Infant formula market study: CMA publishes final report

On 14 February 2025, the Competition and Markets Authority (CMA) released the final report on its infant formula and follow-on formula market study, outlining its findings and providing recommendations to improve outcomes for consumers. 

Background

The in-depth market study into infant formula was launched on 20 February 2024, driven by concerns over pricing, competition, and consumer information. The study aimed to address the unintended consequences of existing regulations, as well as the market dynamics, which may be leading to higher prices for parents. Infant formula is a critical product for many families, with two-thirds of families relying on it at some point during a child’s early life. 

The CMA keeps markets under review as part of its general functions (section 5, Enterprise Act 2002) and market studies have been conducted regularly by the CMA across a variety of products and markets. They are typically shorter than full statutory ‘market investigations’, normally taking up to a year from launch to final report, but, unlike market investigations, their findings are non-binding. Recent examples include market studies into housebuilding (2024), electric vehicle charging (2021), and music streaming (2022).

The CMA’s decision to review the infant and follow-on formula market corresponds with the authority’s focus on protecting the most vulnerable consumers (including people at times of vulnerability). Indeed, the final report notes that many parents will choose a brand of infant formula for their baby in vulnerable circumstances, often in hospital immediately after birth. In a 2019 research report, the CMA noted that there had so far been comparatively little focus on vulnerability associated with certain market contexts, for example, when a person is making a purchase at a stressful time. This market study can be seen as an endeavour by the CMA to put this research on market-specific consumer vulnerability into practice.

Key findings 

The final report highlights several critical issues within the infant formula market:

• Limited competition: The CMA found that the infant formula market is highly concentrated: just three firms account for over 90% of supply, and the largest manufacturer alone accounted for more than 50% of the market over the first 11 months of 2024. In such a concentrated market, there is little incentive for manufacturers or retailers to compete on price, resulting in consumers having to pay more than they might in a more competitive market.
• Regulatory impact on pricing: Infant formula and follow-on formula products are tightly regulated so as to ensure that: (1) manufacturers’ advertising does not discourage breastfeeding and (2) formula milks provide essential nutrients for babies and are safe. The final report found that the scope of the regulations on advertising and labelling have inadvertently contributed to price rises, particularly given that suppliers are prohibited from promoting price reductions or deals, as well as point-of-sale advertising. These regulations also mean that suppliers are instead reliant on brand building and brand recognition to differentiate products.
• Role of brand visibility: The final report finds that an important method used by manufacturers to build brand recognition is through the supply of infant formula to the NHS for distribution to parents in healthcare settings. Although this supply is small in the context of the whole market (approximately 1% of a manufacturer’s total revenue), manufacturers view supplying the NHS as an important customer acquisition channel, given that brand visibility in hospitals is a significant factor driving brand choice and parents rarely switch infant formula brands. In this context, manufacturers have been willing to sell to the NHS predominantly below cost.
• Consumer information: Parents often make decisions about infant formula in vulnerable situations, such as immediately after birth, without access to clear and impartial information. The final report explains that most parents and carers who need or choose to use infant formula experience high pressure to do the best they can for their baby. Consumer research found that ‘when it comes to choosing a brand for their infant, consumers want to purchase “the best’’– whatever that means to them.’ There is evidence that parents who experience feelings of guilt around formula milk use, as opposed to breastfeeding, are particularly vulnerable, as are those making unplanned decisions to use formula milk in hospital settings or under time pressure. Parents, wanting the best for their new child, often perceive that higher priced products are of better quality, despite NHS advice that all infant formulas meet minimum nutritional standards. Evidence reviewed by the CMA showed that parents could make a saving of around £300 over a baby’s first year of life by switching from a popular mid-priced product to a low-priced brand.
• Labelling: The CMA notes that similar branding and labelling across ranges of infant and follow-on formulas can confuse consumers and indirectly promote infant formula through follow-on products (i.e., formula tailored to babies aged 6 months and above). Furthermore, the final report outlines concerns about the enforcement of existing regulations on labelling. Despite submissions from some manufacturers that they comply with provisions in the regulations which require infant formula and follow-on formula to be clearly distinct from each other, the final report raises concerns of widespread non-compliance with, and underenforcement of, these provisions.

Recommendations

The final report set out proposals for the UK, Northern Irish, Scottish, and Welsh governments to improve market outcomes for parents regarding infant formula choices and prices. 

The CMA identifies three possible proposals: (1) reduce regulatory restrictions to allow price promotions and certain advertising; (2) enhance the design, effectiveness, and enforcement of existing regulations; and (3) introduce price caps.

The CMA has rejected option (3) due to the risk of creating price ceilings that may adversely result in higher prices, and does not recommend option (1) alone due to potential conflicts with public health goals and limited consumer benefits. Instead, the CMA proposes several recommended measures to improve regulatory effectiveness, aiming to ensure parents are able to make more informed choices, as well as to encourage price competition among manufacturers. Within this context, the CMA has made four key recommendations:

• Eliminate brand influence in healthcare settings: Parents should be provided with timely, clear, accurate, and impartial information on the nutritional sufficiency of all infant formula products as early as possible. Where parents are given infant formula in healthcare settings, labelling should be standardised to reduce the influence of branding on their decision making.
• Equip parents to make strong choices in retail settings: Clear, accurate, and impartial information on the nutritional sufficiency of all infant formula products should be displayed clearly and prominently on shelves and when buying online. In store, all brands of infant formula should be displayed together to enable quick and easy price comparisons.
• Strengthen labelling and advertising rules: Given that brand awareness and reputation play an outsized role in decision making, parents’ decisions are often not based on objective, tangible, and verifiable information. All packaging should clearly display information on nutritional sufficiency. Claims that are intangible, or cannot be easily checked by parents, should be banned. Advertising for follow-on milks should be banned. Parents should be allowed to use gift cards, vouchers, loyalty points, and coupons to purchase infant formula.
• Effectively enforce current and updated regulations: Strengthen the roles played by the relevant authorities so they must approve the packaging of all infant formula products before sale. 

Government response

The recommendations set out by the CMA in the final report are non-binding, meaning the government and relevant local authorities are not obliged to implement them. However, the governmental reaction has been largely positive.

Public Health Minister, Ashley Dalton, said: “…for those families that cannot or choose not to breastfeed, it is vital that they can access formula that is affordable and high quality. Families should not be paying over the odds to feed their babies because of outdated regulation. As part of our Plan for Change, we’re determined to ensure every child has the best start to life. We will carefully consider these recommendations and respond fully in due course.”

The CMA has said it will now engage to explain these measures and support their implementation.

Timeline of events

• 20 February 2024: The CMA launches the market study into infant formula and follow-on formula.
• 13 March 2024: Deadline for responses to the invitation to comment on the market study.
• 19 August 2024: Statutory deadline for publishing a notice regarding the decision on whether to make a market investigation reference.
• 8 November 2024: Publication of the interim report outlining the provisional findings and potential solutions.
• 29 November 2024: Deadline for final submissions on the interim report.
• 14 February 2025: The final report is published.