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Exclusive: Maker of Walmart, Amazon store-branded baby replacements see shortage through the rest of 2022




NEW YORK, May 13 (Reuters) – Perrigo Company PLC (PRGO.N), which makes store-bought baby replacements for retailers, including Walmart Inc (WMT.N) and Amazon.com Inc (AMZN.O), expects shortages and increased demand to last for “balance of the year,” CEO Murray Kessler told Reuters in an interview.

The Biden administration this week has come under increasing pressure to address a shortage of infant formula, which has its roots in a recall of some formulas in February from one of the country̵[ads1]7;s most important producers, Abbott Laboratories (ABT.N).

“We have stepped up and are taking our own lives to do everything we can,” Kessler said.

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Perrigo’s formula production facilities in Ohio and Vermont now run at 115% of capacity, Kessler said.

At the request of the U.S. Food and Drug Administration, Perrigo is focusing on four items, the branded versions of Similac Pro Sensitive and Pro Advance and the Enfamil Gentle Ease and Infant, Kessler said.

The company added that it also makes other formulas. It also has a small business that makes some national formula brands, including Bobbie.

The closure of Abbott’s breast milk substitute plant in Sturgis, Michigan, exacerbated the lack of a national pandemic, leading to empty shelves in large box stores and supermarkets and causing parents to panic. Abbott’s brands include Similac formulas.

Perrigo works with retailers, including Walmart and Target Corp (TGT.N), so they “get something every week,” Kessler said. The dealers’ allocations are based on an average of what the dealers received before “this crisis”, he said.

Some retailers, including CVS Health Corp (CVS.N) and Target, are rationing baby substitutes.

The White House on Thursday announced steps it is taking to alleviate the shortage, including allowing more imports. President Joe Biden said Friday that he expects more formula on the shelves in weeks.

The French food and beverage company Danone SA (DANO.PA), which also makes infant formula, said that the “unexpected recall of Abbott Nutrition in February has led to an increase in demand in the US market.

“We are in discussions with US authorities to see how we can support them in dealing with their shortcomings.”

Of the total U.S. baby replacement market, Perrigo accounts for about 8%, Kessler said, adding that it has gained a share as it has worked to meet the growing demand.

Due to “massive inflation”, Perrigo raised prices by around 3% in the first quarter, Kessler said.

The company has ordered materials to meet the increased demand throughout the year, he said.

Bobbie, a European-style breast milk substitute that is new to the market, so the number of customers doubles in the first week after the recall of Abbott substitutes, and it has continued to climb, CEO Laura Modi told Reuters.

Perrigo produces Bobbie’s formula, but can only meet around 50% of the company’s demand, Modi said, which led to it stopping taking in new customers. Perrigo can meet 100% of Bobbie’s current customer needs, she said.

Bobbie has around 70,000 customers.

Abbott closed production facility in Michigan following complaints of bacterial contamination.

The FDA later cited five bacterial infections reported in infants given the company’s formula, including two deaths. Abbott has said that their plants “probably are not the source of infection” and plans to reopen the plant 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 and Marguerita Choy

Our standards: Thomson Reuters Trust Principles.



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