Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, if
Speaker 1: you've been paying any attention, then you understand the dire
Speaker 1: shortage of baby formula in this country. White House officials
Speaker 1: are working to provide government transportation and logistics support to
Speaker 1: infant formula makers. This is President Joe Biden seeks to
Speaker 1: address a national shortage of the vital products that's left
Speaker 1: shelves empty and parents frustrated. Joining us now is somebody
Speaker 1: who knows quite a bit about the industry. Laura Modi
Speaker 1: is the co founder and CEO of Bobby. It's a
Speaker 1: baby formula that's organic, it's female founded, and mom lead
Speaker 1: here in the United States. Laura, good to have you
Speaker 1: with us. Um I want to just get an idea
Speaker 1: from you about demand that you're seeing right now, because
Speaker 1: here's a note on your website when you go to
Speaker 1: it that says we're temporarily at capacity for new customers.
Speaker 1: When when did you have to to tell people that
Speaker 1: you can't take on new customers. Look, it breaks my
Speaker 1: heart to have to be in a position where we
Speaker 1: can't accept anyone new into the family. But the recall happened.
Speaker 1: That Abbott recall happened in late February, and we saw
Speaker 1: unprecedented growth following that. The first week of the recall,
Speaker 1: our customer count doubled and it didn't stop. We were
Speaker 1: absorbing the shock of a large player unable to serve customers.
Speaker 1: And it was about three weeks ago. I'm staring at
Speaker 1: supply versus demand and saying we need to make a
Speaker 1: tough decision here, And in hindsight, it was actually one
Speaker 1: of the easiest to prioritize serving our current subscribers versus
Speaker 1: growing the business. So what do the issues look like
Speaker 1: in terms of what are you trying to tackle to
Speaker 1: increase capacity. Look, this isn't like any other industry. Into
Speaker 1: in formulas an essential good. I mean, we're continuing to
Speaker 1: hear about the safety and quality requirements of infant formula
Speaker 1: and speaking out about the careful dance that we need
Speaker 1: to have between safety and speed is very critical. You
Speaker 1: can't just ramp up capacity at the flick of the switch.
Speaker 1: It takes many years. So we need to look at
Speaker 1: solution in two different ways. What are we doing in
Speaker 1: the immediate to get out of the crisis, and then
Speaker 1: what are we doing in the long haul to make
Speaker 1: sure that we're getting more production capacity online in the
Speaker 1: country to be able to serve babies. What specifically needs
Speaker 1: to be done in order to get us there, because
Speaker 1: it seems like to me, like you said, it's not
Speaker 1: like any other industry, it's heavily regulated, um in the
Speaker 1: supply chain is long and it spans different areas. What
Speaker 1: needs to happen in order to get us back on track. Look,
Speaker 1: as I said, like in the short term, we have
Speaker 1: to actually look at this like a crisis. There is
Speaker 1: not enough production capacity in the country to be able
Speaker 1: to serve the demand. And what the White House is
Speaker 1: doing in the FDA stepping in to create more flexibilities
Speaker 1: to allow formula from overseas, I mean, that really is
Speaker 1: the solution to get out of today's crisis. But in
Speaker 1: the long haul, we're going to have to take a
Speaker 1: hard look at how many facilities are online in the
Speaker 1: country and what is this scenario if another one of
Speaker 1: those formula companies goes down? Are we prepared to feed babies?
Speaker 1: So we need more production? So how what would you
Speaker 1: ask say if you were trying to present bind right now,
Speaker 1: what would you ask for to make that process faster,
Speaker 1: more expedient, and safer, Get more funding and resources into
Speaker 1: the f d A as soon as possible. I mean,
Speaker 1: we're we're seeing kind of the numbers of people that
Speaker 1: are supporting the Infant Formula team, and it needs to
Speaker 1: be far greater than nine people. Getting more resources and
Speaker 1: funding to be able to get boots on the ground,
Speaker 1: to open up more manufacturing, to increase safety protocols has
Speaker 1: to happen immediately. Speaking from an industry standpoint, it takes both.
Speaker 1: We require the government support, government assistance and the FDA
Speaker 1: is oversight to be able to produce more And if
Speaker 1: we can get that funding and resource online, I believe
Speaker 1: you'd be able to see more diversity in the market.
