The Baby Formula Price Trap: How Branding and Regulation Are Costing Parents

Every parent wants to give their baby the best start in life. For many, that means choosing the right infant formula when breastfeeding isn’t an option. But the reality of the UK’s baby formula market tells a troubling story: parents are overpaying for formula milk due to branding tactics, regulatory constraints, and a lack of clear consumer information.

A new report from the Competition and Markets Authority (CMA) sheds light on how this market operates—revealing that families could save up to £540 a year by switching to a lower-priced brand. However, most don’t, because marketing strategies create a false sense of superiority for premium brands. The CMA’s recommendations, including clearer labeling, allowing loyalty points to be used, and hospital-standardized packaging, aim to fix these distortions. But will they be enough?

The Market Problem: How Parents End Up Paying More

The UK’s infant formula market is dominated by three companies—Danone (Aptamil, Cow & Gate), Nestlé (SMA), and Kendamil—which together control over 90% of sales. While all formulas are legally required to meet the same nutritional standards, price differences can be significant.

For example:

• Choosing Aptamil Advanced over a cheaper brand like Little Steps costs parents £540 more per year.
• Even moving from a mid-priced brand like Aptamil to Little Steps would save families around £300 annually.

Despite these savings, most parents stick with the brand they first use—often introduced in hospitals. Formula companies know this and supply hospitals at a loss, securing long-term customers once they leave. This means branding—not actual quality—dictates consumer choices.

The Information Gap: Do Higher Prices Mean Better Formula?

Consumer research by Which? and the NHS has confirmed that all infant formula products meet the same basic nutritional standards. Yet, many parents believe premium brands offer superior benefits. This perception is fueled by marketing claims about special ingredients, despite no proven health advantages.

Parents, particularly those on lower incomes, often feel pressure to buy the most expensive formula because they associate price with quality. The CMA’s findings indicate that misinformation and branding tactics, rather than real differences in nutrition, are driving up consumer costs.

Regulatory Constraints: The Ban on Promotions and Discounts

Unlike most consumer products, baby formula cannot be discounted or included in price promotions. This policy exists to support public health goals promoting breastfeeding, but it also prevents competition that could drive prices down.

The CMA did not recommend lifting this ban immediately, fearing it could undermine breastfeeding initiatives. However, they left the door open for future reconsideration. The challenge for policymakers is balancing cost relief for families with public health objectives.

The CMA’s Recommendations: Can They Fix the Market?

The CMA has proposed a series of changes aimed at improving consumer choice and reducing costs:

1. Removing branding influence in hospitals – Formula should be supplied in plain packaging so that parents aren’t swayed by early exposure to a brand.
2. Providing clear and impartial information – Parents should be informed that all formulas meet required nutritional standards, reducing the assumption that more expensive options are better.
3. Making price comparisons easier – Supermarkets should display all infant formula brands together, separate from follow-on formulas, to help parents compare prices.
4. Allowing vouchers and loyalty points – Parents should be able to use gift cards, loyalty points, and coupons to buy formula, increasing affordability.
5. Extending the advertising ban – The CMA recommends banning ads for follow-on milk, which currently serve as a loophole for brands to build awareness of infant formulas.

Market Implications: Will These Changes Work?

While these recommendations could help, they stop short of price controls, which the CMA considered but ultimately rejected. Introducing a price cap might have unintended consequences, such as setting a de facto “floor price” that eliminates budget options.

Still, by improving transparency and removing the branding advantage companies exploit in hospitals, the CMA’s measures could push parents toward lower-priced formulas without compromising quality.

The Need for Smarter Regulation

The baby formula market is a classic example of how asymmetry in consumer information and regulatory constraints can distort prices. Branding and advertising strategies prey on the anxieties of new parents, while restrictions on price competition make it harder for families to find affordable options.

With three firms controlling almost the entire market, stronger competition is necessary. The CMA’s proposals are a step in the right direction, but without deeper intervention—such as revisiting the ban on price promotions—parents may continue to pay more than they need to.

For now, the best strategy for parents is to be informed: all formulas are nutritionally equivalent, and choosing a budget brand could mean saving hundreds of pounds without compromising a baby’s health.

Glossary of Economic Terms

• Market Power – The ability of a firm or group of firms to control prices or exclude competitors in a market.
• Brand Loyalty – The tendency of consumers to continue buying a particular brand due to familiarity rather than objective quality differences.
• Consumer Information Asymmetry – A situation where consumers do not have the same level of information as producers, leading to inefficient decision-making.
• Price Elasticity of Demand – A measure of how sensitive consumer demand is to changes in price; inelastic demand means people continue buying despite price increases.
• Regulatory Capture – When regulatory agencies act in favour of the industries they regulate, rather than the public interest.
• Price Cap – A regulatory measure that sets a maximum price for a good or service.
• Competition Policy – Government policies aimed at promoting market competition and preventing monopolistic practices.