Seanad debates
Wednesday, 24 January 2024
Nithe i dtosach suíonna - Commencement Matters
Consumer Prices
10:30 am
Eileen Flynn (Independent)
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I welcome the Minister of State, Deputy Richmond.
Rebecca Moynihan (Labour)
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I thank the Minister of State for taking this matter, which is impacting worried parents all over the country. In the past decade and particularly since the Covid pandemic, the price of infant formula has shot up. The price for an 800 g can in some of the main supermarkets varies between €15 and €25. A baby may need up to ten cans of formula a month, which ends up costing the equivalent of 18% to 20% of the monthly State maternity benefit or 143% of the monthly child benefit. We have a responsibility to protect new parents from this type of price gouging, which is far above national inflation rates. The consumer price index for baby food increased by 7% in the 12 months up to December 2023, which is well above the national rise across other goods. This is not just happening in Ireland but also in the UK. I have head of cases where the cost of infant formula has increased by between 30% and 50%.
Of the baby formula brands available, there are six that manufacture in Ireland. Generally, however, only Nestlé and Danone are commonplace named brands on supermarket shelves here. The monopolisation of the baby formula market is playing a direct role in profiteering and the exploitation of new parents. We need to protect parents and ensure babies throughout the country have a stable and affordable source of nutrition. Ireland is a net exporter of baby formula and we subsidise its manufacture through Enterprise Ireland. Since 2014, €13.2 million has been paid to six formula companies through Enterprise Ireland. In theory, that should be cutting the cost of production and reducing prices for Irish consumers. Instead, vulnerable babies are at risk of hunger and worried parents are forgoing their own needs in order to feed their child. In some supermarkets, formula is security-tagged because it is among the most shoplifted items. In the UK, the competition regulator is investigating the baby formula market, with a focus on the disproportionate price increases and the lack of generic brand options. I am writing today to the Competition and Consumer Protection Commission, CCPC, to ask it to investigate the situation in the market in Ireland.
There are three actions the Government can take to address this issue.First, we have the ability to employ sections 61 and 62 of the Consumer Protection Act, which allow for the setting of price caps on specific goods to protect new parents and children. I have checked this, and according to European Union law, we can allow supermarket vouchers to be applied to stage one infant formula. Infant formula is currently classed, with alcohol and cigarettes, as a non-essential good, which is not covered by a voucher system. It is stigmatising and helps absolutely nobody to treat formula in this way. The formula system is not specific to what goods people choose, so the marketing of formula does not impact on the WHO code. We should provide formula directly to low-income parents who want to formula feed. The UK has the healthy start scheme, which we do not, to help any parents who require infant formula. Second, we need to treat formula as an essential good and ensure there is a low-cost generic formula option available to all parents. A failure to do this and actually tackle it expressly permits multinational companies that produce in Ireland and that benefit from subsidisation by Irish taxpayers to exploit children and parents. Investigating the market, preventing monopolisation, price capping formula, applying vouchers to it and allowing a low-cost generic option to be provided to parents and children is essential to ensure that all children, regardless of how they are fed, receive essential nutrition.
Eileen Flynn (Independent)
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I welcome our students and their teachers this morning. It is lovely to see young people in our Gallery. I thank them and hope they enjoy the rest of their visit.
Neale Richmond (Dublin Rathdown, Fine Gael)
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I thank Senator Moynihan for raising this vitally important issue. I am through the gap of needing baby formula in our household, but it was not long ago that I absolutely empathised with those parents who are seeing the prices rise and rise. The Senator has raised some key issues that require a direct response, and I will get to that. Before I do, I will talk more generally about grocery prices in the State over the past calendar year. This would have been a particularly big issue around June and July when it dominated the headlines. We saw worrying rates of grocery inflation in the State, way above general inflation, and indeed way above the overall 7% on baby formula cited by the Senator. We are seeing grocery inflation ease down. It is between approximately 2.5% and 3% at the moment. That still means prices are going up, but we got a commitment from supermarkets that they would cut prices on essential goods, which they have done. I am not here to champion the supermarkets. I am not here to champion any particular brand, but we saw cuts in particular in essential goods when it comes to foodstuffs and beyond. We saw cuts from each supermarket in the region of between 700 and 800 items in own brand. Own brand is key, in particular when we talk about this area.
In June last the Competition and Consumer Protection Commission conducted a high-level analysis of the overall grocery sector in Ireland. The CCPC report found that there is no excessive pricing in the sector, which the report sets out is a high-volume, low-margin industry. I would welcome Senator Moynihan's letter to the CCPC. Even though it sits on the other side of the Department to the one I work in, I will contact it directly on foot of this debate saying that I too would support such a look at it.
