Exclusive: Walmart maker, Amazon-branded infant formula faces shortages through rest of 2022

NEW YORK, May 13 (Reuters) – Perrigo Company PLC (PRGO.N), which makes private label infant formula for retailers including Walmart Inc (WMT.N) and Amazon.com Inc (AMZN.O), expects shortages and increased demand to last “the rest of the year”, chief executive Murray Kessler told Reuters in an interview.

The Biden administration has come under increasing pressure this week to address a shortage of baby formula, which has its roots in a February recall of certain formulas by one of the nation’s leading manufacturers, Abbott Laboratories (ABT.N) .

“We stepped up and we are killing ourselves to do everything we can,” Kessler said.

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Perrigo’s formula manufacturing facilities in Ohio and Vermont are now operating at 115% capacity, Kessler said.

At the request of the U.S. Food and Drug Administration, Perrigo is focusing on four items, branded versions of Similac Pro Sensitive and Pro Advance and Enfamil Gentle Ease and Infant, Kessler said.

The company added that it also manufactures other formulas. He also owns a small business that makes national formula brands, including Bobbie.

The closure of Abbott’s infant formula factory in Sturgis, Michigan, has exacerbated national pandemic-related shortages, resulting in empty shelves at big box stores and supermarkets and panicking parents. Abbott’s brands include Similac formulas.

Perrigo is working with retailers, including Walmart and Target Corp (TGT.N), so they “get something every week,” Kessler said. Retailer allocations are based on an average of what retailers were receiving before “this crisis”, he said.

Some retailers, including CVS Health Corp (CVS.N) and Target, are rationing infant formula.

The White House on Thursday announced steps it is taking to ease the shortage, including allowing more imports. President Joe Biden said Friday he expects more formula to hit shelves within weeks.

French food and beverage company Danone SA (DANO.PA), which also makes infant formula, said “Abbott Nutrition’s unexpected recall in February has led to increased demand in the US market.

“We are in discussions with the American authorities to see how we can help them deal with their shortages.”

Of the total U.S. infant formula market, Perrigo accounts for about 8%, Kessler said, adding that it has gained market share as it strives to meet growing demand.

Due to “massive inflation,” Perrigo raised prices about 3% in the first quarter, Kessler said.

The company ordered materials to meet the increased level of demand throughout the year, he said.

Bobbie, a European-style infant formula new to the market, saw its customer numbers double in the first week after Abbott formulas were recalled, and it has continued to climb, CEO Laura Modi told Reuters.

Perrigo makes Bobbie’s formula but can only meet about 50% of the company’s demand, Modi said, which has caused her to stop taking on new customers. Perrigo can meet 100% of Bobbie’s current customer needs, she said.

Bobbie has approximately 70,000 customers.

Abbott closed its manufacturing plant in Michigan after complaints of bacterial contamination.

The FDA later cited five reported bacterial infections in babies given the company’s formula, including two deaths. Abbott said its factories are “not likely the source of infection” and plans to reopen the facility within the next two weeks.

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Reporting by Jessica DiNapoli in New York and Richa Naidu in London Editing by Nick Zieminski and Marguerita Choy

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