Tech

Silicon Valley is eyeing the giant market for infant formula

VIDEO12:5312:53
Why the infant formula market is growing and the companies looking to...
Key Points
  • The market for infant formula is expected to reach $95 billion by 2026. 
  • New companies are popping up in Silicon Valley to carve out a slice of the market. 
  • These include Bobbie, which is developing a new formula based on European ingredients, and Sugarlogix, a biotech start-up that is looking to recreate the sugars found in human breast milk. 
Laura Modi, Co-Founder of Bobbie Baby, wants to create a new "European style" infant formula here in the U.S.
Katie Brigham

While working at Airbnb, Laura Modi noticed a strange trend among Bay Area mothers.

Many new parents were circumventing U.S. regulators by importing their formulas from Europe.

In Europe, there are different rules around the ingredients that brands are allowed to use in formulas, and some parents believe that European formulas are healthier.

So Modi set about forming a start-up that would essentially recreate European formulas for the U.S. market. She started a new venture, called Bobbie Baby, alongside her former Airbnb colleague Sarah Hardy, and the pair raised $2.5 million in venture capital funding.

But after less than 10 days on the market, the U.S. Food and Drug Administration issued a warning in June to consumers to stop using Bobbie's infant formula. Among its various complaints, the U.S. FDA told parents that the formula was manufactured in Germany and imported to the United States, and that there weren't sufficient nutrients for some infants, especially those born premature or with a low birth weight.

"We were very surprised," said Modi.

Modi explained that the company faced a number of hurdles in manufacturing its product in America. Modi said there are only a handful of approved facilities to manufacture infant formula, and most require a minimum batch of orders that far exceeds what a start-up can realistically achieve in its first months. Modi considered going down a different route, such as the toddler formula market, but she remains committed to working with regulators to bring Bobbie to market as an approved infant formula.

"Toddler is a totally different category, and our mission is to support the infants and new parents," she said.

The market for infant formula

Bobbie might have struggled in its first months, but the industry is paying close attention to whether it can overcome its challenges.

In Silicon Valley, new tools, technologies and services are increasingly getting financed to help out new parents. Much of this has been focused on fertility, but increasingly, companies are popping up to help mothers nurture their infants, whether it's through new and improved formulas or more comfortable, user-friendly breast pumps.

There are also start-ups forming that aim to work with existing infant formula companies to improve their blends. A start-up called Sugarlogix is using cutting-edge gene editing tools to recreate in a lab the most commonly found breast milk sugars, which are known to be associated with boosting the baby's immune system.

All of these companies are hoping to provide women with more options. The benefits of breastfeeding have been touted by many health institutions, including the World Health Organization, but most parents turn to formula at some point, either as a supplement or alternative to breastmilk. Reasons for the switch might include health problems with the mother or infant, and a lack of maternal leave in the U.S. that makes it hard to nurse.

As a result, the infant formula market alone is expected to reach $95 billion by 2026, making it a lucrative opportunity for new entrants. Currently the space is dominated by such companies as Nestle, Abbott and Danone.

Some mothers, including Leslie Ziegler Schrock, a health entrepreneur who's now writing a book about pregnancy, noted that there's still stigma attached to using formula.

"I thought, why is my body failing me," said Schrock, after she was told that her baby wasn't gaining enough weight and she needed to introduce formula.

Modi from Bobbie agrees with that sentiment.

"I found myself standing in the middle aisle of a pharmacy choosing a formula that felt like the complete opposite of breast milk," said Modi, who struggled to breastfeed because of an infection of the breast tissue called mastitis.

Modi said that Bobbie is finding that U.S. manufacturers are increasingly open to working with her team, as they're seeing the writing on the wall regarding the demand for European formulas.

"It's hard and it should be because we're developing products for a vulnerable population," said Modi. "But it shouldn't be impossible."