Abbott Nutrition to Invest $500 Million in Infant Formula Manufacturing as Shortages Continue

Similac and Enfamil products on largely empty shelves in the baby formula section of a Target store, amid continuing nationwide shortages in infant and toddler formula, in San Diego, on May 25, 2022. (Bing Guan/Reuters)

Abbott Nutrition has announced plans to invest half a billion dollars in an infant formula manufacturing facility, saying that it has determined that the domestic supply chain for formula needs to be bolstered amid capacity shortfalls.

“We’re moving forward with plans for a half-billion-dollar investment in a new U.S. nutrition facility for specialty and metabolic infant formulas,” Abbott Nutrition chairman and CEO Robert Ford said during an Oct. 19 earnings call.

Ford said the company is in the final stages of deciding where to build the plant, which he expects to be “state-of-the-art” and that would set “a new standard for infant formula production.”

“We recognize there’s more to do but feel confident in the progress we’re making,” he added.

Baby formula had been in short supply in the United States amid supply chain pressures and a labor shortage.

The supply crunch hit a fever pitch in May when an analysis by Datasembly showed that around 40 percent of the top-selling infant formula products were out of stock at the end of April.

“This is a shocking number that you don’t see for other categories,” Ben Reich, CEO of Datasembly, told CBS News at the time. “We’ve been tracking it over time and it’s going up dramatically.”

Prior to the shortage, infant formula out-of-stock levels sat at around 5 percent.

The supply shortfall prompted an outcry from concerned parents, prompting the Biden administration to fly in supplies from other countries, including Australia, New Zealand, and Switzerland, under an initiative dubbed Operation Fly Formula.

The U.S. Department of Health and Human Services (HHS) said in an update in early October that, as of Sept. 29, Operation Fly Formula had completed 74 flights and imported over 97.9 million 8-ounce bottle equivalents of baby formula.

The supply problem was made worse when Abbott Nutrition shut down a baby formula plant in Sturgis, Michigan, in February and recalled its infant formula products after reports of bacterial infections in babies who had consumed products made at the facility.

The Abbott Laboratories facility in Sturgis, Mich., on May 20, 2022. (Eric Cox/Reuters)

The Sturgis plant has since reopened but the Food and Drug Administration (FDA) recently warned that infant formula supply chain fragility remains.

“Years of consolidation in the infant formula industry and concerning food safety processes and general procedures at some of the facilities producing these products have resulted in a fragile supply chain that is susceptible to production disruptions when quality issues are identified,” said FDA Commissioner Robert Califf, in a Sept. 20 statement.

Califf said that domestic baby formula manufacturers like Abbott Nutrition “have stepped up to meet the call to increase their production capacity and are working diligently” to address supply chain vulnerabilities, but more needs to be done.

“The long-term resiliency of the infant formula supply chain will rely on greater diversification of manufacturers, including new entrants to the U.S. marketplace, investment in new manufacturing facilities by infant formula producers and a commitment by these companies to consistently and continuously adhere to the FDA’s quality and safety standards,” he said.

The FDA said that it had carried out an internal review of its response to the baby formula shortage and that a number of factors—including limited infant formula-specific training among FDA investigators—had hampered the agency’s response.

Besides aspects that are within the purview of the FDA, the agency cited other factors that must be addressed by external stakeholders, such as a limited number of domestic baby formula manufacturers and needed improvements in the ingredient supply chain.