Question Period Note: INFANT FORMULA SITUATION IN CANADA

Q1 – When will Canada Royal Milk have the capacity to manufacture infant formula for the domestic and export markets? Q2 – Why has the price of infant formula increased in the last two years?

R.1 - Canada Royal Milk’s (CRM) licence was amended by the Canadian Food Inspection Agency (CFIA) on March 20th, 2024, to permit domestic production of infant formula. This makes CRM the only domestic manufacturer of infant formula in Canada.  

On July 4, 2024, CRM launched its infant formula for the domestic market, made from Canadian milk at their Kingston, Ontario plant. R.2 - Prices may vary due to a variety of factors, including supply chain disruptions, changes in consumer demand, inflation, labour, transport, and cost of inputs.

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

Having a new player in the infant formula scene should help stabilize supplies and prices in Canada.

CRM has the capacity to satisfy the Canadian market.

Until very recently, there was no domestic production of milk-based infant formula in Canada. Rather, all infant formulas approved for sale in Canada were manufactured in other countries, with a majority of products (over 90%) imported from the United States (U.S.). However, as of July 4, 2024, Canada Royal Milk (CRM) launched its infant formula (Niuriss) for the domestic market. This product is made from Canadian milk at their Kingston, Ontario plant. The product is currently only available for online purchase, but the company expects it to be available for retail distribution later this year. The Canadian plant has sufficient capacity to serve the whole Canadian market.

A shortage of infant formula in the U.S. and Canada was triggered by the February 2022 closure of a large infant formula manufacturing plant by Abbott Laboratories in Michigan. The supply has now stabilized, although occasional supply disruptions may occur for some products.

In terms of imports, in 2023, Canada imported 24,551 tonnes of dairy-based infant formula, marking a 2.42% increase from the 23,972 tonnes imported in 2022. The average retail price (scanner data) of infant formula for a 900g standardized format was $44.98 in June 2024, compared to $44.08 in the previous month and $38.70 in June 2023. 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). In June 2024, the CPI for infant formula was up 4.3% compared to a year ago, while CPI for food purchased from stores increased 2.1% over the same period.

In addition, Canada also maintains certain export restrictions on certain infant formulas as per Canada’s obligations under the Canada-United States Mexico Agreement (i.e., export thresholds), where Canada is required to monitor its global exports of specific dairy products and charge an export duty when the quantity exported exceeds certain threshold amounts. In the last dairy year ending in July 2024, the export threshold was set at 41,457,349 kg; however, there were no exports for the year.  

Government of Canada's Initiatives to Diversify Infant Formula Supply

To alleviate the shortage of infant formula, Health Canada published an interim policy in 2022 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 31, 2025. More than 100 products are currently eligible for temporary importation under this policy, and the list is updated regularly. Products eligible for temporary importation include infant formula available to consumers in pharmacies and retail stores as well as products reserved for medical use.

Health Canada is now developing longer-term solutions to enable a diverse and resilient infant formula market for Canadians. This includes:

The publication in December 2023 of a transition strategy to facilitate the continued sale of products listed on the interim policy beyond December 2025 while Health Canada’s pre-market assessment of these products is underway;

The publication of a comprehensive regulatory modernization proposal for infant formula and other foods for a special dietary purpose, and;

Further to new ministerial exemption authorities introduced this past June as part of the 2024 Budget Implementation Act (Bill C-69), the 2022 interim policy was replaced with a ministerial exemption order to enable the exceptional importation of infant formula and other foods for a special dietary purpose in the event of a shortage or risk of a shortage.

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 order to supply the domestic market, submissions to the Canadian Food Inspection Agency and Health Canada were required.

In April 2023, the CFIA amended CRM’s licence to add the activity of manufacturing infant formula for inter-provincial sale. The company’s readiness to produce safe products in compliance with regulatory requirements was also assessed.

In 2023, Health Canada completed a mandatory review of Niuriss and the Kingston manufacturing facility submissions, which were deemed satisfactory.

CRM’s licence was amended by CFIA in March 2024 and the company is now licensed to produce infant formula for the domestic market.

On July 4, 2024, CRM launched their domestic infant formula, Niuriss, for online sales. Niuriss is sold for $41.99 for a 700-gram format for babies up to 12 months of age.

CRM also plans to export its infant formula products to the U.S. and China.

CRM has submitted their application to the U.S. Food and Drugs Administration. They are not expecting a response until the fall.

To export to China, CRM will need to be approved by China’s State Administration of Market Regulation (SAMR) – they are currently waiting for SAMR to schedule an inspection of their facility in Kingston.

We continue our efforts to ensure that Canadians have access to a safe, healthy, and reliable supply of infant formula.

Infant formula consumed in Canada is mainly imported from well-established suppliers

Canada Royal Milk launched an infant formula for the domestic market in early July 2024. This is fantastic news for Canadian families.

Canada Royal Milk’s production will further support the strength and diversity of the Canadian market.