Amazon sees an opening in upheaval in the infant formula industry
“Formula is the perfect product for Amazon,” said Austin Frerick, deputy director of the Thurmond Arnold Project at Yale University, an antitrust law program. Among other things, he noted that it’s non-perishable and valuable for attracting returning customers — something the company, which currently controls just over 2% of the U.S. grocery market, could use. “I think they want a bigger food game and more of your food dollar,” Frerick added. “Because that’s what Walmart offers. You can buy your DVDs, books and TVs on Amazon but on your deodorant you will go to Walmart.
Amazon, however, faces growing mistrust in Washington, where there are widespread concerns about its alleged anti-competitive behavior, and among food safety experts, who cite the challenges of monitoring third-party vendors on its platform. form.
“Amazon has historically been slow to remove recalled food products from its entire platform, which creates a significant risk to consumers,” said Brian Ronholm, former deputy assistant secretary for food safety at the USDA under the Obama administration.
“We have developed industry-leading tools to prevent unsafe or non-compliant products from being listed in our stores and to remove products that do not meet our standards,” an Amazon spokesperson said in a statement. “We have clear infant formula policies and require vendors of infant formula to submit documentation that reflects compliance with applicable regulations and requirements. When we become aware of a product recall, we immediately remove all affected products from our store and notify customers directly via email. »
The baby formula shortage that erupted into the public consciousness this spring has shed light on the small handful of manufacturers who control more than 90% of the US infant formula market – and how strict government regulations have helped them. to maintain this dominance. And it has prompted the federal government to re-examine many of these restrictions, including limits on the use of federal nutritional benefits to buy formula milk online, as well as food safety regulations that for decades have prevented most foreign infant formula to enter the US market.
This could give online platforms like Amazon, which is already a major infant formula retailer, the ability to sell a wider range of infant formula to more American consumers. Instacart, which provides infant formula among other groceries, also disclosed lobbying on infant formula issues in its latest federal disclosure, noting that it has met with officials from USDA, the White House and the Centers for Medicare and Medicaid Services. The company also listed federal nutrition programs as lobbying topics.
Amazon, which is among the top lobbying spenders in Washington, certainly weighs in on his view.
As formula shortages turned into a political crisis for President Joe Biden in May, Food and Drug Administration Commissioner Robert Califf met with Douglas Herrington, a senior Amazon executive who has since taken over as as CEO of WorldWide Amazon stores, according to Califf’s public calendar.
FDA spokeswoman Janell Goodwin said the meeting was one of many Califf and Deputy Food Policy and Response Commissioner Frank Yiannas have held with retailers, manufacturers and of stakeholders “to discuss the supply of infant formula as part of the FDA’s practical approach to responding”. disruption of the infant formula supply chain.
Other Amazon officials and insider lobbyists also met with FDA and White House officials during the formula crisis this spring. According to two people familiar with the conversation, company officials encouraged the federal government to tap into Amazon’s massive distribution networks to speed delivery of the formula to desperate consumers. The White House and the FDA ultimately prioritized physical stores over Amazon.com for distribution.
Amazon officials felt the White House didn’t want to give the impression it was prioritizing the online retail giant, according to a person familiar with the conversations. The company has had sometimes contentious relationships with the Biden administration and progressive Democrats in Congress. A White House official, who was not authorized to speak publicly, said the reason was simpler. “They can’t take the WIC,” the official said, referring to the federal nutrition program for low-income mothers and babies, which is used to buy about half of all infant formula consumed in the country. .
Indeed, from now on, WIC benefits cannot be used to buy food online – restrictions that have proven to be a major headache for the administration as it tries to resolve the crisis. formulas. The federal government has worked to change that in recent years, including modernizing the 1980s payment system for WIC as well as the Supplemental Nutrition Assistance Program, known as SNAP, which provides assistance federal food to more than 40 million Americans.
In 2019, the Biden administration launched a pilot program allowing SNAP recipients to use their benefits on Amazon.com as well as Walmart.com. Now they are in the early stages of evaluating similar changes to WIC, potentially opening another billion-dollar pot. In total, the USDA budget for nutrition, which covers WIC and SNAP, is over $130 billion annually. Federal officials and congressional aides say modernizing federal nutrition programs online is the next big regulatory and legislative fight facing the food industry.
Two people familiar with the conversations between Amazon and White House officials confirm they discussed expanding SNAP’s online access.
“We regularly meet with a wide range of stakeholders, including industry, as part of our commitment to hear all ideas and explore all options to better meet the needs of the American people,” the press secretary said. White House Deputy Abdullah Hasan.
Amazon officials say their expansion into food markets and federal nutrition programs have provided US consumers with better access to products. But some lawmakers, nutrition advocates and food safety experts warn its expansion comes with downsides, including worries about internet and other access issues in poor rural and urban areas.
“Amazon presents itself as being an answer for underserved rural communities, but it’s also sometimes a fantasy because there are many, many rural communities they don’t distribute to,” said a consultant who works on issues of nutrition and agriculture in DC” And if something goes wrong in their supply chain, you suddenly have millions of people who aren’t getting the basics they need.
Legislators including House Education and Labor Chair Bobby Scott (D-Va.), have meanwhile raised concerns about price gouging by third-party sellers on Amazon and other online platforms during the formula crisis, urging the FTC to crack down.
“We continuously compare the prices submitted by our selling partners with current and historical prices inside and outside our store to determine if the prices are fair,” the Amazon spokesperson said in a statement. “If we identify a price that violates our policy, we remove the offer and take appropriate action with the seller.”
Amazon has also become a more general target for those on the left concerned about industry consolidation and the dominance of a handful of online tech companies — a group that includes several top Biden administration officials. The president himself argued with Amazon founder Jeff Bezos on Twitter this spring over tax policy and inflation. Despite the sometimes strained relationship, some Biden administration officials have suggested that Amazon will continue to be a major player as the federal government tries to bring more federal nutrition programs online.
“I’m sure they have everything to gain,” a second White House official, who was not authorized to speak publicly on the matter, said of Amazon. “But what is the trade-off really here, if it means a low-income mother may have better or easier options?”
Daniel Lippman contributed to this report.