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Decades’ Long Decline in Baby Milk Formula Volume in the US Attributed to Switch from Liquid to Powder

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When examining milk formula in the US in terms of volume per capita or in terms of total volume, there appears to be a stark decline in use in the 21st century. The precipitous decline in the total volume of milk formula sold in the US from 2000 to present can be attributed to the shift in market share from liquid to powder products, and not to dramatic decreased use by serving. There are a variety of factors that contribute to the decline of the volume of liquid baby formula sold in the US.

National trends and use of formula

Liquid was the predominant form of baby formula from the 1950s until the mid-1990s when powder took precedence. At the same time, breastfeeding increased in the 1990s and has continued to increase since, resulting in a smaller market per capita for total formula in the US.

Market share of liquid formula decreased from almost 30% of the market by value in 2001 to around 10% in 2008. This follows a steep decline from the 1990s and prior to this, when liquid formula accounted for the majority of value sales.

The effect of WIC on the baby formula market

This steep decline in liquid formula correlates with an increase in the participation of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program. In 1985, roughly 15% of American infants were covered by WIC, while in 2005, the number reached 47%.

The program provides federal grants to states for supplemental foods, health care referrals, and nutrition education for low-income pregnant, breastfeeding, and non-breastfeeding postpartum women, and to infants and children up to age five who are found to be at nutritional risk. WIC participation is significant to the liquid and powder split because WIC is known to have a large impact on unit price. Over the time period of 1980 to 2002, infant formula has not substantively changed but wholesale prices have nearly doubled.

Growth in WIC participation and the corresponding increase in unit price correlate with preference for powder over liquid because liquid varieties are priced significantly higher than powder formulas on a per serving basis. As retail unit prices have doubled for non-WIC participants, non-WIC parents look to spend a little as possible on formula and increasingly opt for powder products.

Other factors

Although some liquid products, specifically ready-to-drink (RTD) products, provide parents with greater convenience, the majority of liquid formulas are concentrates and still require some degree of preparation and therefore lack a strong competitive advantage over powder on the grounds of convenience. Moreover, over the past two decades, the variety of powder formulas has increased, with many powder formulas offering features that liquid formulas cannot. Such formulas include more organic varieties, as well as those targeted for babies with specific special dietary needs.

The 21st century market

There is an inverse relationship between value and volume. Figs 1 and 2 show that in 2001, despite the fact that liquid formula held only a 30% of the value share, it accounted for over 60% of volume by mass. This relationship demonstrates that analysis of the market in volume in tonnes does not correlate to value sales, nor does it correlate to per capita usage due to the discrepancy in serving size between liquid and powder. The graph below shows aggregations of standard and special milk formulas by type. Toddler milk is excluded.


Future predictions

The liquid and powder categories are expected to further differentiate in the coming years, with liquid continuing its decline in volume and value and powder holding market dominance for the forecast period 2015-2020.

One of the failings of liquid formula in the US is its failure to innovate; the brands that represent the nexus of trends, such as all-natural and organic, are primarily offered in powder, and not liquid form. The Honest Company and Earth’s Best, two high-end brands which boast of such trends and aim to cater to well-to-do American mothers do not offer a liquid formula variety. Earth’s Best saw double-digit growth annually from 2010 to 2014.

Although some consumers will continue to prefer liquid formula, the format is becoming increasingly dated. Liquid formula is expected to decrease 16% by volume between 2015 and 2020, from 24,300 tonnes in 2015 to 20,400 tonnes in 2020. Unless innovation hits liquid formula hard, American consumers are likely to continue reaching for powder varieties.

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