Bad News for Parents as Reckitt Forecasts Baby Formula Shortage in US to Last Until Spring

Reckitt Benckiser issued a grim warning to parents, saying that the near year-long baby formula shortage in the United States that prompted an intervention from the White House is likely to continue until spring next year, Reuters reported.

Panicked parents across the country had emptied the baby formula aisles at supermarkets earlier this year after former top U.S. manufacturer Abbott Laboratories recalled dozens of types of its Alimentum, EleCare, and Similac formulas back in February.

The products, made at a facility in Sturgis, Michigan, were pulled by Abbott after complaints of bacterial infections. Supermarkets like Walgreens Boots Alliance and Target were forced to limit its sales, putting pressure on the administration of President Joe Biden to address the formula crisis.

Formula crisis to last until spring of 2023

The White House took steps to address the formula shortage back in May, invoking the Defense Production Act to help manufacturers obtain the ingredients that are needed to ramp up supply.

Robert Cleveland, who is the senior vice president of Reckitt's North America and Europe Nutrition operations, said that supplies are yet to return to normal in the United States since the peak of the formula crisis back in May and June. That is despite the U.S. making progress in replenishing formula stocks in the second half of the year.

Cleveland said he suspects that the formula shortage will persist to some degree in the U.S. until the spring resets. He added that when they talk about the crisis, they talk about the condition of the shelves and how they appear to the consumers, and how well that shelf meets their particular needs.

The share of Reckitt in the infant formula market has skyrocketed since Abbott's recall in February, making the British company the No.1 supplier of formula in the United States.

The U.K. firm has yet to see its newfound popularity recede, with Cleveland saying that just over 50 percent of the formula market has remained relatively unchanged since the early part of 2022.

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Reckitt benefits from Abbott's massive formula recall

Reckitt's top position has been further boosted by the U.S. government saying that it will temporarily cover the cost of baby formula for low-income American families who are dependent on discounts given by the government in states that are contracted with the company.

Formula companies normally bid for state contracts to become the sole provider of baby formula for low-income American families under the Women, Infants and Children (WIC) program. The firms offer in their bids a rebate in the form of discounts to the states.

The U.S. government's intervention, aimed at incentivizing companies to boost their formula supplies effectively covers that rebate. Reckitt has previously said that its formula factories are operating 24/7, and the company was feeding more than 40 percent of all low-income WIC infants.

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