On the menu today: There is a clear dividing line between American households with newborns and those without, and you can see it in which people have been talking about, and worrying about, a nationwide infant formula shortage for months and which people just heard about the problem recently. Target, Walmart, CVS, and Walgreens are all limiting how much infant and toddler formula customers can purchase per visit. So how did the U.S. — the wealthiest, most advanced, and most prosperous nation on the planet — end up in a situation where so many parents are worrying about feeding their youngest children?
The Deep Roots of the Infant-Formula Shortage
Most reporting on the infant-formula shortage points the finger at Abbott Laboratories, which instituted a February recall of powder formulas, including Similac, Alimentum, and EleCare, manufactured in its Sturgis, Mich., facility. The recall — which the company emphasizes was voluntary — came after four consumer complaints of Cronobacter sakazakii (a.k.a. Salmonella Newport) in infants who had consumed powdered formula manufactured in the Sturgis plant. Cronobacter germs can cause sepsis, a dangerous blood infection, or meningitis, which swells the protective linings surrounding the brain and spinal cord. Those infected with Salmonella bacteria develop diarrhea, fever, and abdominal cramps twelve to 72 hours after infection, and infants are more severely affected than adults.
Abbott Laboratories emphasized that no product it distributed to consumers has tested positive for the presence of either of these bacteria, but that during testing in the Sturgis facility, the company found evidence of Cronobacter sakazakii in areas of the plant where products would not come in contact with it. As a precaution, it recalled all formula manufactured in this facility with an expiration of April 1, 2022, or later. No Abbott liquid formulas are included in the recall, nor are powder formulas or nutrition products manufactured at other Abbott facilities.
Here, it’s worth noting that the supply chain for infant formula was strained well before Abbott’s recall. According to the data-research firm Datasembly, the percentage of stores nationwide at which formula was out of stock surpassed double digits way back in July 2021, and by January 2022, it had hit 23 percent.
According to Datasembly, infant formula is now out-of-stock in 40 percent of stores nationwide. Moreover, in Iowa, South Dakota, North Dakota, Missouri, Texas, and Tennessee, more than half of baby formula was completely sold out during the week starting April 24. In another 26 states, between 40 and 50 percent of infant-formula supplies were sold out.
In January, the Wall Street Journal reported that consumers were having a hard time finding formula, and manufacturers and retailers were each pointing the finger at the other:
Retailers are struggling to predict demand at individual locations, as many Americans have relocated and are spending long periods away from home during the pandemic. Meanwhile, manufacturers are struggling with staffing and shortages of ingredients and packaging materials. The big formula brands sold in the U.S. are largely produced in domestic facilities though raw materials and packaging may include sourcing from other countries.
(Three weeks earlier, shortly before Christmas, President Biden boasted that his administration had averted a supply-chain crisis: “The much-predicted crisis didn’t occur. Packages are moving, gifts are being delivered, shelves are not empty.”)
The initial shortages spurred only a mild increase in prices, but the current shortage is driving prices higher. Datasembly notes that:
Overall prices didn’t increase when out-of-stock percentages started to increase. For example, in January the average out-of-stock rate of all baby formula products was at 3.3 percent and the average price was $24.37. But then in March, when the average out-of-stock rate was at 28.4 percent, the average price hit $26.21, resulting in a 7 percent difference. Even during November and December, when the out-of-stock rate was hovering between 24-27 percent, the average price was between $24 and $25.
Manufacturers of perishable goods would always prefer that the demand for their products be steady, or preferably growing at a manageable pace. But the pandemic disrupted American baby-making as much as it disrupted every other American activity. The U.S. birth rate declined during the pandemic and hit a low of 55.3 births per 1,000 women aged 15–44 in the first quarter of 2021. That number has slightly increased over the past two quarters, up to 55.9, and the slight uptick in the number of hungry newborns has coincided with the shortage of formula.
The good news for harried parents is that that one brand of formula is as good as another, nutritionally — so if their regular brand is out of stock, parents can use another brand as a substitute with no concerns.
“It’s okay to switch between brands if needed. They’re generally the same ingredients, but maybe tweaked in very small, minimal ways, but you can switch between brand names or off-brand names from the supermarkets and the bulk stores.” Tom Herrmann, a spokesperson for the Arizona Department of Health Services, told a local Arizona CBS affiliate.
Pediatrician Steven Abrams notes that the exception is if your baby is on a specific extensively hydrolyzed or amino-acid-based formula such as Elecare for which no store-brand substitute exists. He recommends that if parents are unsure about how to proceed, they should talk to their pediatrician.
There’s one other odd wrinkle: Infant formula is one of the items most frequently stolen from retail stores, at least according to a survey of retailers conducted by National Retail Federation. (Note the survey was conducted during the Covid-19 pandemic, which may have altered criminal behavior.) This is one of the reasons some stores keep infant formula in a locked cabinet.
While some poor or desperate parents may shoplift infant formula, it is primarily “organized retail theft” operations that target formula because it meets the “CRAVED” criteria described by criminologists: Concealable, Removable, Available, Valuable, Enjoyable and Disposable. (Some might dispute the label “enjoyable,” but parents of newborns always need it, ensuring a consistent market for resale.)
While you might be thinking of the anarchic scenes of groups of thieves ransacking retail stores out in California, large-scale theft of infant formula is not a new problem:
In Spring 2012, Kevin Shultz, a loss-prevention manager for Publix Supermarkets, received the first of what would be many reports that year concerning a mysterious plague of thefts. Initially, the missives trickled in from stores around Tampa, where Shultz is based. But Publix has more than 1,000 locations scattered through the Southeast. Some 400, mostly in Florida, fall under his purview, and soon, he was getting similar reports from all over the state: Cape Coral, Fort Myers, Orlando, Miami. The thieves seemed to be multiplying — and all they wanted was baby formula.
Loss prevention is the rare topic about which competing retailers will trade intelligence, and from talking to his counterparts at Walmart, Target and Walgreens, Shultz learned that they were losing large volumes of formula, too. That sort of overlap tended to rule out the employee theft that often accounts for large-scale pilferage. To store-security officers and local cops, who were addressing the crimes on a case-by-case basis, the incidents didn’t appear related. But Shultz had a unique perch, and as he dug deeper, the thefts began to take on a pattern — the work, he believed, of organized crime…
They were craftier than your run-of-the-mill smash-and-grabber. One man, in Orlando, liked to select an opaque, lidded storage bin from a sales display, fill it with formula, then proceed through the exit doors, brandishing a phony receipt for the bin. Others worked in teams. One couple used their children as camouflage, stowing their take in a specialized diaper bag that retained its shape empty or full. Another hid formula in a stroller with a spacious undercarriage. Many thieves favored reusable Walmart bags, which had the advantage of a substantial, precise capacity: 18 12.5-ounce cans of formula (three layers of six), or nine 1.45-pound tubs (three layers of three).
In 2020, police charged three Maryland residents with stealing $11,000 of baby formula from a number of Giant grocery stores in Pennsylvania. In 2021, police accused a California man of stealing $33,000 worth of baby formula in Auburn, Calif. In Miramar, Fla., police are looking for a “baby- formula bandit” who robbed the same Publix four times over two months.
The shortage of infant formula is indeed a recall problem and a supply-chain problem. But it is also an inflation problem — normally, parents spend $1,200–$1,500 in expenditures on infant formula in the first year alone — and a crime problem.
ADDENDUM: Check out Friday’s Three Martini Lunch podcast, now with more background music that I cannot control.