Home » UK Business News » UK regulator to probe baby formula market over 25 percent price hike

UK regulator to probe baby formula market over 25 percent price hike

By Nithya Bose in UK Business News, posted November 30, 2023

The UK competition watchdog is to look into the baby formula market, after manufacturers hiked prices by 25 percent over two years amid the cost of living crisis.

The market raises concerns about limited choices, a scarcity of own-label products, and parents hesitating to opt for more affordable alternatives.

Danone and Nestlé dominate the market, accounting for 85 percent of sales.

The Competition and Markets Authority (CMA) suggests families could save over £500 in a child's first year by exploring other options.

The probe is part of a broader examination of inflation in the grocery sector.

It revealed about three-quarters of companies, spanning categories like baked beans and pet food, raised prices faster than costs, maintaining substantial profit margins.

These findings intensify claims of "greedflation," implying brands are exacerbating the cost of living crisis with unnecessary price hikes.

CMA CEO Sarah Cardell said: “Food price inflation has put huge strain on household budgets, so it is vital competition issues aren’t adding to the problem.

“While in most cases the leading brands have raised prices more than their own cost increases, own-label products are generally providing cheaper alternatives.”

The investigation assesses whether regulatory changes are necessary to foster competitive pricing.

Though shoppers tend to find cheaper alternatives, parents are hesitant to switch brands regarding formula.

"Very limited availability of own-brand alternatives"

Cardell said: “Unlike other products examined, there is little evidence of parents switching to cheaper branded options as prices have risen and very limited availability of own-brand alternatives.

“We’re concerned that parents may not always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices.

“We will investigate this further and consider whether changes to regulations are necessary to ensure parents can get the best deal possible.”

Danone holds a 71 percent market share, and Nestlé, with 14 percent, dominates the UK baby formula market.

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Due to stringent government ingredient regulations, the CMA identifies cost as the primary distinguishing factor.

Of the 10 product categories examined, baby milk raises the most concerns, prompting the CMA to release its findings next year.

This inquiry aligns with ongoing concerns about food price inflation, and responses from industry giants such as Danone and Nestlé suggest a willingness to engage with the CMA.

The CMA plans to examine loyalty scheme pricing in January and scrutinise how supermarkets' exclusive deals for loyalty cardholders impact competition and consumers.

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