US infant formula shortage: FDA approves two products from Australia’s The a2 Milk Company

08-Nov-2022 - Last updated on 08-Nov-2022 at 02:36 GMT

The US FDA has been accepting new infant formula products into the country under the enforcement discretion framework to address nationwide shortage. ©Getty Images

Two products made from Australian and New Zealand-listed The a2 Milk Company (The a2MC) were granted entry into the US market under an expedited process, the US FDA announced.

In an update on November 2, the FDA announced that the approved products were 1) a2 Platinum Infant Formula Stage 1 (0-6 months) and 2) a2 Platinum Follow-on Formula Stage 2 (6-12 months).

This is the first time the FDA has updated the list of companies and products that could enter the US market via the expedite enforcement discretion policy since July.

The policy was introduced by the FDA as it sought to expedite the imports of infant formulas to tackle a national shortage brought on by Abbott’s closure of its Michigan facility, following complaints of infant illness.

Approval is given following the review of information pertaining to nutritional adequacy and safety, microbiological testing, labelling and additional information about the facilities’ production and inspection history.

The company had submitted its application to the FDA on May 26.

It said that production would need to take place soon, as the products are not currently available in inventory.

“Products to be supplied to the US has the same formulation as a2 Platinum but has different scoops, mixing instructions and labelling requirements to meet the FDA requirements.

“This product is not currently available in inventory and needs to be manufactured as soon as possible,” it said in a ASX statement.

The products would be manufactured through Synlait Milk’s facility in New Zealand, which The a2MC said would be able to supply nine million cans over a nine-month period.

On the same day, the FDA also announced the approval of two products made from Danone’s Ireland facility. They are Aptamil Care Infant Milk Stage 1 (0-6 months) and Aptamil Care Follow-on Milk Stage 2 (6-12 months).

Sales difficult to predict

On the other hand, the firm said that it would be difficult to predict its infant formula sales potential in the US in the early stage.

“The company believes sales will be significantly below indicated manufacturing capacity unless the situation changes.

“In the near-term, and prior to confirming distribution plans, sales during FY23 are expected to be up to one million cans all within 2H23, assuming enforcement discretion remains in place throughout the period.

“Actual sales will ultimately depend on consumer demand, consumer offtake, supply shortages, and market conditions at the time,” the firm said.

It also expects gross margins to be lower than average and distribution costs to be higher due to potential air freight and rework costs, as well as marketing and investment to enter the category.

At the moment, the firm already runs a liquid a2 milk business in the US, with distribution to about 27,000 stores.

So far, Danone New Zealand, Bellamy’s Organic, and Bubs are the other companies from the Oceania that have been granted approval to export to the US under enforcement discretion.