Why Silicon Valley Is Eyeing The Infant Formula Industry

Why Silicon Valley Is Eyeing The Infant Formula Industry

September 13, 2019 100 By Ewald Bahringer


The global infant formula industry is valued
at over 50 billion dollars and it’s expected to reach
95 billion by 2026. At the same time, doctors and
health organizations are always reminding new parents that breast is best. So how come the formula
industry is still thriving? The biggest driver to the increase in
the formula market is the increasing number of working women. Honestly, I felt lied to by the world in
what it meant to be a working mom trying to do your best, but also
go back and manage your career. When his weight dropped 12 percent, we
had to put him on formula supplementation. I thought, why is
my body failing me? Why can’t I give him what he needs? Well, breast milk does provide
undeniable benefits, strengthening an infant’s immune system, preventing infection and
even lowering the risk of obesity, the reality is a majority of
parents will need to turn to formula at some point. Many lack the time or appropriate
accommodations to breastfeed or pump, while others may
face medical complications. So there are all of
these different factors to overcome. You know, does your baby
have a good latch? Are you making enough milk? Are you drinking enough water? Are you resting enough? And if any one of them goes,
your supply can go down with it. Entrepreneurs and investors are finally starting
to take note of the business opportunities around
infant nutrition. From high tech breast pumps to apps
that track women’s periods and peak fertility, so-called femtech is
having a moment. Now, some entrepreneurs are trying to
bring improved formulas to market and lobbying to update FDA regulations
along the way, while others are engineering solutions to make formula is
close to human breast milk as possible. Breastfeeding wasn’t always
so popular. The world’s first commercial infant formula
was developed in 1865 and quickly gained international popularity
as well as competition. In the United States, evaporated
milk formulas became widely available throughout the 1920s and 1930s, and
a number of commercial formulas also rose to prominence in
the following decades. Formula was in vogue, and families
of higher socioeconomic status were more likely to adopt
these new feeding methods. In the nineteen hundreds, the formula
industry began marketing both to mothers but also to physicians. Formula industries designed our hospitals
to optimize formula feeding. And formula feeding really
became the norm. In the early 1970s, only about 25
percent of babies received any breast milk at all. After this time, rates of breast feeding
began to tick upwards as the health benefits became
more widely understood. Wealthy parents once again
led the way. And today, breastfeeding rates
in the U.S. are significantly higher
among well-off mothers. Now, the American Academy of
Pediatrics officially recommends that mothers breastfeed their kids for the first six
months of life and continue to breastfeed, while supplementing with solids,
for the remainder of the first year. But though breastfeeding rates remain
relatively high, the majority of mothers still can’t make
it that long. In the most recent data, 83 percent
of babies in this country receive some breast milk at the time of birth. But by three months, about 50 percent
of those babies are needing breast milk substitutes and infant formula. At the one year mark, only about
one third of mothers are still breastfeeding at all. One reason may be the
United States’ maternity leave policies. It’s one of the only countries in
the world which does not require businesses and corporations to
offer paid leave. And thus, the majority of U.S. workers do not receive
it as a benefit. One in every four women goes back to
work within two weeks of giving birth. That’s crazy. Overall, two thirds of mothers report
not being able to breastfeed their children for as long
as they initially intended. But unfortunately, today there’s still
some stigma around formula feeding. Parenting can be judgy. And we’re seeing that very specifically when
it comes to how you feed your child. The majority of U.S. formulas are provided by one of
four large companies: Nestlé, Mead Johnson, Abbott or Danone. And some contain ingredients that
may give parents pause. What you see here in the U.S. to make up their carbs, you often
see different types of sugars being used with corn syrup being
a predominant carb. Concerns like this have helped to spur
a thriving and relatively open black market for European alternatives. In Europe to make up their
carbs, they don’t use corn syrup. Although we’re seeing questions around
the safety of bringing European formula over to the U.S., we’re still seeing
pediatricians recommending them. We did a study with 350 pediatricians
to realize 87 percent of them have recommended European formula in
the last six months. When you see parents coming from
transatlantic trips with suitcases packed full of formula, you know
there’s a need to evolve. Laura Modi saw an opportunity. A mother and entrepreneur, she got
a common infection called mastitis when breastfeeding her first child. This caused inflammation of her breast
tissue and left her unable to breastfeed for a brief period. So, I found myself standing in the
middle aisle of a pharmacy, choosing a formula that felt the complete
opposite to breast milk. Riddled with ingredients I
couldn’t articulate, pharmaceutical disclaimers, in a way that
just didn’t feel like food. She felt guilty that she had to
stop breastfeeding and let down by the alternatives she saw. I’m a confident woman. And I have never felt more unconfident as
I did when choosing to feed my daughter formula. Embarrassingly, I used to
hide my product. I did everything I could to be able
to prove that I wasn’t feeding her formula. So she set out to create one
that she could be proud of. Called Bobbie Baby, it seeks
to replicate European formulas. Grass fed cow’s milk is the main
ingredient and it contains no artificial sugar, corn syrup or processed oils. It raised 2.5 million from investors in 2018, but
within weeks of shipping its first product, Bobbie came
