A DTC baby formula startup is caught in the center of a supply chain crisis

After weeks of “unprecedented growth,” Bobbie co-founder Laura Modi made a hard decision: to not accept any more new customers.

A sign stand next to a small amount of toddler nutritional drink mix at Target in Stevensville, Maryland, on May 16, 2022, as a nationwide shortage of baby formula continues due to supply chain crunches tied to the coronavirus pandemic that have already strained the countrys formula stock, an issue that was further exacerbated by a major product recall in February. (Photo by Jim WATSON / AFP) (Photo by JIM WATSON/AFP via Getty Images)

Parents unable to track down formula in stores have been turning to Facebook groups, homemade formula recipes and Bobbie, a 4-year-old subscription baby formula company.

Photo: JIM WATSON/AFP via Getty Images

The ongoing baby formula shortage has taken a toll on parents throughout the U.S. Laura Modi, co-founder of formula startup Bobbie, said she’s been “wearing the hat of a mom way more than that of a CEO” in recent weeks.

“It's scary to be a parent right now, with the uncertainty of knowing you can’t find your formula,” Modi told Protocol.

Parents unable to track down formula in stores have been turning to Facebook groups, homemade formula recipes and Bobbie, a 4-year-old subscription baby formula company that sells organic, European-style formula modeled after human breast milk. The company has been “pretty massively” impacted by the shortage, said Modi, with sales and new customers spiking as demand increases. But Bobbie can’t meet that new demand amidst the shortage, and so Modi had to make a tough call: The company closed its subscription service to new customers and opened a waitlist. Current or former Bobbie customers can still purchase baby formula directly from the company or sign up for a subscription.

“I had to make a hard decision staring at supply versus demand and decide to prioritize our current customers over growing the business,” Modi said.

The baby formula shortage began in February when Abbott Nutrition, one of the largest suppliers of the product in the U.S., recalled several major brands of its powder formula after four babies suffered bacterial infections linked to products made in its Michigan factory. The company has since shut down that plant. The recall exacerbated ongoing pandemic-related supply chain issues in the baby formula market.

Photo: Bobbie

Abbott’s recall includes the leading powder formula products, including Similac, Alimentum and EleCare. Three other manufacturers, Mead Johnson, Gerber and Perrigo Nutritionals, are trying to keep up with the demand, but given the supply chain issues, there’s still a massive gap. According to Axios, 43% of baby formula is out of stock. For manufacturing, Bobbie partners with Perrigo Nutritionals, which is reportedly operating its facilities at 115% capacity and expects shortages to last through 2022, according to Reuters. Modi told Reuters that Perrigo is able to meet 100% of the company’s current needs.

“This [shortage] is a big wake-up call that we cannot ever be dependent on any one manufacturer or anyone's supplier to make sure that we always have the product on hand,” Modi said.Modi said Bobbie saw its customer count double in the first week following the recall. Weeks and weeks of “unprecedented growth” followed, she said. Limiting the company’s customer base was the best way to ensure reliability and a consistent supply of formula to those who have used Bobbie. The company’s more than 70,000 subscribers get bundles of four, eight and 10 cans of formula for between $114 and $285 per month.

“The decision was, rather than going out of supply, we’re going to give peace of mind to our current customers that if they started on Bobbie, they'll be able to continue on Bobbie,” Modi said.

The move to limit the number of customers who can buy Bobbie products is similar to policies of retail stores like Target, Kroger, Walgreens and CVS, which have placed limits on the amount that a person can buy in one transaction to prevent stockpiling.

Photo: Bobbie

Modi said the feedback to Bobbie’s decision has been overwhelmingly positive. After announcing the subscriber limit in an Instagram post last week, the company received an outpouring of support from parents who buy its products.

“I’m not even kidding when I say I cry happy tears every time that I open that can,” one customer said in an email to Bobbie shared with Protocol. “As long as I’m feeding a baby formula, I will always choose Bobbie. You have made a customer for life.”

The baby formula shortage is showing some early signs of easing: Abbott reached an agreement with the FDA on Monday that will reopen its Michigan factory. The company said baby formula could be available on shelves six to eight weeks after the production restarts, which would take two weeks, pending FDA approval. And on Wednesday, the Biden Administration invoked the Defense Production Act to boost baby formula production, as well as authorized flights to bring imports from overseas. According to the Associated Press, 98% of baby formula consumed in the U.S. is produced domestically. Bobbie didn’t say when it will reopen its sales, but plans to update its subscribers in June.

For now, Modi isn’t focused on growing Bobbie’s bottom line. Her goal is to give the company’s current customers a sense of relief knowing that Bobbie has them covered.

Correction: This story has been updated to correct the number of years Bobbie has been operating. This story was updated May 18, 2022.

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