Walmart’s EXCLUSIVE maker and Amazon-branded infant formula expect shortages through rest of 2022

Empty shelves show a shortage of baby formula at a Target store in San Antonio, Texas, U.S., May 10, 2022. REUTERS/Kaylee Greenlee Beal

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NEW YORK, May 13 (Reuters) – Perrigo Company PLC (PRGO.N), which makes private label baby formula for retailers including Walmart Inc (WMT.N) and Inc (AMZN.O)s expects shortages and increased demand to last “through the rest of the year,” CEO Murray Kessler said in an interview with Reuters.

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, the company is only making four items, the Similac Pro Sensitive and Pro Advance and Enfamil Gentle Ease and Infant branded versions, Kessler said. Perrigo also has a small company that makes national formula brands, including Bobbie.

The closure of the Abbott Laboratories (ABT.N) infant formula plant in Sturgis, Michigan, has exacerbated pandemic-related nationwide shortages, resulting in empty shelves at big box stores and supermarkets and panicked parents. Abbott’s brands include Similac formulas.

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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.

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

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

The White House on Thursday announced measures to ease the shortage, including allowing more imports.

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 new-to-market European-style infant formula, saw its number of customers 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 the 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

Our standards: The Thomson Reuters Trust Principles.

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