The CMA has highlighted “significant concerns” that restrictions on the promotion and marketing of infant formula products could lead to parents paying “more than they need to”.
Baby formula is one of the categories under the regulator’s spotlight in a wider investigation into profiteering in the food and drink sector, launched in response to the cost of living crisis.
In February, the CMA kicked off a market study of the sector after its own report found baby formula prices had risen by 25% over a two-year period. The update issued on 16 August outlined its initial findings.
While the regulator identified that the market structure could be creating “poor market outcomes” for consumers, it stopped short of launching a formal market investigation. Instead, it said it would continue with its market study, and was working with the Westminster and devolved UK governments with a view to publishing recommendations in October.
The main crux of the concerns related to the impact that marketing restrictions on baby formula products could have on a customer’s ability to identify best-value products, and switch down to cheaper alternatives.
Under advertising rules, retailers and manufacturers are prevented from promoting price cuts on formula lines, or from including the products in special promotions, which could make it harder for a customer to tell when certain lines are cheaper or may have changed in price, the CMA said.
“As well as a lack of switching by existing customers, those who are choosing an infant formula brand for the first time are generally not choosing cheaper options as prices have risen,” it said.
The body was further concerned that the way in which manufacturers built brand awareness in light of regulations could lead customers to spend more than they needed to out of brand loyalty, or the feeling that they were obligated to buy a certain product at a certain stage of their baby growing up.
For example, many higher priced products could be perceived as being more premium or better for babies, despite all formula products being required to meet the same compositional requirements. The labelling of products – for example as “follow-on formula” or “growing-up milks” – could further influence buying decisions, the body said.
“For many, the decision to formula feed is made in vulnerable circumstances, for clinical reasons, in healthcare settings after birth,” the report said.
“Many parents and carers are, naturally, not focused on comparing products and prices when they need to make a decision to start buying formula, and once they have found a product that works well for their baby they are reluctant to switch.”
This could have a further knock-on effect on challenger brands, who could face “considerable” barriers to gaining market share while staying within the regulations.
The CMA said it would look at the impact of both elements as part of the ongoing study.
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