The infant formula business is booming. Companies like Abbott and Mead Johnson can spend $1 billion on marketing or research and development because of the high profit margins that come with mass-producing formula. A Florida attorney general estimated that for every dollar formula companies charge for wholesale baby milk, only 16 cents is spent on production and delivery. That’s a huge margin between costs and sales, allowing Mead Johnson to maintain eye-popping profit margins that are over 60 percent. Compare that to the retail behemoth Walmart, whose profit margins are closer to 24 percent. Apple’s 2015 profit margin was 39 percent. Infant formula is extremely profitable. In 2015 Mead Johnson reported net sales of $4 billion, while Abbott’s sales topped $5 billion for the year. And Abbott Laboratories has been able to post 15 percent profit increases every year for over two decades.
With billions of dollars in sales and double-digit revenue growth every year, it begs the question of where companies cross the line between making profits and profiteering. How much profit is too much for a company mass-producing an inferior diet for babies? And at what point is what is required to maintain such profit growth unethical? Yes, infant formula is a necessity for the babies who need it, but the economics benefit only infant formula makers. Billions could be saved by families, taxpayers, and corporations by encouraging more breastfeeding. In New York City, ready-to-feed infant formula costs about twenty-one cents per ounce with an average baby consuming twenty-five ounces per day. In one year, that’s 9,125 ounces at the price of $1,916 (the actual cost is even higher when you add in bottles, nipples, water, and time spent traveling to and from the store). That’s a huge cost to families but a huge windfall for the manufacturers. Those manufacturers are not focused on what’s best for babies. They are publicly traded companies with demanding shareholders and earnings-watching Wall Street analysts who want to see continued revenue growth. Satisfying these interests involves employing practices that ultimately mislead women and compromise infant health.
On June 15, 2016, Kasper Jakobsen, the president and CEO of Mead Johnson Nutrition, presented at a Deutsche Bank analyst conference. The opening slide was of a bright-eyed, smiling Asian baby and the Mead Johnson tagline, “Nourishing the Best Start in Life.” The tagline itself is telling as the infant formula company uses the language of a “best start” in life, which has been primarily used in reference to breast milk. According to the edited call transcript posted on the company’s Web site, Jakobsen spoke about their strong focus on digital and social media and their analytics, particularly their robust database of pregnant women.
Some of you may not be aware that out of all women who give birth in the United States of America, we have the names and addresses of approximately 70 percent of them in advance of them giving birth. So, that’s a fantastic asset for the company to be able to interact with consumers at the most critical time when they are thinking … “What are we going to do about feeding our child?… What questions do we have about feeding methods and problems and how to overcome them?”
Jakobsen does not reveal if women knowingly share their information with infant formula companies or through what mechanism the company receives this information and if there is consent. Jakobsen continued:
I think it’s an asset that we’ve really just begun to leverage and I’m excited about the potential to grow that further. There are all kinds of things that we can do with these digital assets if we begin to think about it in a more entrepreneurial fashion … and we don’t think about it simply as an add-on to how we do marketing for infant formula … but we think in a more entrepreneurial fashion about how we could behave like a start-up.
“Behave like a start-up”? In most business-management literature, behaving like a start-up is synonymous with taking risks, always finding new market opportunities and going for the win, at any cost. Jakobsen also said, “This idea about how do you go about disrupting yourself is increasingly becoming important for companies in the consumer products industry, no matter whether you sell infant formula or you sell beer.” I’d like to think the approaches to selling these products—while both damaging to your health—should actually be very, very different.
A year earlier, on February 17, 2015, Jakobsen openly acknowledged exploiting economic and social trends for profit gain in his presentation to the Consumer Analyst Conference.
The U.S. is an approximately $4 billion [infant formula] market. It’s a very large market and I think there were three factors that fueled our growth in the U.S. market in 2014 and then there was one offset. So, let me begin with the offset.… [W]e continue to see breastfeeding rates in the U.S. climb through 2014. Now we’ll be watching very closely as we go through 2015 to see whether the improvement in unemployment trends will cause this trend to abate somewhat. It’s our hope and expectation that that will be the case.
