Perrigo swoops for Nestlé’s infant formula plant and Good Start brand as US tackles market monopoly

03 Nov 2022 --- Perrigo has acquired Nestlé’s gateway infant formula plant in Wisconsin, US, and purchased US and Canadian rights to the Nestlé-owned Good Start infant formula brand, as part of a US$170 million investment to expand its presence in the market.

The investment marks the first phase of the over-the-counter health and wellness solution provider’s Supply Chain Reinvention Program. The company has not revealed the financial distribution of the different investments.

Before the purchase, Perrigo lacked the capacity to meet the demand from its 17 US-based store brand and contract manufacturing customers – both market entrants and established brands alike.

“With this newly added capacity, Perrigo can increase supply to these customers and support the Good Start brand in the US and Canada by improving utilization and expanding the capacity of the Gateway plant and producing a wider range of formulations. These new investments will help Perrigo increase consumer choices for infant formula in the marketplace,” says the company.

Also included in the US$170 million investment is US$60 million to expand the production of Gateway formulas, adding seven million pounds yearly to the existing 29 million pounds production. The investment does not include the annual US$20 million investment Perrigo makes for safety and quality assurance.

A domino effect
This year, the US infant formula shortage exemplified the dangers of market monopolies. In the large market dominated by four companies, decision-makers have called for change in the infant formula space, and companies have started diversifying their products to meet consumer demand.

Included in the US$170 million investment is US$60 million to expand the production of Gateway formulas.Additional issues arose from the shortage, such as predatory behavior in the form of arbitrage as empty shelves led online sellers to drive the prices up.

“Long before this year’s infant formula shortage, we had been pursuing options to increase capacity to meet the growing demand for our infant formula in the US,” says Murray Kessler, president and CEO at Perrigo.

“But this year’s industry shortage galvanized our commitment to not only invest to meet the demand for our store brand and contract customers, but also to help prevent future infant formula shortages.”

“The purchase and expansion of Gateway is the first major initiative in our recently announced Supply Chain Reinvention program. It solidifies our long-term manufacturing supply of infant formula in the US, increases affordable infant formula availability to consumers, and delivers value to Perrigo shareholders.”

Formula imports continues
The US Food and Drug Administration (FDA) recently claimed to have leveraged several flexibilities to bolster the infant formula supply and that all available resources are dedicated to ensuring access to safe, nutritious formulas for everyone in the US.

This week, the FDA announced imports from Irish-based Danone and New Zealand-based The a2 Milk Company for sale at US retail outlets. The agency did not specify the quantity imported from any of the companies.

Earlier this year, the Biden-Harris administration set up Operation Fly Formula to tackle the shortage through imports of formula from manufacturers around the world.

By Beatrice Wihlander