For the past couple of weeks, the United States has been experiencing massive shortages in baby formula. In this blog post I plan to explore the supply chain issues that contributed to this shortage and highlight the companies in the alternative protein space that will supply additional sources for breast milk and baby formula in the future. I acknowledge that the source of a baby’s nutrition is a sensitive topic (and has been well before this formula shortage), and I hope that this blog post comes across as respectful and understanding of that.
What is the current issue?
Recently, Abbott, one of the major suppliers of baby formula in the United States, shut down a large manufacturing plant due to the identification of a deadly bacteria known as cronobacter sakazakii. The temporary closure of this factory resulted in a nationwide shortage of baby formula, highlighting flaws in our supply chain for this industry. Cronobacter is a bacteria that can survive in dry environment. Because of this, formula makers are required to test at least one pound of their formula for the presence of the bacteria. However, there are currently no methods in place that require reporting test results to the FDA by the manufacturers. Additionally, the exact frequency at which tests have to be done and the amount of formula that needs to be tested per amount of formula produced is also not defined. The shortages caused by the identification of cronobacter in baby formula highlight a couple of major issues. First, there could likely be tighter regulations for monitoring the presence of this bacteria in baby formula. Second, having additional providers for baby formula in addition to more manufacturing locations would greatly help to ensure that the temporary loss of one major player (or a plant) does not result in a national shortage of a product.
What is the market landscape?
In the United States, the major players in this space are Abbott, Mead Johnson, and Gerber. According to the USDA, in 2008, these three companies accounted for 98% of all US baby formula sales. Within the United States, a major determinant of how the baby formula market is distributed is the USDA's Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). WIC, is a government program that provides nutrition and education services to low-income families. Through this program, the government is able to provide baby formula to program participants, helping to offset the expensive costs associated with formula. The USDA estimates that about 60% of all baby formula sales in the US are purchased through WIC. So what formula can be bought through WIC? Within each state, WIC formula will be provided by a single manufacturer, as determined by a bidding process to be the exclusive provider for the program. This biases the market to the companies that obtain these WIC contracts, and biases the market within each state to the manufacturer that holds the WIC contract. This regulation is one of the limiting factors for other companies to break into this space.
What alternative protein companies are in this space?
Most baby formulas are animal-derived (cow-milk) supplemented with other vitamins and minerals to ensure that babies are getting a nutrient dense diet. The specific formulation requirements are determined by the Codex Alimentarius, which is an international standard that has identified required components for baby formula. This standard is agreed upon by the Food and Agriculture Organization of the United Nations and WHO. Further restrictions can be determined by individual regulatory agencies within a country. There are several reasons for why producing baby formula through methods used in the alternative protein space could be beneficial. This includes being able to obtain a product that is more similar to human breast milk as well as minimizing the amount of resources that are needed to be put towards animal agriculture.
There are a handful of alternative protein companies in this space as well as several others that are tangentially related and could potentially pivot to contribute to this space as well. All of these companies fall into two major categories: precision fermentation companies and cell culture companies.
Let’s chat about the precision fermentation companies first. Companies using this approach identify proteins that are present in breast milk. By identifying the genetic code that provides the instructions on how to build that protein, they can provide these instructions to microflora. These microflora then act as their production factories, producing large amounts of this specific protein, while being cared for and maintained in bioreactors. This fermentation technique is a technique that has been used in the pharmaceutical industry for decades, however, only recently has it been used for food applications. Because it has been used previously in food and drug settings, this means companies working in this space have specific FDA regulations to follow that are already in place.
The companies in this space include Helaina, a company founded in 2019 by Laura Katz and based out of New York, New York. While the exact proteins and protein composition of My Helaina’s formula are proprietary, the company states that their formula will be more similar to human breast milk compared to current formulas on the market. This is possible because the technology they use allows them to utilize the exact sequences found in human breast milk, while most current powder formulas are simply dried versions of cow milk that have been supplemented to be more similar to human milk. Another company in this space is Harmony Baby Nutrition which was founded in 2018 by Wendel Afonso and based out of Boston, MA. Harmony Baby Nutrition says that they ‘make sure that every component we grow is 100% identical to those found in breast milk, so every ingredient that comes out of [their] lab is one that could come from a breast.’ The technology used for this approach is straight forward and has recently been used in the food industry (for example, Perfect Day). Because of this, it is likely that these products could hit the market soon once companies are able to produce at scale. BIOMILQ recently announced they could be on the market in as soon as three to five years.
The other companies in this space are making breast milk using real mammary cells. To accomplish this, the companies grow mammary cells that they have obtained from sample breast tissue. These mammary cells will be capable of producing human breast milk. Because this is a newer process compared to fermentation, companies using this method will potentially have additional regulatory hurdles to overcome. While the FDA and USDA have come up with a formal agreement on how to navigate the cellular agriculture space, the exact regulatory hurdles that companies will have to overcome (aside from proving their facility is complying with good manufacturing practices) have yet to be determined. There are two US-based companies in this space. This includes BIOMILQ, founded in 2020 by Leila Strickland and Michelle Egger and based out of Durham, North Carolina. BIOMILQ’s product should be more similar to human breast milk as it will have the correct proportions of protein, fats, and carbohydrates. TurtleTree, which was founded in 2019 by Fengru Lin and Max Rye, is based out of San Francisco, CA and Singapore. Their first product to the market will be lactoferrin, which is a protein important for iron transport that is typically found in human milk. In baby formula, lactoferrin is found at a much lower concentration. By producing only this protein, Turtle Tree can market the product to existing companies on the market while also working towards its own product. Finally, there is a company in Israel, Wilk, also operating in this space. It is less clear how close to market any of these cell culture companies are. Because TurtleTree is targeting a single protein at first, it is likely that they will be able to get to market faster because it is easier to characterize and validate the safety of a single protein compared to an entire extract.
What is the future for baby formula?
The current national shortage in baby formula highlights some major faults in our supply chain that should be addressed. These new companies operating in the alternative protein space have the potential to address the need for more suppliers that can create a more robust and resilient supply chain. Additionally, the baby formula space is one that is not often iterated on. Because of this, these companies will likely be very competitive to current baby formula options due to their ability to be more similar and potentially even identical to human breast milk. While these alternatives are very promising, there are still aspects about these companies that won’t fully be resolved. For example, some current health concerns about using formula rather than breast milk include the lack of immunity passed on to the baby and the lack of hormones in the formula. Additionally, while these products will be created in an aseptic and sterile environment, it is unclear how resilient their production methods will be to cronobacter. Finally, unless there are changes to the way WIC is operated, it is possible that these companies may have a hard time breaking into the field and competing against these larger giants already in the space.
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