Why baby formula prices have doubled every 10 to 15 years in Canada

Breastfeeding rates have more than tripled in Canada since 1965, yet the price of baby formula hasn't dropped in decades.

On the contrary, according to an analysis by CBC Radio's Cost of Living, prices appear to have only increased in the past half century and doubled every 10 to 15 years.

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Today, parents who are unable or choose not to breastfeed can expect to spend more than $1,000 a year on infant formula. 

While infant formula is not among the many food items tracked by Statistics Canada, The Cost of Living dug up historic data from the various provincial health authorities, as well as samples of old newspaper ads and flyers to compile an unofficial picture of how prices have changed over time for Canadians.

Based on the mixed data compiled by Cost of Living, it appears the retail price of the traditional powdered milk variety of baby formula has risen nearly tenfold since the early 1970s. This estimate has been adjusted for inflation, as well as volume differences in packaging.

Prices vary around the world

Many factors influence the retail price of baby formula, according to Nestlé, one of the four main multinational companies that manufacture formula products. 

Those factors include raw and packaging material costs, import duties, costs of production such as energy and labour, local taxes, shipping and transportation, local registration costs, warehousing and distribution, and the profit margins expected by manufacturers' trade partners. 

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In Canada, we can add currency to that extensive list since we import most of the baby formula consumed in this country. So the value of the loonie also plays a role in contributing to formula's rising cost in Canada in recent years, on top of other cost fluctuations. 

"All of these may change from country to country, hence prices may vary significantly," a Nestlé representative wrote an email to CBC Radio's Cost of Living.

It's more complicated than materials and labour

A closer look at the sticker at the grocery store, however, reveals a more complicated pricing scheme.

In the United States, the most expensive baby formula is 1.8 times more expensive than the cheapeast among Nestlé, Abbot, Mead Johnson and Danone brands.

But in China, that price gap shoots up. The most expensive brands there are 2.5 times more costly than the cheapest products from the same four companies, according to a 2017 report by Changing Markets Foundation. 

"Most parents in China still only have one child, so they're willing to invest more in nutrition," said Nusa Urbancic, one of the report's authors.

"They also trust more the foreign brands because in 2008 there was the melamine scandal where some formulas were contaminated with this toxic chemical and a lot of children died," she added.

Retailers tend to charge what consumers are willing to pay.

And some markets are much more tolerant of high prices, because of scarcity or concerns over safety.

Inelastic demand: when you need it, you NEED it

In Canada, breastfeeding is now the norm. Nine in ten mothers breastfeed their babies, according to Statistics Canada. 

Still, only 26 per cent of parents breastfeed exclusively in the first six months.

That leaves a lot of families turning to the baby bottle. 

It doesn't matter what price you're looking at. You are likely to buy it once you're hooked.- Sylvain Charlebois, director of Dalhousie University's Agri-Food Analytics Lab

In that sense, baby formula is a lot like gasoline — when you need it, you really need it. And if you can't find a substitute, you'll pay whatever is on the price tag. 

"Retailers know that you need it, and you'll buy it," explained Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University.

"It doesn't matter what price you're looking at. You are likely to buy it once you're hooked," he said.

As a father of twins, Charlebois said he could relate to the helpless feeling of juggling many priorities and stresses, and perhaps not putting a priority on searching for a lower cost at the grocery checkout.

"The price won't necessarily push parents away," he said. 

In economics, when price fluctuations make little to no impact on how much consumers buy, it's called inelastic demand. And that's also the reason why baby formula rarely goes on sale.

Retailers will sometimes sell an item at a loss in order to stimulate buying and lure new customers. But Charlebois said only a fool would discount baby formula as a "loss leader." 

"Oh no! No way!" said Charlebois.

"If a grocer actually decides to manage baby formula as a loss leader, he's leaving or she's leaving money on the table!"

Produced and written by Falice Chin.
Click "listen" at the top of the page to hear this segment, or download the Cost of Living podcast.
The Cost of Living airs every week on CBC Radio One, Sundays at 12:00 p.m. (12:30 NT).