Super-Sol, Seeking End to Baby-formula Duopoly, Launches Own Product

Israelis have been reluctant to try new baby formula brands since 2003 when three babies died due to a deficient product from Remedia.

Eliyahu Hershkovitz

Super-Sol is hoping to break the duopoly that controls Israel’s baby-formula market with the release yesterday of a store-brand formula.

The biggest rollout of a Super-Sol house brand is for the first private-label baby food in Israel.

Israel’s baby-formula market has been controlled by Materna and Similac since 2003. Remedia’s formula disappeared from the market after it emerged that the German manufacturer had omitted a crucial vitamin from its nondairy formula. Three infants died and 23 others suffered permanent damage as a result.

Teva’s Nutrilon brand, launched in 2011, has a market share of just 10%, in part because it is no cheaper than its main competitors.

Super-Sol will charge 40 shekels ($10) for 700-gram cans of powdered formula, at both its discount stores and its more expensive urban locations. The product, formulated in three stages for babies of different ages, is made by Perrigo.

In comparison, as of last week 700-gram cans of Materna Extra Care, which Super-Sol says is equivalent to its new product, were selling for 59.90 shekels at Super-Sol Deal, 57.90 shekels at Rami Levi Shivuk Hashikma and 59.90 shekels at Yeinot Beitan.

Tins of Materna Dairy, also 700 grams — the cheaper version of the product — were selling for 52.90 shekels at Super-Sol Deal and 49.90 shekels at Rami Levi Shivuk Hashikma. Super-Sol says its product is superior to Materna Dairy.

Super-Sol representatives estimated that a one-year supply of its new store brand would cost 2,000 shekels, compared to 3,500 for Materna Extra Care.

The supermarket chain says that like Materna Extra Care, its new product includes “optional components” such as probiotics and fatty acids.

Perrigo has manufactured private formula brands for chain stores in the United States for the past 25 years, and controls 14% of the market there. It is the country’s largest manufacturer of private formula brands, and makes formula for mega retailers including Walmart, CVS and Target.

Super-Sol is also planning to release a line of cereals and jarred foods for babies, as well as accessories such as pacifiers.

The store says it will take at least an additional more year before it releases formula with a mehadrin kashrut certification, the stricter level of kashrut demanded by the ultra-Orthodox community.

Israel’s formula market is worth an estimated 570 million shekels a year, said Super-Sol’s vice president of marketing, Uri Kilstein. The grocery chains lose an estimated 170 million shekels a year from selling it, he added, because they lack bargaining power vis-à-vis the manufacturers — and no chain can allow itself to give up on selling baby formula, he added. Baby formula is often a loss leader for the chains.

Materna is produced by Osem, while Similac is made by Promedico. Both are very profitable for their manufacturers — Materna had operating profits of 18% as of 2015, according to the company’s financial reports.

Israelis have been reluctant to try new baby formula brands following the Remedia affair. Another player, Medici’s Optimil, disappeared from the market in 2014 due to disappointing sales.