The hope expressed by Mead Johnson’s CEO, that the structural barriers that make breastfeeding and employment very difficult for mothers will cause them to abandon breastfeeding in favor of formula feeding, highlights the unethical strategies and trends that infant formula makers exploit for their success. When a CEO directly connects improving employment numbers to less breastfeeding and more formula purchases, then the breastfeeding and work problem is far from resolved. It recognizes that exclusive breastfeeding for any meaningful duration has become the luxury of those not returning to work or those who can employ themselves. It also proves that the formula company has a vested interest in employers and federal policies not allowing more paid time to breastfeed. This borders on the exploitive.
But pays off handsomely for the CEOs. Miles D. White, the CEO of Abbott Labs, maker of Similac, was one of the highest paid CEOs in 2016, earning $19.4 million in total compensation, according to the Equilar/Associated Press S&P 500 CEO Pay Study for 2016. The study said that figure represented a 16 percent increase over his previous year’s salary. By way of comparison, Wall Street CEOs, who have some of the highest salaries, saw their pay rise an average of just under 10 percent in 2015. According to the most recent jobs numbers, the wages of the average American worker rose by just 1.6 percent in 2016.
Let’s be clear, under our capitalist system, businesses exploit supply shortages, disasters, inefficiencies, and wars all the time. CEOs in the U.S often have fat contracts and even fatter golden parachutes. Companies benefit from unfair incarceration laws. While people died during the Iraq and Afghanistan wars, billions were made by military contractors, construction companies, and ammunition suppliers. But the current war on women and mothers earns its billions at the expense of voiceless babies. And the spectrum of indirect beneficiaries spreads far, including large investment companies, such as The Vanguard Group, a mutual fund giant with over $3 trillion in assets, including billions in employer-sponsored retirement plans. As of March 2016, Vanguard owned more than 96 million shares of Abbott Labs valued at over $4 billion, making it one of the largest shareholders of infant formula stock. Billionaire investing giant Warren Buffett, owns a 25 percent stake (valued at over $22 billion in March 2016) in Kraft Heinz, the huge consumer foods conglomerate that also makes the Nurture brand of infant formula and a variety of baby foods. Nestlé is technically still under an international boycott for its egregious infant formula marketing practices of the past.
To create these mind-blowing returns for shareholders, pharmaceutical companies often use psychological warfare—another profiteering-like tool. To start, they use a common business ploy of creating the appearance of a problem. After all, the most successful products and services are created to solve a problem. For instance, cars were invented to get people from one place to another more quickly. “Problems” are relative. One person’s problem may not be that of another. Problems can be personal. Problems can be perceived. The problem of waiting too long for a cab or not having the physical cash to pay for one led to the growth of Uber. Problems can even be manufactured. I did not know that room-temperature baby wipes were a problem until I was being sold a $21.99 w
ipe warmer. In order for the business of infant feeding to be financially viable, there had to be a problem that can be solved by a commercial product. Years ago, before pasteurization, there was a very real problem: infants who could not be breastfed often died from contaminated milk and unsuitable substitutes. But for the business of infant formula to thrive, sick and orphaned babies could not be the only problem in need of a solution. The business model needed a wider audience for commercial success. Breastfeeding itself needed to be a problem. A woman’s lactating breasts needed to be perceived as unreliable, and a mother’s milk supply needed to be questioned so that artificial milks could solve the problem.
After casting uncertain lactation as a problem, the formula industry generated profits through fearmongering. One go-to maneuver of the industry is a strategic marketing staple, courtesy of Gene Amdahl, an IBM executive turned multi-million-dollar tech entrepreneur. Amdahl famously coined the term FUD to refer to IBM’s killer business tactics. FUD stands for “fear, uncertainty, and doubt”—exactly what IBM salespeople instilled in the minds of potential customers considering other products. The goal was to persuade buyers to be “safe” by buying IBM products rather than to risk a computer crash, virus, or server disruption with a competitor’s equipment. After 1991, the term became more generalized to refer to any kind of misinformation used as a competitive weapon. From a strategic marketing perspective, the objective is to amplify your prospective customer’s FUD toward your competitor’s product and alleviate it for yours.
