Why aren’t infant formula stock prices improving?


Through Operation Fly Formula, the White House has pledged to import enough formula to manufacture the equivalent of approximately 40 million 8-ounce bottles.

More than a quarter of that supply – enough to make 13 million bottles – has already been delivered as of June 19, according to a statement from the US Department of Human Services.

Still, stock prices for formulas continue to hit new lows, according to data shared with CNN by market research firm Information Resources Incorporated, or IRI.

More than 21% of infant formula – powders, ready-to-drink and liquids – were out of stock in the week ending June 19, compared to a typical rate of 10% before Abbott’s national infant formula recall Nutrition. February.

Stock rates for powder formulas, in particular, are even worse. More than 27% of powdered products were out of stock in the week ending June 19, compared to 25% the previous week and 23% the previous week, according to IRI data.

“Our goal remains to increase supply and move it to retail shelves and warehouses as quickly as possible,” White House spokesman Kevin Munoz told CNN, citing the efforts of Operation Fly Formula as well as the surges offered by the Defense Protection Act and the increased flexibilities of the United States Food and Drug Administration.

The Operation Fly Formula deliveries are not enough to fully replenish the formula supply – they only cover a few days of typical sales.

But the Biden administration isn’t just monitoring stock prices. They are also monitoring formula sales, which jumped 24% at the end of May.

The administration explains that for sales to increase so much, it follows that there must be enough supply to support demand.

Experts, however, say formula sales are generally very steady, and this increased demand is evidence that consumers are likely stockpiling formula, potentially perpetuating the shortage.

“Obviously, babies don’t need thousands of extra bottles in a month,” said Ram Ganeshan, a professor at William & Mary whose research focuses on supply chain management and logistics strategy. .

“So there’s a 24% increase in demand that’s unexplained. I guess people are hearing about the shortage and making sure they have enough on their kitchen shelves. They’re buying more than normal .”

The out-of-stock rate is the fraction of time someone went to the store and didn’t find what they were looking for, said Sridhar Tayur, a professor of operations management at Carnegie Mellon University.

Without a clear end in sight to the shortage, families could “overbuy” and buy enough formula for two or four weeks when they usually only buy for a week, he said.

“So the first people will go there and buy twice as much as normal, which means only half the families will get it.”

Some stores such as CVS, Walgreens and Target have imposed limits on the amount of formula that customers can purchase. But as stockpiling continues, many families will continue to see empty shelves and experience a shortage of baby formula, experts say.

At the same time, manufacturers are focusing production on specialty formulas that were central to the recall and, in turn, limiting the number of other options they offer.

Production of formulas at Abbott's Michigan plant was delayed after flooding caused by severe storms

“Smaller formula packs are not being produced at the moment,” said Krishnakumar Davey, president of customer engagement at IRI.

This limits the options consumers see available on shelves and affects stock rates. Families who typically buy smaller packs of infant formula might opt ​​for larger packs simply because that’s what’s available, which could also help boost sales volume, he said. .

Tayur consulted with the White House on strategies to improve formula stock. He said they discussed the critical need for predictability as the country resets – so consumers have confidence that the formula they need will be on the shelf every time they look for it.

“The predictability of supply affects buyer psychology so that it doesn’t create unnecessary spikes in our demand,” he said.

Despite some setbacks – such as flooding that halted production at the factory just after it reopened and a global supply chain that continues to face challenges – experts agree that help is coming.

And in the meantime, Operation Fly Formula shipments can be a major psychological boost for consumers, experts say, even if they don’t restock an overwhelming amount of physical product.

“It’s like a boom and bust cycle,” Ganeshan said.

“Right now we don’t have much and then we do all these things (like ramping up production in US factories and bringing in more imports through Operation Fly Formula). By the end of August, September, the shelves will be full. I think that’s when it will finally relieve itself.”


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