under FDA scrutiny. Since it was made in Germany and
not an approved domestic facility, it did not meet U.S. regulations. It also didn’t contain a
complete list of nutrients on its label. But Bobbie says its formula
does meet the European Commission’s regulations, which differ in
some specific ways. In the E.C., there’s a limitation on how much table
sugar you can use in infant formula. Where in the U.S., you can make up 100 percent
of your carbs with table sugar. The European Commission also requires that
at least 30 percent of carbs come from lactose and bans certain
additives that are common in U.S. formulas. American formulas would not meet the criteria
for the EU were they to be sold there. So it tells you a little bit about
how strict the EU is and also, you know, the differences between the food
science in the two countries. For its part, Nestlé says it’s
actually committed to removing all added sugars from its formulas, except for
those meant for babies that are allergic to lactose. We intend to by the end of 2019,
no longer make any of our infant formulas that would contain sucrose or glucose
syrup solids, particularly for all routine and starter infant formulas. And Abbott emphasizes that all its
ingredients are closely vetted and that its extensive research and experience means
consumers can always trust its products. We’ve spent almost a hundred years
developing infant formulas at the forefront of nutrition. We have over 600 scientists worldwide
studying breast milk components with the goal to advance infant formula
innovation and bring infant formulas closer to breast milk. But Modi has been frustrated by
the dominance of the major formula companies and her own
run-ins with the FDA. She says it’s too difficult for new
players to enter into this space. It’s hard. And it should be, because we’re
developing products for a vulnerable audience that should
be extraordinarily safe. But it shouldn’t be impossible. But for now, Bobbie’s products have been
recalled and won’t be back on the market until the company can
fall in line with U.S. regulations. So for the time being, it seems
we can’t really replicate European recipes here in the U.S., so why can’t we
just replicate breastmilk itself? That would be the best solution, but
it turns out it’s pretty much impossible. Breast milk is a
highly specialized and variable substance personalized for each specific mother
and each specific environment. We know that breast milk
is a living substance. If a mom is in an environment
where she’s exposed to a certain infection, that her breast milk will make
antibodies specific to that exposure. The hormones in breast milk even
change depending on time of day. And the fat content changes
throughout a single feed. Even the formula giants themselves acknowledge
that they can never quite measure up. To mimic and replicate breast
milk is not possible. But what is possible is to study
all of these components in breast milk and wherever possible we add
them to infant formula. Companies big and small are beginning
to replicate some of the special sugars found exclusively in breast
milk, called human milk oligosaccharides or HMOs. After fats and carbs, HMOs are
the third most prevalent ingredient in breast milk. And unlike corn syrup or table sugar,
they play a vital role in an infant’s nutrition and gut health. So in human breast milk, there are
over 180 different types of sugars that the mother makes. They’re there to help the microbiome,
for example, and help the baby’s health in those kinds of ways. The major sugar that’s missing is
2′-Fucosyllactose, or 2′-FL it’s often called. In 2016, formula maker Abbott released
the first formula containing 2′-FL. And in 2018, Nestlé followed suit with
a 2′-FL formula of its own. Until we launched in 2016, only
breastfed babies could benefit from this molecule. Now human milk oligosaccharide
2′-FL has been clinically shown to strengthen the developing immune system
of formula fed babies to be more like breastfed. Sugar logix, a Berkeley-based startup, is
also working to synthesize 2′-FL and other HMOs in its lab through
yeast fermentation, a method it said it pioneered. Sugarlogix says that currently,
major formula companies are synthesizing 2′-FL from E. coli bacteria, a process that
requires rigorous quality control testing since E. coli contains dangerous toxins
that must be removed. Sugar logix believes its method of
yeast fermentation will be simpler and cheaper. The startup is backed by
biotech accelerator IndieBio as well as venture capital firm SOSV and has
raised about two million dollars. By 2021, it hopes to hit
the market, partnering with major formula companies to supply them with 2′-FL
as well as other each HMOs. Companies like Bobbie Baby and Sugar
logix will likely enter the premium market first. For comparison, Abbott’s Similac Pro-Advance formula
with 2′-FL as well as its organic formula, are about 13
percent to 15 percent more expensive than the company’s basic offerings. We believe that at first, it will
enter into a smaller space of premium infant formulas, but that eventually there
is no reason not to choose these ingredients. So we envision a future where it
becomes the next must have ingredient for infant formula. This sounds ideal to families who not
only care deeply about their infant’s nutrition, but feel that the
messaging around breastfeeding has unintentionally put pressure and even
judgment on mothers who formula feed. If you can breastfeed
your baby, you should. Breast milk is good. But if you can’t, you shouldn’t be
made to feel like a failure. Consumer tastes are changing and companies are
beginning to catch up to it. For the first time, consumers are
reading labels and they’re questioning what’s in their products. Eighty percent of all health care decisions
in the home are made by women. And I think venture is finally starting
to realize that that’s true and just how big the pregnancy market is. But change is hard and
the FDA is no exception. And no regulatory body
is an exception. It will take time. And I think as we start to
see consumers and parents raise their hands looking for change, we will
see regulation change to.