Shocking News: America Out of Baby Foods

Abbott Laboratories had a baby food that had been "poisoned" and had to stop production in a unit and will resume production probably in a week's time.

It is true! The baby food shortage has hit the US since March with parents panicking about where and when they will be able to find the products they need to feed their children.

The out-of-stock rate, which represents the amount of formula that is not in stock compared to what is typically available, was 43% for the week ending May 8, according to Datasembly, a real-time data provider for retailer and consumer packaged goods brands.

With no easy end in sight, caregivers across the country have been forced to spend their free time driving from store to store in search of baby foods, prompting retailers to limit the number of cans customers can buy. Others turned to Facebook groups and informal support networks to purchase the nutritional products that worked best for their children.

How did a baby food crisis come in one of the world's richest countries? Experts say a pullout by one of the industry's largest manufacturers, persistent supply-chain problems, and a market dominated by just a few players have combined to form what one consumer goods expert called a "perfect storm" affecting the supply of essential formula for millions of babies in the US. This shortage could last for months. The reasons for the crisis are as follows.

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‘A whistleblower report was submitted to the FDA in October 2021, and it alleged further health and safety compliance issues at the facility and contributed to a formal inspection by the agency earlier this year.’

Baby Food Poisoned?

Abbott Nutrition is the food industry arm of healthcare and medical device giant Abbott Laboratories, and it is making products ranging from carbohydrate-laden beverages that help patients recover from surgery to energy drinks, powdered and liquid formulas for babies. Although it maintains a global manufacturing network, its plant in Sturgis, Michigan is one of the few in the US that produces formula.

On February 17, Abbott voluntarily recalled its Sturgis-made products and closed the plant after reports that four infants became ill from a bacterial infection and two died after consuming food produced at the plant. A whistleblower report was submitted to the FDA in October 2021, and it alleged further health and safety compliance issues at the facility and contributed to a formal inspection by the agency earlier this year.

And the company is waiting for approval to reopen. “We understand the situation is urgent — getting Sturgis up and running will help alleviate this shortage,” the company said in a statement to Fortune. After conducting its own investigation, which included genomic sequencing of bacteria, the company reported that nothing in its facilities matched the specific strain of bacteria that had caused the illnesses and deaths.

“The Cronobacter sakazakii that was found in environmental testing during the investigation was in non-product contact areas of the facility and has not been linked to any known infant illness,” the company said in a statement.

However, the FDA found more problems with the facility that went beyond the possibility of prior contamination. After its own inspection, which took place from January 31 to March 18, the FDA says that it had observed Cronobacter sakazakii "in medium and high care areas of powdered infant formula production," a problem regardless of whether or not it was the same strain that caused the specific infant deaths.

The agency also said in its report that the company “did not ensure that all surfaces that contacted infant formula were maintained to protect infant formula from being contaminated by any source.” According to the FDA, the company is still working to "correct the findings" of its inspection. As a result, the plant has not yet been able to reopen.

According to the company, Abbott won't be able to get products from its Sturgis facility on shelves for another six to eight weeks. And that's only if it reopens as soon as possible.

Even after the plant reopens and begins to provide baby food to families again, a bigger question still remains: How can the closure of a single manufacturing plant have such a drastic effect on access to nutrition for millions of babies?
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Monopoly in the Market of America

The baby formula market exists as a shared monopoly, with just a few manufacturers controlling almost all of the supply.

Abbott had a market share of about 43% a decade ago, according to a 2011 USDA report, the most recent figure available.

Little has changed since then. The company still maintains exclusive supplier contracts in many states with WIC, the USDA's supplemental nutrition program for low-income families, which accounts for nearly half of baby food sales nationwide. A few other manufacturers, including Mead-Johnson and Nestlé, also have WIC contracts and control the rest of the market.

In addition, the baby food market is difficult for another reason.

Its demand is determined by the nation's birth rate, and the market has been shrinking for years. The number of births has decreased every year since 2008 except 2014, according to the US Census Bureau.

With only a few key players whose capabilities are tied to a shrinking market, repercussions are inevitable when something gets in the way of a certain product reaching store shelves. Other manufacturers are forced to grapple with the influx of new demand from consumers who can't get what they would normally buy.

“The dilemma (manufacturers) have is that it's not a very lucrative market,” says Prof. Patrick Penfield at Syracuse University. “The only way you can grow your market share is if you’re aggressively going after competition.” Because Abbott is already one of the biggest players in the game, significantly expanding his stake isn't really an option.

“I’m not saying that's what Abbott Laboratories did,” he cautions. “But that would be an assumption of mine.”

Is FDA Responsible for the Shortage of Baby Food?

Abbott is not the only company possibly at fault. “There's plenty of blame to go around here,” says Prof. Scott Faber at Georgetown University’s law center and vice president of government affairs at Environmental Working Group.

Faber sees that the FDA itself is as in part responsible for the shortage. The agency did not react fast enough to the whistleblower report and should have done a plant inspection sooner.

“When a drunk driver causes a car crash, the drunk driver bears much of the blame, but so does the bartender who looked the other way while serving one too many drinks,” he says.

On submission of the report for the record last month, Rep. Rosa DeLauro (D-Conn.) wrote, “I am equally concerned that the FDA reacted far too slowly to this report. The report was submitted to the FDA on Oct. 20, 2021. The FDA did not interview the whistleblower until late December 2021. According to news reports, FDA did not inspect the plant in person until Jan. 31, 2022, and the recall was not issued until Feb. 17, 2022.”

The agency did not complete its inspection and issue observations to Abbott until March 18. The company says it has been working since then to update its education and training protocols, as well as its cleaning and maintenance procedures. “The FDA would not have shut down that factory if they didn’t find anything. So there's definitely some type of noncompliance that's going on,” says Penfield.

Now the FDA is working to catch up with a crisis that seems to have been playing out in slow motion for months.

“The FDA recognizes that many consumers have been unable to access infant formula and critical medical foods they are accustomed to using and are frustrated by their inability to do so,” the agency said in a statement to Fortune. “The agency is doing everything in its power to ensure there is adequate product available where and when they need it.”

Future of Baby Foods

The White House held a press conference this week to address the shortage of baby foods and how it plans to get it restocked as quickly as possible with ensured safety.

“Those steps include first cutting red tape to get more infant formula to the shelves by urging states to provide flexibility in the WIC program, which can be a key driver of some supply disruptions,” said a senior administration official. The official added that the administration is asking the FTC and state attorneys general to monitor price overcharged by third-party sellers.

The official outlined a third avenue for alleviating the shortage of baby foods: foreign imports. “The U.S. normally produces 98% percent of the infant formula it consumes, and trading partners in Mexico, Chile, Ireland, and the Netherlands are key sources of imports,” was duly said in the press conference.

However, there is no timeline yet for when those formula imports will arrive in the US and be distributed. On Friday, FDA Commissioner Robert Califf tweeted that the agency will announce its plan next week.

Asked how long the shortage will last, the official said there is no estimate for when Abbott's facilities will be back up and running.

“I see continued shortages,” says Penfield about the coming weeks. “I think there's a lot of pressure on Abbott to get that plant up and running. And until they do so, you're gonna see these continued shortages.”

Source-Medindia