Dive Brief:
- Infant formula maker Perrigo bought a factory and other assets from Nestlé, part of $170 million plan to expand U.S. manufacturing.
- Perrigo said Nov. 1 it purchased the U.S. and Canadian rights to Nestlé’s Good Start infant formula brand in addition to its plant in Eau Claire, Wisconsin.
- The company will invest $60 million to expand the Wisconsin plant, which is expected to create an additional 7 million pounds of capacity.
Dive Insight:
Domestic producers have struggled to make up for the shortfall from the temporary shutdown of a large manufacturing plant in Sturgis, Michigan, the largest owned by Abbott Nutrition, which controls over 40% of the U.S. infant formula market.
Perrigo is no exception. The company said in its Nov. 1 press release that it has had insufficient capacity to meet customer demand for its 17 store brand customers. It’s also struggled to meet demand for its contract manufacturing customers.
Perrigo President and CEO Murray Kessler said the company had been pursuing options to increase its capacity to meet growing demands even before the infant formula shortage in the U.S. Nevertheless, Kessler said the shortage motivated Perrigo to invest further.
“The purchase and expansion of Gateway is the first major initiative in our recently announced Supply Chain Reinvention program,” Kessler said in the Nov. 1 press release. “It solidifies our long-term manufacturing supply of infant formula in the U.S., increases the availability of lower priced, high-quality infant formula to consumers, and delivers value to Perrigo shareholders."
The Wisconsin facility is an addition for Perrigo, which already spends $20 million on its formula facilities in Ohio and Vermont. The company said it will begin operating the Good Start formula brand in North America but noted Nestlé will continue to fulfill its contracts with the U.S. Department of Agriculture’s Women, Infants, and Children program so that supply is uninterrupted. Perrigo will provide the product through the Gateway plant in Wisconsin.
Tarun Malkani, CEO of Nestlé-owned Gerber, said that sale of Good Start to Perrigo will allow Gerber to pursue growth opportunities and focus on its core baby food business in the U.S.
In June, President Joe Biden met with Nestlé and other formula makers to discuss how manufacturers have boosted production in light of shortages. The Biden Administration imported hundreds of thousands pounds of baby formula into the U.S. under Operation Fly Formula.
