Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

U.S. baby formula shortage leads to boom in advertisements

Published 12/22/2022, 12:07 PM
Updated 12/22/2022, 12:11 PM
© Reuters. FILE PHOTO: A selection of Enfa products, a brand of Reckitt Benckiser Group PLC, are seen on display in a store in Manhattan, New York City, U.S., March 24, 2022. REUTERS/Andrew Kelly/File Photo

By Jessica DiNapoli

NEW YORK (Reuters) - It's not your imagination if you feel like you're seeing more ads for baby formula than ever before.

Formula makers have stepped up marketing campaigns to grab a bigger piece of the lucrative, $5.6 billion formula market, after a severe shortage earlier this year shook consumer confidence, said Allen Sayler, an industry consultant.

The months-long closure of Abbott Laboratories (NYSE:ABT)' formula plant in Michigan, after complaints of bacterial infections in infants, eroded the Similac maker's market share. Other brands had a chance to step in due to relaxed government rules, frantic parents looking for formula and retailers like Walmart (NYSE:WMT) seeking alternatives, Sayler said.

“A high level of uncertainty on supply created business opportunities that did not exist before,” Sayler said, adding that formula makers are attracted to the United States because birth rates are higher than Europe, China and Japan and many U.S. moms return to work outside the home.

Profit margins have also grown, according to a report from industry research firm IBISWorld.

The number of viewers of TV and streaming ads for formula skyrocketed to roughly 562 million this year, up from just 200,000 last year, according to data from media measurement firm ISpotTV. Some ads came from new brands the U.S. government approved to ease the shortage. Others came from already approved brands stepping up marketing.

French dairy producer Danone SA (OTC:DANOY) made an exception to its internal policy against advertising formula due to the U.S. shortage, a spokesperson said.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The World Health Organization (WHO) asks that governments and companies ban advertising of baby formula to guard against predatory marketing practices and encourage breastfeeding, which it recommends as the healthier choice. The United States never enacted legislation enforcing the WHO advertising ban.

To be sure, breastfeeding is not always possible and formula is an essential food.

Danone ran the biggest of the formula campaigns this year for its Aptamil brand, recently allowed by regulators on U.S. shelves, ISpotTV found.

Danone spent roughly $2.1 million to air commercials on NBC, the Hallmark channel and ION, according to ISpotTV. The ads tout that Aptamil is Europe’s No.1 formula, and “now we’re here for you.” The ads are still airing on streaming services, and the campaign has boosted awareness of Aptamil, an executive said.

Danone's aim with the commercials is to "accelerate education" as "we're still seeing bare shelves across the country," the spokesperson said.

An average of roughly 77% of infant formula was in stock in December across major U.S. retailers, up from 51% in June, according to e-commerce analytics firm Dataweave.

An executive from Reckitt Benckiser Group Plc (LON:RKT), which makes Enfamil, recently told Reuters he expects the formula shortage will persist until the spring.

Three million viewers spotted Enfamil's streaming and local TV ads for its Gentlease formula this year, according to ISpotTV. A fraction of that figure saw Enfamil ads in 2021.

ISpotTV does not track spending on streaming and local TV campaigns.

A Reckitt spokesperson said that online videos have been part of its "media mix" for several years and that its expansion into streaming platforms is part of the company's strategy.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The U.K.-based company has a policy prohibiting advertising formula in countries with high child mortality and malnutrition rates. The policy "acknowledges the importance and supports the aim and principles" of the WHO Code.

The last significant U.S. TV advertising campaign for formula was in 2017, when Enfamil ran commercials for its formula for toddlers over 1 year old, according to ISpotTV.

Brands have also targeted new and expecting moms’ Instagram and Facebook (NASDAQ:META) feeds.

U.S.-based formula company Bobbie, which saw its sales soar in the shortage, ran an ad featuring supermodel Ashley Graham on ABC's "Bachelor in Paradise" last month, attracting 5 million views, ISpotTV found.

ISpotTV pegged the cost of the ad at $71,000 but a Bobbie spokeswoman said it was less without sharing the exact figure.

In the commercial, Graham talks about overcoming the stigma of bottle-feeding. Bobbie's strategy for advertising is to "show up" for parents, who deserve to learn about formula in the same way they would for any other product, said CEO Laura Modi.

"The...approach to stop all formula companies from advertising has swung the pendulum in another direction where formula is within the same category as cigarettes," Modi said. "This fuels guilt and prevents new, next-generation companies from establishing their own, ethical approach."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.