A formula…for baby formula

I’m sure this will come across as ungrateful and that’s certainly not my intent. I mean, I am very thankful that I left baby Dimitri’s three-month visit to the pediatrician with five free 8 oz. cans of Enfamil A.R. Our doctor seems to think that this will curtail some problems Dimitri is experiencing with acid reflux. Anyway, the street value on this “powder” is somewhere between $50 and $60 (about $1.30 to $1.80 per oz.), depending on your preferred retailer and it’s not the first time we’ve received free samples of formula. In fact, I am relatively certain that since Dimitri’s birth in late August, we’ve actually received just as much free formula as what we’ve purchased at the store. We’ve even received entire cases of powder formula on more than one occasion. And many sample containers include one or two coupons that offer discounts on future purchases of the same product.  And at that, we have rarely paid full price for the stuff between all the manufacturer’s coupons and other discounts we’ve acquired. We were even getting samples and coupons through the mail months before we even knew whether this kid was a “he” or a “she”! All this begs the question: If the producers and distributors of baby formula can afford such widespread and relatively deep discounts, why is baby formula so expensive in the first place?

I will be the first to admit that I’m no expert when it comes to mathematics or marketing but some points are fairly obvious. For example, I use the phrase “relatively deep discounts” to reflect that the majority of coupons we receive lop between $3 and $5 off a $17.00 can of formula. So those who sell the product are willing to pass up around 18% to 29% of the retail price on a certain percentage of sales. That’s a noteworthy—and welcome—savings for many folks, especially for those who make the annual median wage ($26,364) or less.¹  Consider also the sheer volume of samples that manufacturers give away to hospitals, doctors’ offices and directly to consumers. I’ve seen this first hand. No doubt the freebies aren’t considered actual “product” by the manufacturers themselves. It’s a safe bet that the samples (most of which are marked “Not for Retail Sale”) are regarded as advertising expenses rather than actual stock, so companies lose nothing from their bottom line by giving away so much of what they produce. To be sure, they probably sell a lot more than what they give away. But do they sell so much because they give away so much? Probably not. I don’t know how competitive the baby formula market is these days but even with a declining birth rate in the United States, people are still having babies and those babies still need to eat. And most of them, at some point, will need some kind of baby formula either as their primary diet or as a supplement. But if the companies who produce formula still turn a hefty profit at the end of the day, they are ultimately validating the assertion of supply-side economics which holds that consumption and demand are secondary consequences of a successful capitalist enterprise.²  (I’m not even going to get into the shelf life of formula and the implications of overproduction when viewed from the supply-side perspective. Perhaps that’s a discussion for another day.)

It’s fairly clear that, generally speaking, baby formula is ridiculously overpriced. Although it’s a necessity with regard to the health and well-being of infants, as a commodity baby formula is neither scarce nor expensive and it’s not necessarily difficult to produce, either. The plethora of discount offers, coupons and free samples that producers offer to consumers further exposes the fact that the “market” itself is almost completely artificial. Rosa Luxemburg nicely summed up this kind of phenomenon in her unfinished work What is Economics?:

Price fluctuations are like secret movements directed by an invisible agency behind the back of society… This movement is observed as atmospheric pressure read on a barometer, or temperature on a thermometer. And yet commodity prices and their movements manifestly are human affairs and not black magic. No one but man himself—with his own hands—produces these commodities and determines their prices, except that, here again, something flows from his actions which he does not intend or desire; here again, need, object, and result of the economic activity of man have come into jarring contradiction.

Don’t get me wrong here; getting free baby formula is nice. Now more than ever, I enjoy having a little extra cash in my wallet whenever possible. Hell, I’d even be happy to publicly endorse Enfamil A.R. if it keeps my baby boy’s reflux in check. I’d work cheaply, too; they could just pay me with free formula! But at the end of the day, I’d be happiest if the folks who produce the stuff could just do away with all the smoke and mirrors and simply offer their products at a consistent, reasonable price that is both indicative of the actual cost of production (plus labor) and affordable to all consumers. I am certain this is possible.

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1. “U.S. Median Annual Wage Falls To $26,364 As Pessimism Reaches 10-Year High” Huffington Post
2. “Supply-side economics” Wikipedia