Infant formula makers have exploited the FUD tactic to market to vulnerable parents for years. Mothers already doubt that they have sufficient milk, and heightening that fear can actually hinder the biological process of breastfeeding. That fear is naturally present. I’ve said many times that lactation is a self-limiting condition. Fear and anxiety can stifle the letdown reflex and, therefore, lactation, so companies purposefully design marketing strategies to aggravate existing worries about infant feeding. In that way, they actually stymie their greatest competitor—the biological process of lactation and the breastfeeding mother. This practice has been a marketing staple in the formula industry worldwide. As far back as the 1940s, manufacturers of Borden KLIM evaporated milk ran a radio jingle in the Congo that stoked mothers’ fears over insufficient milk:
The child is going to die
Because the mother’s breast has given out
Mama o Mama the child cries
If you want your child to get well
Give it KLIM milk
In Africa in the 1950s, Nestlé’s Lactogen was advertised for “when breast milk fails.” Today, the infant formula industry consistently sends the message that breast is best but that, if breastfeeding fails, formula is there. While mentioning that breastfeeding often fails, the formula makers, at the same time, create certainty about their own product, adding ingredients that sound similar to breast milk and touting it as “closest” to mother’s milk.
At times, their tactics have included egregious acts explicitly designed to fool mothers, starting with the most vulnerable ones: those in developing countries.
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In the 1960s, the increasing birthrate and rapid urbanization of Third World countries made the developing world a ripe market for infant formula manufacturers. In places like Africa, relatively weak professional and social institutions, fewer legal hurdles to doing business, and understaffed government departments helped create a fertile ground for expansion and unregulated marketing. For mothers in those countries, formula invoked images of modernization and an appealing Western lifestyle. Infant formula companies went as far as employing “milk nurses,” women dressed in nurse-like uniforms who distributed formula samples and information to mothers, showing up at their homes unannounced or waiting in clinic lobbies. Women assumed they were medical professionals offering infant nutrition advice when they were actually salespersons there to push a product. Nestlé was considered the most aggressive offender. Its marketing practices in the developing world were exposed in a scathing report in The New Internationalist in 1973, called “Babies Mean Business.” Nestlé’s activities were deemed so egregious that they became the rallying point for the largest-ever international campaign to end the commercial exploitation of infant feeding practices, led by the group Baby Milk Action. Another infant formula brand, Dumex, had milk nurses, who were banned from entering maternity wards directly in Singapore and would instead wait outside the hospital gates to catch new mothers with free samples on their way home, The New Internationalist reported. In Jamaica, Bristol-Myers milk nurses allegedly entered public maternity hospitals and copied names and addresses of new mothers in order to visit them at home. These allegations led to a hearing in the U.S. Senate and prompted the World Health Organization to develop an international code of marketing rules. By then, the commercial success was undeniable. By 1980, Nestlé, Unigate, Bristol-Myers, Abbott, Wyeth, Glaxo, and several other formula companies were bringing in multimillion-dollar profits globally for products that, in most instances, the mothers did not need. A Nestlé boycott still exists in some form in several countries today.
From a business perspective, the profiteering was a huge success—especially for Nestlé. In 1977 Fortune magazine estimated that Nestlé was the most profitable food company in the world. It dominated the global baby milk market and was also considered the most aggressive promoter of formula feeding. Even when international health advocates, starting in 1974, mounted shareholder resolutions against American companies to curb inappropriate sales practices, particularly in Africa, Nestlé had de facto immunity. Only Swiss nationals could own shares in the company, so U.S. citizens could not use investor influence to push for change. It was virtually untouchable in the United States. By the mid-1970s, over 75 percent of American babies were fed on formula—a historical low for breastfeeding.
