Infant formula market was more concentrated before WIC rebate contracts for formula

Two pie charts comparing infant formula manufacturers' shares in 1987 and 2022.

State agencies that administer USDA’s Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) use competitive, single-source contracts to reduce the cost of infant formula. These contracts provide significant discounts in the form of manufacturer rebates for each can of formula purchased through WIC. Infants who receive formula through WIC consume more than half of all infant formula in the United States. The manufacturer holding the WIC contract in a State sells the most infant formula in that State, including to consumers not participating in WIC. The infant formula market is highly concentrated. However, comparing market shares over time indicates that the market has become less concentrated. In 1987, the year of the first rebate contract and 2 years before Federal law required that WIC State agencies use cost containment systems, three manufacturers accounted for 99 percent of sales of infant formula in the United States. In 2022, three manufacturers accounted for 83 percent of sales of infant formula. In addition to WIC contracts with manufacturers, other factors influence infant formula market concentration, such as regulation of formula manufactured inside the United States and import restrictions on formula manufactured outside the United States. Entrances and exits of manufacturers and changes in their market shares over time suggest these factors impact firms differently. This chart appears in the USDA, Economic Research Service report The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC): Background, Trends, and Economic Issues, 2024 Edition, published in February 2024.

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