The Infant Formula Market: Consequences of a Change in the WIC Contract Brand
AbstractThe Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) is the major purchaser of infant formula in the United States. To reduce cost to the WIC program, each State awards a sole-source contract to a formula manufacturer to provide its product to WIC participants in the State. As part of the contract, the WIC State agency receives rebates from the manufacturers. In this study, we use 2004-09 Nielsen scanner-based retail sales data from over 7,000 stores in 30 States to examine the effect of winning a WIC sole-source contract on infant formula manufacturers’ market share in supermarkets. We find that the manufacturer holding the WIC contract brand accounted for the vast majority—84 percent—of all formula sold by the top three manufacturers. The impact of a switch in the manufacturer that holds the WIC contract was considerable. The market share of the manufacturer of the new WIC contract brand increased by an average 74 percentage points after winning the contract. Most of this increase was a direct effect of WIC recipients switching to the new WIC contract brand. However, manufacturers also realized a spillover effect from winning the WIC contract whereby sales of formula purchased outside of the program also increased.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by United States Department of Agriculture, Economic Research Service in its series Economic Research Report with number 118020.
Date of creation: Aug 2011
Date of revision:
Contact details of provider:
Postal: 1400 Independence Ave.,SW, Mail Stop 1800, Washington, DC 20250-1800
Web page: http://www.ers.usda.gov/
More information through EDIRC
WIC; Special Supplemental Nutrition Program for Women; Infants; and Children; infant formula; rebate; sole-source contracts; contract brand; spillover effect; ERS; USDA; Industrial Organization; Institutional and Behavioral Economics; Marketing;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-19 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oliveira, Victor & Davis, David E., 2006.
"Recent Trends and Economic Issues in the WIC Infant Formula Rebate Program,"
Economic Research Report
7228, United States Department of Agriculture, Economic Research Service.
- Oliveira, Victor & Davis, David E., 2006. "Recent Trends and Economic Issues in the WIC Infant Formula Rebate Program," MPRA Paper 6657, University Library of Munich, Germany.
- Oliveira, Victor & Frazao, Elizabeth & Smallwood, David M., 2010. "Rising Infant Formula Costs to the WIC Program: Recent Trends in Rebates and Wholesale Prices," Economic Research Report 59384, United States Department of Agriculture, Economic Research Service.
- Oliveira, Victor & Prell, Mark A. & Smallwood, David M. & Frazao, Elizabeth, 2004. "Wic And The Retail Price Of Infant Formula," Food Assistance and Nutrition Research Reports 33873, United States Department of Agriculture, Economic Research Service.
- Rui Huang & Jeffrey Perloff, 2014.
"WIC Contract Spillover Effects,"
Review of Industrial Organization,
Springer, vol. 44(1), pages 49-71, February.
- Huang, Rui & Perloff, Jeffrey M., 2007. "WIC Contract Spillover Effects," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9773, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Huang, Rui & Perloff, Jeffrey M., 2009. "WIC Contract Spillover Effects," Research Reports 153344, University of Connecticut, Food Marketing Policy Center.
- Rui Huang & Jeffrey M. Perloff, 2009. "WIC Contract Spillover Effects," Food Marketing Policy Center Research Reports 118, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
- Davis, David E., 2011.
"Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions,"
2012 Annual Meeting, August 12-14, 2012, Seattle, Washington
123863, Agricultural and Applied Economics Association.
- Davis, David E., 2011. "Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions," SDSU Working Papers in Progress 12011, South Dakota State University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.