On infant formula specifically, Article 10 of Commission Delegated Regulation (EU) 2016/127 sets out the requirements for promotional and commercial practices for infant formula. This does not make provision for free or low-priced products, samples, special displays, discount coupons, premiums, special sales, loss leaders, tie-in sales or any other promotional gifts, to promote the use of infant formula. These measures are designed so that the marketing and distribution of infant formula does not interfere with the protection and promotion of breastfeeding. While this is well intentioned, it has the knock-on impact that we have a situation where, as the Senator laid out, a customer has vouchers from a particular supermarket we all know and can spend them on most items bar alcohol and baby formula. I think we all agree it is eminently sensible they cannot spend them on alcohol. However, baby formula is a slightly different one. However, as Senator Moynihan will appreciate, breastfeeding policy falls under the remit of the Minister for Health and national health policy, including the Healthy Ireland framework. This is an area we may need to explore, but that gives the reasons.
I turn to the Senator's direct asks. She makes two contradictory requests. I am not getting into a political debate here. We talk about the use of price caps, the use of section 62(1) and then stating an understanding concerning the potential monopolisation of the infant formula market. I think I remember the Senator's colleague Deputy Ged Nash initially mooted the issue of price caps during the summer. That was withdrawn and it was withdrawn by others because where price caps have been introduced in Croatia and Hungary, we have seen the rate of inflation go up to 50% in the case of Hungary and 20% in Croatia. In Spain, where the socialist Government looked at the potential of introducing price caps with regard to grocery inflation in November 2022, there was a massive backlash because this would have led to a massive impact on smaller and rural shops, and there would have been a lack of goods more generally getting into market. It would reduce supply to singular. That is why I am loath to go down the price cap route for any product, to be frank. I am giving the Senator a straight answer to a straight question in that regard.
I am more than happy to take up the issue of supermarket vouchers with the Department of Health, and I would appreciate her engagement with that. Indeed, Senator Flynn might have some thoughts on it as well. I know she has spoken out on related issues. I think the UK's healthy start initiative sounds excellent. There is no reason why we cannot potentially have something achieved in this jurisdiction. I undertake to raise that with the Minister for Health. I will speak to the Senator's final point when I get the chance to come back in.
Rebecca Moynihan (Labour)
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I thank the Minister of State. I appreciate him outlining it from a consumer protection point of view. I saw a reply from his colleague, the Minister of State, Deputy Naughton, when Deputy O'Reilly asked this question last May because it has been an existing issue. She essentially received an outline on the promotion of breastfeeding, which read to me as saying the Government was not going to do anything because people should be breastfeeding, which certainly does not help any parents. I find those answers really frustrating so I appreciate the Minister of State's engagement. I understand the issue about coupons applying directly to formula, but these are general supermarket vouchers. It should not contradict the WHO code, because it is not applying directly to formula. It is not applying directly to brands, which is marketing, but it is allowing them to be applied across the board. It is more of a marketing tool for supermarkets than for particular brands in themselves. It should not impact that. I had a look into that European Union directive. As far as I understand, that has been repealed, or it has not been replaced. Maybe we can explore around that a little more. This issue was raised in the UK and Danone has already decreased its prices by 7%. The key thing is making available, at the Government level, low-cost, generic formula for all. That does not contradict WHO guidelines, but people who use formula are able to avail of a low-cost, generic option.
Neale Richmond (Dublin Rathdown, Fine Gael)
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We can definitely dig in a bit more on the general use of supermarket vouchers. I could easily have given her the response that just went into the merits of breastfeeding over formula, but apart from the fact that my wife would kill me-----
Rebecca Moynihan (Labour)
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I would kill him too.
Neale Richmond (Dublin Rathdown, Fine Gael)
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-----I do not think that is any use to the discussion we are having. I do not think it realises the lived experience, for want of a better phrase, for many people. I think the issue of low-cost, generic formula may be teased out in parallel to this. The Government is obviously not going to get into the business of producing baby formula. However, the Senator is right that more than €30 million in grant aid support was given to companies that produce baby formula, among other products. These are great companies that employ a lot of people and our exports to China and Mexico are huge in this area for a reason. However, let us see what conditionality can be looked at. When I spoke to the Senator previously about wider grocery prices, the emphasis was making sure that essential goods were available at a lower cost, in particular through own-brand labelling. That might be a solution if we had some form of own-brand labelling in infant formula. That might be able to look at achieving what has been achieved in the UK. I am happy to speak further in due course.