UK Competition Watchdog Launches Inquiry into Baby Formula Market
The UK's Competition and Markets Authority (CMA) is set to probe the baby formula industry after discovering significant price hikes outpacing cost increases.
In particular, the prices of baby formula rose by 25% over two years, enhancing manufacturer profit margins amidst the cost of living crisis.
The market is highly concentrated, with Danone and Nestlé holding an 85% sales share. The CMA's preliminary concerns point to a lack of competition and the limited availability of store-brand alternatives, noting that most parents aren't switching to less costly options, potentially missing out on over £500 in savings during their baby's first year.
This investigation comes as the CMA reports on grocery inflation, where it found many brands increasing prices beyond their rising costs, a trend criticized as "greedflation." Sarah Cardell, CMA's chief executive, emphasized the importance of competition not exacerbating financial strain on households, highlighting that store-brand products are typically less expensive.
In the baby formula sector dominated by Danone's Cow & Gate and Aptamil (71% market share) and Nestlé's SMA and Little Steps (14% share), formula prices are mainly differentiated by cost due to strict regulations on ingredients. The British Kendamil holds a 9% share, and HiPP has 5%.
Both Danone and Nestlé have expressed their commitment to affordability and readiness to cooperate with the CMA investigation. Responses from HiPP and Kendamil were not immediately available.
Amid ongoing high food price inflation, the consumer group Which? estimates supermarket prices have surged by over a quarter in the past two years. While the report acknowledges increased production costs, it also points out instances where branded goods' price rises exceeded those cost hikes. Which? expressed concern about the limited budget options in smaller stores affecting cash-strapped consumers.
Furthermore, the CMA plans to scrutinize loyalty scheme pricing in supermarkets later in the year, addressing the exclusivity of discounts to scheme members and its potential impact on consumers and market competition.
The market is highly concentrated, with Danone and Nestlé holding an 85% sales share. The CMA's preliminary concerns point to a lack of competition and the limited availability of store-brand alternatives, noting that most parents aren't switching to less costly options, potentially missing out on over £500 in savings during their baby's first year.
This investigation comes as the CMA reports on grocery inflation, where it found many brands increasing prices beyond their rising costs, a trend criticized as "greedflation." Sarah Cardell, CMA's chief executive, emphasized the importance of competition not exacerbating financial strain on households, highlighting that store-brand products are typically less expensive.
In the baby formula sector dominated by Danone's Cow & Gate and Aptamil (71% market share) and Nestlé's SMA and Little Steps (14% share), formula prices are mainly differentiated by cost due to strict regulations on ingredients. The British Kendamil holds a 9% share, and HiPP has 5%.
Both Danone and Nestlé have expressed their commitment to affordability and readiness to cooperate with the CMA investigation. Responses from HiPP and Kendamil were not immediately available.
Amid ongoing high food price inflation, the consumer group Which? estimates supermarket prices have surged by over a quarter in the past two years. While the report acknowledges increased production costs, it also points out instances where branded goods' price rises exceeded those cost hikes. Which? expressed concern about the limited budget options in smaller stores affecting cash-strapped consumers.
Furthermore, the CMA plans to scrutinize loyalty scheme pricing in supermarkets later in the year, addressing the exclusivity of discounts to scheme members and its potential impact on consumers and market competition.
