Parents could save up to £500 a year on baby formula as watchdog says changes needed

Competition regulator concludes year-long investigation into the baby formula milk industry saying power of branding needs to be tackled

The regulator proposes sweeping changes for the baby formula industry, after finding many brands cost more than the weekly value of people’s benefits, leading some parents to forgo food to buy the product.

The Competition and Markets Authority (CMA) said issues like high prices and branding in the industry are leading to ‘poor outcomes’ for parents, who could be saving between £300 and £500 a year by switching to lower priced products.

The recommendations followed a year-long investigation into the supply of baby formula milk over concerns that few parents were switching brands as prices rose by 25% over two years.

At the time of launching its investigation, the regulator voiced concerns over lack of choice. The industry is dominated by just three companies – Danone, Kendal and Nestle, which make up about 90% of the market.

However, the regulator stopped short of recommending a price cap, which it had said it was looking into last year, and focused instead on changes that will help parents make better choices.

Sarah Cardell, chief executive of the CMA, said:

Many parents who ‘need, or choose, to formula feed, pick a brand at a vulnerable moment, based on incomplete information, often believing that higher prices must mean better quality.’

‘This is despite NHS advice stating that all brands will meet your baby’s nutritional needs, regardless of brand or price.’

Non-branded baby formula for NHS hospitals

Advertising and labelling of infant formula is strictly regulated. For example, advertisement and promotion, including price reductions or deals, is restricted so as not to discourage breastfeeding.

The regulator said, rather than competing strongly on price, manufacturers place significant emphasis on building brand awareness to secure customers. 

For example, some regularly supply the NHS with below cost formulas to reach new parents – and once parents have found a brand that works for their baby, they rarely switch.

The regulator said the NHS could favour its own non-brand baby formula, in a bid to help drive prices down. It also said existing products should be provided in non-branded containers in hospitals to reduce brand influence.  

The CMA found many parents choose a brand for the first time in vulnerable circumstances – often in hospital immediately after birth – and frequently without the clear, accurate and impartial information needed to make informed decisions. 

It said people often feel under pressure, and naturally want to do what is best for their baby. Many actively choose a more expensive product, assuming this means better quality. 

However, NHS advice makes it clear ‘it does not matter which brand you choose, they’ll all meet your baby’s nutritional needs, regardless of price.’

Making it easier for parents to shop around

The regulator said parents should be equipped with the right information to help make price comparisons easy.

It said packaging should clearly display nutritional information, while any claims that cannot easily be checked by parents should be banned. It said this would make it easier for parents to pick between brands.

Different pricing between brands can have a sizable impact on parents’ finances. Evidence reviewed by the regulator shows that parents could make a saving of £300 to £500 over a baby’s first year of life.

A £300 saving could be made by switching from a popular mid-priced product to a low-priced brand. While savings of £500 could be made by switching from a premium high-priced brand to a low priced brand.

It also said parents should be allowed to use gift cards, vouchers, loyalty points, and coupons to buy baby formula.

Low income families impacted the most by high prices

The regulator said it had heard concerns that parents on lower incomes are more likely to formula feed and so are disproportionately impacted by infant formula pricing. 

While some government support is available to those eligible, most infant formulas exceed the weekly value of benefits available through schemes such as the Healthy Start and Best Start Food. This can lead to parents foregoing food in order to provide for their babies.

Sophie Livingstone, chief executive of Little Village, a baby bank service, said nearly one in 10 of the families her charity supports are ‘resorting to watering down formula to make each box last longer.’

‘The cost of baby formula is simply too high and piling on the pressure when families are already juggling high housing, energy and food costs.

‘We want two things to happen – that the cost of formula comes down and that the Government provides clear guidance that allows baby banks to safely supply formula to the families most in need.’

The regulator has made its recommendations to UK, Northern Irish, Scottish and Welsh governments, who it said are ‘committed to the public health goal of supporting breastfeeding.’