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While big business has dominated the market using fear and uncertainty to churn profits, a new crop of smaller businesses is adding another dimension to the scaremongering. The fear of not having enough milk has been coupled with worries about milk quality. One such business is called Happy Vitals, which offers direct-to-consumer breast-milk testing kits that are touted as “easy-to-use” but come with hard-to-swallow prices. According to the Web site, “mothers can learn for the first time about the nutrient makeup of their breast milk, improve their diet and nutrition, and safeguard against exposure to heavy metals and other toxins that are harmful to a child’s growth and development.” This is classic pandering to a mother’s doubts that their milk is not good enough for their baby. You can alleviate your fears, but it will cost you $169.95. That will get you a simple analysis of a sample of breast milk for four key nutrients: glucose, lactose, protein, and fat. For the much larger price tag of $659.95, they will also test for “indicators of immunity”: cortisol, IgA antibodies, IgG antibodies, IgM antibodies. Eleven micronutrients: calcium, folate, iron, vitamin D, vitamin A, ferritin, magnesium, phosphorous, sodium, potassium, and vitamin B12. And four heavy metal toxins: arsenic, lead, mercury, and cadmium (based on samples of an infant’s hair and nails). These unnecessary kits capitalize on women’s fears and confusion around science that makes mothers think their milk may be tainted.
From home kits to mind tricks, focusing on the subliminal works. Drawing on cues from society in general, formula makers also skillfully use the fear of being judged as a “bad” mother to peddle their products. Since breastfeeding is unfairly used as one of the measures of a good or bad mother, companies have leveraged that fear of being judged into a reason to support formula feeding. Women are forced into so-called choices, such as returning to work too soon. When their lactation slows as a result and they turn to formula feeding, they fight back against being judged as “bad” for their decisions. No mother should be judged for the choices she makes or the lack of choices she has concerning working or infant feeding. But women feel a need to defend themselves. And thus ensued the so-called mommy wa
rs—women judging women for choices and, sometimes, things that really aren’t choices at all. The mommy wars are leveraged as marketing tools by infant formula makers and other business interests by creating mom types and then pitting one against the other. Each mom type then buys the product associated with her type. For years, minivans were marketed to soccer moms. Creating mom silos works great for marketers. Mead Johnson and Abbott have also plowed millions of dollars into marketing campaigns that co-opt the language of mommy wars and “judgment” just to create more divisions. In 2015 Similac hit the viral mother lode with its “Sisterhood of Mother-hood” YouTube video commercial. The opening scene shows a series of mom stereotypes—from working mothers to “granola” types, “breast police,” and stay-at-home dads—who come together in a park for a standoff. “Nipple up,” says one mom in the breastfeeding posse as the sides get ready for a West Side Story–like showdown. Suddenly, one of the mothers loses hold of her baby’s stroller, and it goes rolling down the hill. With a baby facing danger, everyone runs after the stroller, abandoning their “sides” to save the child. You can’t help but feel a tug at the heartstrings. The Internet and social media circles exploded with warm and fuzzy comments applauding the “feel good” commercial for showing how all moms and dads are in this together. But exactly when weren’t we?
Let’s be honest, marketers don’t make commercials to make you feel good; they make commercials to sell their product. And telling a story is a powerful selling tool. What’s the underlying story of this commercial? There is a war. The war is being waged by judgmental, sanctimonious parents, who are the enemies. When fighting occurs, random bad things happen. These bad things can only be stopped and lives saved when all the warring factions come together to do what is right in a crisis situation. And since a very cute baby was saved, no one can say that the choice was wrong. This is the exact same narrative of failed breastfeeding. Everyone should be okay with any route mothers take without any mention of medical knowledge or the social or public health consequences because using formula ultimately saves a baby and that can’t be wrong. The subtext is that if a parent uses formula, any mention of breastfeeding or scientific facts is just judgey.
The Big Letdown Page 5
