Media Cost Similac 8% of Its Market Share

A media ruckus over Similac, following later-refuted suspicions that a certain brand of its infant formula caused babies to vomit, has cost the company market share. That story may not have proved accurate, but an earlier report that Similac's lactose-free formula was no such thing was true. Together they may have had an impact on consumers behavior, though the company itself denies any drop in its market share.

StoreNext, a market research company, has figures indicating otherwise.

Milk substitutes are considered one of the most stable markets, from the perspective of market share and consumption habits. Parents don't like to take risks and try new products.

Market share hasn't been stable, though, since media reports dating from October that babies had vomited after consuming Top 3 formula. The Health Ministry checked the product and within two weeks issued a report clearing the Simac product.

But the crisis immediately cost the company a 5% drop in market share, according to StoreNext figures for November.

Not only hasn't the effect waned, it's worsened. According to the market research company StoreNext's figures for April this year, Materna, the leading company in the category, increased its market share to 67.8% by volume, from 60.1% a year earlier.

It did so at Similac's expense. From April 2008 to April 2009, Similac's market share tumbled from 39.4% to 31.8%, according to StoreNext.

A source in the baby-foods sector says the reason for the contraction is the media reports.

In May 2008, the media reported that Similac Top Free, which Similac advertised as being the only lactose-free formula, did have lactose. That report didn't affect sales, though.

Another factor may be that unlike Materna, Similac isn't kosher for Passover, which took place in April. Some outlets covered over their inventory of Similac on store shelves, as they did other chametz. However, sales of Similac hadn't fallen during Passover 2008.

StoreNext's figures don't include the drugstore chains, which supply more than 20% of Israel's consumption of infant formula.