The Infant Formula Market and the WIC Program

Students

Faculty

Assistant Professor of Business Economics and Public Policy

Project Summary

This summer, I worked with Dr. Abito on infant formula market research. The goal of our research was to measure the effect that having the “WIC” label had on consumers’ purchasing behavior, and transitively formula firms’ market shares. Along with this effect, we hope to measure the cost of production of unit of formula to characterize the infant formula market’s competition.

The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) is a program developed by the US federal government in order to provide low-income households with access to proper nutrition and care. Roughly every four years in each state, WIC offers a formula firm the WIC contract. USDA research on infant formula firms’ market share reveals that upon winning the WIC contract in a state, that the market share of the new WIC formula provider rises to the order of 90-95% of that state's infant formula sales. This measure is significant, as WIC households make up around 40% of the formula market.

Researching the state of the infant formula market was an eye-opening experience for me. For one, working closely with the trends of oligopoly competition revealed many patterns: only the top firms can have a chance at winning the WIC contract and expanding their market share, as the non-WIC brands rarely held higher than 20% market share. Additionally, I learned how strong the infant formula lobby is in the United States, as it has successfully stunted natural feeding initiatives in the US such as the Baby-Friendly Hospital Initiative. Market-specific research is not only necessary to point out optimal pricing strategies for firms, but also to identify the industry’s behavioral patterns.

Throughout my summer, I got to explore some of the skills necessary for academic economics. These skills included statistics, programming, and independent problem-solving. It was also my first time having independent control over parts of a research project, from the formation of the research question to choosing methods for analysis. Working with Dr. Abito gave me the chance to apply and expand programming skills without using classroom time that I would rather spend studying math or economics.