Baby formula shortage: British manufacturer to deliver at least 2 million cans to U.S.

Head of Growth at Kendamil Dylan McMahon joins Yahoo Finance Live to discuss the company working alongside the FDA to ship baby formula to the U.S., the stranglehold domestic baby formula producers have on the U.S. market, and the outlook on future imports to alleviate the pain families are feeling from the baby formula shortage.

Video transcript

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SEANA SMITH: More formula from overseas coming to the US. About 300,000 pounds of Kendamil infant formula is arriving on a United flight. Just touched down a few minutes ago from the UK today as a shortage continues here in the US.

Now recent data showing that during the last week of May, 74% of formula products were out of stock at some point. Now Dylan McMahon, he's the head of growth at Kendamil, joins us now. Dylan, it's great to have you. First, just talk to us about the conversations, the process, working with the Biden administration to get your formula here into the US.

DYLAN MCMAHON: Yeah, absolutely, Seana. Thanks for having me. Well, look, it's been a relatively quick process, all things considered. I suppose we are in the very fortunate position, whereby we've had an existing relationship with the Food and Drug Administration going back a number of years.

It's always been our intention to bring Kendamil infant formula to the United States, obviously not as quickly or under these circumstances. But with that being said, we had an existing relationship, [INAUDIBLE] a very strong one with the FDA. And when the opportunity arose to try and support hundreds of thousands, millions of families across the United States, we lapped at that.

So we've been speaking with the Food and Drug Administration. And we have to thank them for their tireless work and for progress in this very quickly. We shared with them our quality processes, the nutritional breakdown of Kendamil infant formula. And we're now the first international formula manufacturer approved to be imported in the United States, which is something we're very proud of.

SEANA SMITH: Well, Dylan, you talk about the fact that you had been in discussions with the FDA. If I read this correctly, you've been talking to them for about five years, trying to get your formula into the US. From your perspective, as a formula maker, what's been the holdup?

DYLAN MCMAHON: Well, it's a good question, Sean, but I suppose the United States maybe treats the import of formula, and rightly so, a little bit differently than other countries across the world. So although, Kendamil infant formula is currently about 10% of the United Kingdom's infant formula market and is exported to about 42 countries internationally, in order to get into the United States, The FDA-- or not just for Kendamil, for any new brand-- needs you to make sure that you are fully nutritionally compliant and you actually carry out a clinical study illustrating that your formula is safe, as well as audits and becoming authorized by the FDA as a factory.

So it's a long process. It involves animal trials as well as infant trials. We're in the final stages of those trials. And our hope and expectation is that by the end of this year, when the window for Operation Fly Formula is closed, we will be able to make a smooth transition into being a fully approved FDA formula in the United States.

SEANA SMITH: Dylan, do you think some of these efforts from the Biden administration to import formula from overseas-- are you confident that this is going to open up the US, the broader formula market to more European makers?

DYLAN MCMAHON: Yeah. Well, it's a good question. I suppose certainly in the short term it is. As we can see, there are a number of different brands now in talks with the FDA. Kendamil was obviously the first.

I suppose what we do know is that [INAUDIBLE] in November there's a big push under Operation Fly Formula to ensure that all the millions of families that are impacted across the United States have access to formula. And the administration has done a very good job of expediting that entire process of importing the product. And we think that that'll really support families by the time that the window closes.

The expectation is that there will be sufficient volume in the country to be able to continue to supply parents with what they need. In terms of how it impacts, I suppose, European formula going forward and beyond this window, I suppose that's anyone's guess. But what I would say is, as I say, because we have been carrying out this clinical study for a number of years and are in those final stages, we expect Kendamil is here to stay.

SEANA SMITH: Dylan, what's your strategy as you enter the US trying to gain that recognition? Because the reason that we're in this situation that we're in right now here in the US is because it's dominated by only a couple of players. And they account for the mass majority of the market. So how does someone like you and your company really make its mark here in the US?

DYLAN MCMAHON: Yeah, it's a good question, Seana. And you know, you're right, because we're a we're a family owned and independently-operated business. And it is a very big market.

But what I would say was back in April 2020, Kendamil infant formula was about 0.5% of the UK market. It's now over 10% of that market. And that's not because of large advertising campaigns, and it's not because of big press opportunities.

It's because what fundamentally is at the core of Kendamil infant formula is a much higher quality product. And parents in the United States have been calling on Kendamil to import product into the United States going back years. And it was really the thousands of inquiries that really give it the encouragement to move ahead as quickly as we did.

Our formulation is fundamentally different. We believe a higher standard than the United States has seen before, using whole milk fats instead of palm oils as sources of fat, using lactose instead of corn syrups to mimic breast milk. And in the United Kingdom, we've seen a really positive feedback from millions of families. And that resonates with them.

And they see the story. They see our heritage. They see our local supply chain. And that is, that's really brought us to where we are today. We expect the same very high-quality ingredients will drive success in the United States.