes would have severe consequences in this market.
A source close to the CMA stated that a shortage in this industry could be highly disruptive. HiPP Organic UK expressed relief that price caps were not recommended, stating that such measures are unlikely to effectively support families or sustain the industry.
The CMA initiated its investigation following rising baby milk prices and is expected to release its final report in February. Danone voiced support for the CMA’s focus on improving the information provided to parents, particularly around the distinctions between different formulas. Nestlé also committed to working collaboratively with the CMA as its market review continues. Kendamil highlighted that it is the only UK-based baby milk producer, contributing to lower prices.
