Proactive Investors - French food-manufacturing multinational Danone (LON:0KFX) has announced a 7% reduction in the wholesale price of its powdered Aptamil baby formula products following an investigation by the UK's Competition and Markets Authority (CMA) into high formula prices.
The CMA's scrutiny was triggered by significant price hikes in the baby formula sector, with Danone's prices having risen by 25% over two years.
Data shared by the CMA showed that the cost of an 800g pack of Aptamil increased by 26% to £14.50 between March 2021 and April 2023, far exceeding the rate of inflation in the period.
Danone received public outcry and accusations of greedflation after a Sky News investigation revealed that desperate parents had resorted to theft to feed their starving children.
The CMA highlighted that branded suppliers had contributed significantly to higher food price inflation, compounded by the lack of competition in the sector.
Danone and Nestlé make up 85% of UK baby formula sales, while British manufacturer Kendamil holds less than 10% of the market.
Sarah Cardell, the chief executive of the CMA, stated: “Food price inflation has put huge strain on household budgets, so it is vital competition issues aren’t adding to the problem.
“While in most cases the leading brands have raised prices more than their own cost increases, own-label products are generally providing cheaper alternatives.”
Danone has shifted into damage control, stating: “We recognise the challenges faced by parents due to inflation. During this difficult period, we have worked very hard to absorb the significant cost increases we have faced, make savings, and minimise any price increases.”
The situation led to widespread criticism from various stakeholders, including Richard Walker, the boss of Iceland.
Iceland Foods said it will reduce Aptamil prices later this month following Danone’s wholesale price reduction.
Walker commented: “I welcome Danone’s move to reduce the price of Aptamil across the market and it’s only right we again reduce the price even further at Iceland.
“It’s important, however, that this doesn’t gloss over the actions which are still urgently needed to support families.
“While we support breastfeeding as the most beneficial way of feeding infants, the millions of families who rely on formula need more support for their choice or circumstances and simply reducing the price won’t solve the systemic issues we’ve drawn attention to.”