These New Baby Formula Companies Can't Sell to New Customers … – The New York Times

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Correction: A previous version of this article reported that Bobbie sold formula only through subscriptions. At the time of publication, Bobbie had begun selling its formula at Target.

Christina Szalinski
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For many Americans, finding baby formula has been a tremendous challenge this year. But Kara Knaus, a 36-year-old mother of two in Chicago, hasn’t had any issues despite a severe, months-long national shortage. She buys from Bobbie, a company that launched in March 2021 and sells formula exclusively through subscriptions. Bobbie closed sales to new customers this May but continues to deliver to existing ones.

Bobbie subscribers pay about 92¢ to make one 4-ounce bottle of formula that is “modeled after breast milk” with “European style” organic ingredients. The formula is manufactured by Perrigo, a maker of US store-brand formulas. ByHeart, another company that uses a subscription model, launched in March 2022, becoming the first new domestic formula manufacturer in over a decade—and only the fifth overall. ByHeart’s formula costs subscribers about 87¢ to make a 4-ounce bottle, and it contains ingredients that are new to the US formula market, such as whole milk and added alpha-lactalbumin (a protein also found in human milk), which required a clinical trial to bring to market per FDA regulation. It took ByHeart five years to launch because of the time it took to run that trial, buy a manufacturing facility, and source all the ingredients, according to Ron Belldegrun, ByHeart’s co-founder and CEO. Like Bobbie, ByHeart also closed sales to new customers in May.
“Our entire priority right now is serving our current subscribers,” said Laura Modi, co-founder and CEO of Bobbie. ByHeart’s Belldegrun said that his company wants to make sure ByHeart customers have a continuous formula supply “for their entire feeding journey.” (When this article originally published, ByHeart had begun contacting potential customers on its waiting list.)
Part of the reason about 40% of formula has been out of stock nationwide is that there are only a handful of domestic formula manufacturers. In the US, 80% of the baby formula sold is from just two companies—Similac and Enfamil. When Similac issued a recall in February and parent company Abbott paused manufacturing at its Michigan plant—the largest of its five formula factories—it had a tremendous impact on the overall supply. Customers who had already subscribed to Bobbie or ByHeart haven’t had to sweat the shortage, but the price of formulas from those brands isn’t accessible for many families.
Babies can drink as much as 32 ounces of formula in a day, meaning families who buy Bobbie or ByHeart might pay up to $7.50 per day for formula, compared with those who buy the most affordable formula (Member’s Mark Infant from Sam’s Club) who might pay up to $2.50 per day. Like many parents, Knaus was drawn to Bobbie’s organic ingredients. Bobbie also has fewer overall ingredients than many US formulas. ByHeart’s whole-milk formula offers natural milk fat globule membrane (MFGM) and higher levels of a protein source that more closely resembles human milk compared with that of many other formulas.
Unlike ByHeart, Bobbie doesn’t manufacture its own formula. It contracts with the fourth-largest formula company in the US, Perrigo, which also makes formula branded for CVS, Target, Walgreens, Costco, and Sam’s Club, as well as other brands’ formula like Earth’s Best and Burt’s Bees Baby. Bobbie is working with Perrigo to scale up manufacturing, Modi said in a May 2022 interview, adding that an eventual goal is for Bobbie to grow beyond its subscription model and get on store shelves nationwide. (In mid-July, Bobbie started selling its formula at Target.)
Formula is one of the most tightly regulated foods, and it isn’t easy to start from scratch, which is why it took ByHeart so long to launch production at its Reading, Pennsylvania manufacturing plant, Belldegrun said. “There was an easier way: We could have outsourced all of that,” Belldegrun told me, referring to contracting with Perrigo, “but we feel like the ownership of the plant is really what enabled us to do all of our innovation.” One unique feature of the Reading facility is that it takes locally produced, grass-fed, organic whole milk and evaporates it into a powder inside a five-story-tall apparatus—the milk starts at the top in a giant, contained funnel, and it’s heated to a degree that makes the production area feel like a trip to Death Valley. One of the reasons they use whole milk is because it has components that may be beneficial, like MFGM, which is added as a separate ingredient to certain Enfamil formulas.
Because of the nationwide formula shortage, ByHeart hit its year-three sales goals within three months of opening. They’re now focusing on scaling up to meet demand. “We are working 24 hours a day, five days a week, and we’re in the process now of moving to 24/7,” Belldegrun said. “We’ve already committed another $30 million that we’re investing in infrastructure.” The hope is to open up to 500,000 new families, he explained, which would represent about 15% of the US infant formula market.
Both Modi and Belldegrun are hopeful that the current crisis will lead to a less concentrated market. “We can never find ourselves in a situation again where one company has a recall and 40% of the country doesn’t have sole source nutrition for their babies,” Belldegrun said. “And the only way we’re going to sustainably [reach] that solution is to invest in domestic manufacturing.” (President Joe Biden has also said that the US needs more formula producers.)
Because of the shortage, ByHeart hit its year-three sales goals within three months of opening.
But even as Bobbie and ByHeart grow, their formulas are still inaccessible for many Americans because of the cost. Over a million families who rely on the Special Supplemental Nutrition Program for Women, Infants, and Children (also known as WIC) for formula do not have access to these brands, as the program limits their options, and they are required to buy formula in brick-and-mortar stores. Right now, finding a particular kind of formula at any store can be incredibly challenging, and it’s been tough online, too.
But for those who can afford ByHeart or Bobbie and those who became subscribers before the shortage triggered them to close off to new customers, these brands have been a literal lifeline. While other parents have searched in vain for their preferred formulas, driving from store to store or seeking out donations from fellow parents, Knaus has had no issues: “I just feel lucky,” she said.
This article was edited by Kalee Thompson and Tracy Vence.
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