Speaker 1: I'm looking at the ingredients in body infant Formula, Laura,
Speaker 1: and there are literally dozens of them. Which ones are
Speaker 1: the hardest ticke at right now? Great question. I mean, look,
Speaker 1: the recall is on the back of an already constrained
Speaker 1: supply chain, and we were already dealing with questions around
Speaker 1: can we get certain oils, and you know, deep in
Speaker 1: the news right now you're seeing constraints around getting sunflower
Speaker 1: oil palm oil, which we don't use, is another ingredient
Speaker 1: that's having some issues. So I do think following this
Speaker 1: one issue we're seeing the industry has to take a
Speaker 1: hard look at other dependencies, including bottlenecks for single ingredients
Speaker 1: being used, and question, if we can't find that ingredient,
Speaker 1: then what are we using and replace of it so
Speaker 1: that we're not in this again. So I guess that
Speaker 1: brings me to the next question, which is are there
Speaker 1: sub institutes available for some of these ingredients that are
Speaker 1: hard to find? Our are getting pricier and you mentioned,
Speaker 1: uh the several types of oil that seems to be
Speaker 1: a direct effect from the war Ukraine getting out, So
Speaker 1: I'm wondering do you have substitutes lined up? There is substitutes,
Speaker 1: but I don't think operationally as an industry we are
Speaker 1: ready to flip it over very quickly. And if this
Speaker 1: recall has taught us anything is that we need to
Speaker 1: be prepared. So while there's solutions in place, are those
Speaker 1: solutions ready to go immediately? No, And I think it's
Speaker 1: an industry we need to get ahead of it now. Laura,
Speaker 1: when are you going to be able to take more
Speaker 1: customers at Bobby we're hoping later into the summer, I
Speaker 1: will say, with the uncertainty ahead, we are making no
Speaker 1: promises and giving as much peace of mind to our
Speaker 1: current subscribers, which coming at this as a mom first
Speaker 1: and foremost. If your baby is on a product, on
Speaker 1: a brand, you want to go to bed at night
Speaker 1: knowing that you're going to continue to be able to
Speaker 1: get that. So until we see this clear up, we're
Speaker 1: going to keep just serving our current subscribers. As we've
Speaker 1: learned in you know, for people who haven't covered the
Speaker 1: industry very closely, I mean I certainly learned this in
Speaker 1: recent weeks that the baby formula industry is controlled by
Speaker 1: a number of massive players. Um, where do you fit
Speaker 1: in at, Bobby. Yeah, Look, there's no surprise here. The
Speaker 1: shortage we're seeing is inextricably tied to the fact that
Speaker 1: two players dominate the market. When two players dominate the market,
Speaker 1: it essentially means that as a country we have become
Speaker 1: dependent on them. And again we're talking about a product
Speaker 1: that seventy of babies before six months of age rely on.
Speaker 1: This is not like toilet paper or any other product.
Speaker 1: It is an essential good. It is a product that
Speaker 1: we have to turn to Bobby. I mean, really, my
Speaker 1: dream is to break into this market, to be able
Speaker 1: to support parents with another option. We've been unprepared for
Speaker 1: only eighteen months into launching. The business is absorbing the
Speaker 1: shock of the major player not being able to serve
Speaker 1: the market. Talk to us very quickly thirty seconds about
Speaker 1: pricing power. Here you talked about the ingredients you aren't
Speaker 1: able to get. Are you passing on any of those
Speaker 1: costs your customers? We haven't gotten there yet, but I
Speaker 1: will say inflation is something that no industry right now
Speaker 1: can shy away from. It's the gracious that we've seen
Speaker 1: in decades, and we're continuing to see a rise the
Speaker 1: balance that we have for a product like the formulas
Speaker 1: that we want to continue to provide a high quality product,
Speaker 1: but we are seeing costs increase. So really, within the
Speaker 1: next few months, we're going to take a hard look
Speaker 1: at our wrong ingredients in question what is the impact
Speaker 1: on the end product? And I really do hope we're
Speaker 1: getting support from the government to be able to think
Speaker 1: about the right subsidence to be able to produce and
Speaker 1: make it accessible to the masses. Laura Modius, co founder
Speaker 1: and CEO of Bobby, the infant formula company startup joins
Speaker 1: us via Zoom from Washington, d C.