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