EXCLUSIVE Walmart-branded infant formula maker Amazon expects shortages through the end of 2022

EXCLUSIVE Walmart-branded infant formula maker Amazon expects shortages through the end of 2022

Empty shelves indicate a shortage of baby food at a Target store in San Antonio, Texas, U.S. May 10, 2022. REUTERS/Kaylee Greenlee Beal

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NEW YORK, May 13 (Reuters) – Perrigo Company PLC (PRGO.N), which manufactures private label baby formula for retailers including Walmart Inc (WMT.N) and Amazon.com Inc (AMZN.O), expects shortages and an increased Demand to qualify for “Balance Sheet of the Year,” CEO Murray Kessler said in an interview with Reuters.

According to Kessler, Perrigo’s formula manufacturing facilities in Ohio and Vermont are now operating at 115% capacity. At the request of the U.S. Food and Drug Administration, the company only makes four items, the private label versions of Similac Pro Sensitive and Pro Advance, and Enfamil Gentle Ease and Infant, Kessler said. Perrigo also has a smaller company that makes a few national formula brands, including Bobbie.

The closure of Abbott Laboratories’ (ABT.N) infant formula plant in Sturgis, Michigan exacerbated pandemic-related shortages nationally, resulting in empty shelves at major department stores and supermarkets and panicked parents. Abbott’s brands include Similac formulas.

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Perrigo works with retailers like Walmart and Target Corp (TGT.N) so they “get something every week,” Kessler said. Retailer allocations are based on the average of what retailers received before “this crisis,” he said.

“We’ve leveled up and we’re killing each other to do whatever we can,” Kessler said.

Some retailers, including CVS Health Corp (CVS.N) and Target, are rationing baby food.

The White House on Thursday announced steps to alleviate the shortage, including allowing more imports.

French food and beverage company Danone SA (DANO.PA), which also makes infant formula, said Abbott Nutrition’s “unexpected recall in February has led to an increase in demand in the US market.

“We are in talks with US authorities to see how we can help them address their bottlenecks.”

Perrigo accounts for around 8% of the total US baby food market, Kessler said, adding that the company has gained market share as it has worked to meet rising demand.

Due to “massive inflation,” Perrigo raised prices by about 3% in the first quarter, Kessler said.

The company has ordered materials to meet increased demand throughout the year, he said.

Bobbie, a new-to-market European-style infant formula, saw customers double in the first week after Abbott formulas were recalled and has continued to rise, CEO Laura Modi told Reuters. Perrigo makes Bobbie’s formula but can only meet about 50% of the company’s demand, Modi said, leading to it not taking on new customers. Perrigo can meet 100% of Bobbie’s current customer needs, she said.

Bobbie has about 70,000 customers.

Abbott closed its Michigan manufacturing facility after complaints of bacterial contamination.

The FDA later cited five bacterial infections reported in babies given the company’s formula, including two deaths. Abbott said its facilities are “not likely to be a source of infection” and plans to reopen the facility in the next two weeks.

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Reporting by Jessica DiNapoli in New York and Richa Naidu in London Editing by Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.

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