Question Period Note: INFANT FORMULA SITUATION IN CANADA

Q1 –What has the government done to secure a diversified supply?
Q2 – Is Canadian Royal Milk currently manufacturing infant formula for the domestic and export markets? Q3 – Why has the price of infant formula increased in the last two years?

R1 - Health Canada has published an interim policy which has been extended until December 31st, 2024, to facilitate the importation of equivalent and safe infant formulas that have been approved by foreign regulatory authorities.

The interim policy includes a list of eligible products that is updated regularly, and Health Canada is working with manufacturers to import these products where possible.

We are also currently exploring longer-term solutions that could make our market more attractive for importation and domestic production.
Health Canada is consulting on a proposed modernized regulatory framework for foods for special dietary use and infant foods, which includes infant formula. R2 - Canadian Royal Milk is not currently manufacturing infant formula yet. The company presently only manufactures fortified milk powders and exports all its production.
Canadian Royal Milk aims to serve the domestic and export markets for infant formula in the future. R3 - The lack of supply may have affected infant formula availability and affordability.

Improving the safe supply and affordability of products is of the highest importance to the government.

Infant formula situation in Canada

There is no domestic production of milk-based infant formula in Canada. Currently, all of the infant formulas approved for sale in Canada are manufactured in other countries, with a majority of products (over 90%) imported from the U.S.
A shortage of infant formula in the U.S. was triggered by the February 2022 closure of a large infant formula manufacturing plant by Abbott Laboratories in Michigan. While in Canada, the overall situation remains stable. However, Health Canada reported that certain provinces were running low on supplies of extensively hydrolyzed infant formulas and amino acid-based formulas both for babies with food allergies. The supply reached critical levels in summer 2022, especially for some hypoallergic products. As of September 2023, the Canadian supply of regular formula is stabilizing.
In terms of imports, in 2022, we imported 23,972 tonnes of dairy-based infant formula, marking a 5.10% increase from the 22,810 tonnes imported in 2021. For the first nine months of 2023, we imported 18,555 tonnes, which represents a 2.16% decline compared to the 18,964 tonnes imported during the same period last year.
The average retail price (scanner data) of infant formula for a 900g standardized format was $40.18 in October 2023, compared to $33.29 in October 2022. While average retail prices can be used to assess price levels in a given month, Statistics Canada recommends not using them to calculate price changes over time, but rather rely on the Consumer Price Index (CPI). According to the CPI, infant formula inflation for October 2023 compared to a year ago was 12%.

Government of Canada's Initiatives to Diversify Infant Formula Supply
Since late 2022, the priority has been to bring more regular formulas to the Canadian market. To alleviate the shortage of infant formula, Health Canada approved an interim policy to facilitate the importation of equivalent and safe infant formulas that have been approved by a foreign regulatory authority or are allowed to be sold in foreign jurisdictions that have high quality and manufacturing standards similar to Canada. The interim policy has been extended by Health Canada to December 30, 2024. More than 70 products are currently eligible for temporary importation under this policy, and the list is updated regularly.
While Health Canada determines what products are eligible for temporary importation, the decision to import and sell to the Canadian market is made by individual companies. For this reason, the Government of Canada conducts significant engagement with manufacturers, distributors and retailers to reduce or eliminate market barriers to allow timely and fair access to infant formula.

Canada Royal Milk
Canada Royal Milk (CRM), a Canadian subsidiary of Feihe International Inc., a Chinese infant formula manufacturer, built a $332 million plant in Kingston, Ontario which has been in operation since 2020. The supply of milk was worked out in collaboration with Dairy Farmers of Ontario (DFO) and goat milk producers in Ontario and Quebec. CRM investment creates new profitable markets for the dairy sector. For supply-managed dairy producers, the project adds value to products such as skim milk, of which Canada has a surplus.

CRM aims to serve both the domestic and export markets in the future. For the moment, the company does not manufacture or export infant formula, as the regulatory approval process for infant formula has not been completed. It currently only manufactures fortified milk powders for the export market. For infant formula, the company has requested approval from Health Canada and the Canadian Food Inspection Agency (CFIA) to manufacture infant formula for sale within Canada and is also seeking approval by foreign authorities to export infant formula to markets including China and the United States.
Health Canada completed its pre-market assessment of CRM’s submission for infant formula and issued its approval (Letter of No Further Questions) in October 2023. CRM has also requested an amendment to its Safe Food for Canadians licence to permit the company to manufacture infant formula for sale in Canada, which is currently under review by the CFIA. According to CRM, and upon receiving approval, the company has the capacity to begin production of infant formula for the domestic market immediately.

• We stand by parents who are having difficulties finding the products they need at a reasonable price.
• Infant formula consumed in Canada is primarily imported from well-established suppliers.
• The Canadian supply of regular formula is stabilizing.
• We are doing everything we can to mitigate the situation and ensure that Canada has a safe, healthy, and diversified supply of infant formula.