In a groundbreaking move, the UK Competition and Markets Authority (CMA) has proposed that the government consider offering its own low-cost baby formula, potentially under a trusted brand like the NHS. This bold suggestion comes as part of the watchdog’s efforts to address soaring prices and lack of choice in the infant formula market, which have left many parents struggling to afford this essential product.
Investigating a Troubled Market
The CMA launched an investigation into the UK’s infant formula market in November 2023, after uncovering alarming trends. Manufacturers had hiked prices by a staggering 25% over just two years, while managing to increase their profit margins amid a cost of living crisis. The watchdog found the market was dominated by just two companies – Danone and Nestlé – which together accounted for 85% of sales.
Compounding the issue, the CMA noted that parents had very limited choices, with few own-label products available. Many felt compelled to opt for more expensive brands, equating higher prices with better quality for their babies. As Sarah Cardell, chief executive of the CMA, explained:
“We’re concerned that companies don’t compete strongly on price and many parents – who may be choosing infant formula in vulnerable circumstances and without clear information – opt for more expensive products, equating higher costs with better quality for their baby.”
A Government-Backed Solution?
In its interim report, the CMA has put forward a range of potential measures to shake up the market and provide more affordable options for parents. Chief among these is the idea of the government procuring its own infant formula from a third-party manufacturer at a competitive price, then selling it under an established and trusted name like the NHS.
By introducing a lower-priced, government-backed alternative, the CMA believes this could boost choice for parents and put downward pressure on prices across the market. It’s a radical proposal, but one that reflects the severity of the issues facing families and the need for decisive action.
Price Caps and Profit Limits
Alongside the NHS-branded formula concept, the CMA has suggested several other “backstop” measures for the government to consider. These include imposing a price cap on baby formula products, or setting a maximum profit margin for retailers. Such interventions would aim to directly and rapidly bring down costs for consumers.
While the CMA stresses these are not active recommendations at this stage, their inclusion underscores the watchdog’s view that bold steps may be necessary to tackle entrenched problems in the market. As the report notes, even with clearer information and promotion rules, ingrained consumer beliefs about price and quality may limit the impact of less drastic reforms.
“More interventionist measures may therefore be needed to bring prices down in the market more directly, and with more certainty.”
– Competition and Markets Authority
Advertising Overhaul
Reforming the rules around promotions and marketing is another avenue the CMA is exploring. The current ban on infant formula advertising could be extended to cover follow-on formulas, or even all brand-related ads for these products. By limiting the ability of companies to influence consumer choices and build brand loyalty, the watchdog hopes parents will gain more opportunity to compare and select products based on clear facts.
Industry Reaction
Infant formula manufacturers and retailers will no doubt be closely scrutinising the CMA’s report. While some may resist the prospect of price caps or state-backed competition, others have welcomed action to support parents. Supermarket chain Iceland’s boss Richard Walker has previously called for a price cap to stop the “exploitation” of parents in the formula market.
The Road Ahead
The CMA’s interim report is a significant step, but the journey is far from over. The watchdog will now consult on its initial findings and recommendations, seeking input from all sides. A final report, due in early 2025, will then present conclusive evidence and near-term actions for the government to consider.
For parents across the UK grappling with the pressures of the cost of living crisis, the prospect of NHS-approved formula or a more competitive, transparent market will likely be welcome news. But as regulatory wheels turn slowly, many will be hoping for swift and decisive reforms to provide the support they urgently need now. In an ideal world, access to high-quality, affordable nutrition should be a given for every infant – making it a reality will be the ultimate test of this process.
