Founded in 2016, ByHeart broke into the US infant-formula market at the height of the supply crisis that rocked the sector in 2022
The New York company became the fifth US-based supplier of infant formula and how has three plants in a network that manufactures for customers across the country.
Just Food sat down with ByHeart co-founder and president Mia Funt to discuss the company’s distribution plans – recently boosted by contract wins at Walmart, Wegmans and Whole Foods Market – and more than two years on from the shortage of formula in the US – the state of the overall supply chain in the country.
Mia Funt (MF): We launched essentially into the infant-formula shortage in 2022 [which] was the biggest food security crisis we’ve had in a very long time. At one point, we [the industry] were at a 70% out-of-stock level in this country. We – for a couple of reasons but really because we saw how fragile the supply chain in this country truly is – decided to go heads down and acquire and build up two additional facilities so that we could fortify our own supply chain and also the greater US supply chain.
We remain concerned about the state of the formula industry. Since the shortage, we’re the only manufacturer who has brought on two additional manufacturing facilities into the category. I mean, look at the port strike. It was a three-day port strike and again we saw real shortages at-shelf.
Dean Best (DB): Did you have to step up your product launch timetable, or was it just a complete coincidence of timing, that you entered the market just as the breakdown in supplies occurred?
MF: We had been working for five years to get that FDA registration, to do the nationwide clinical trials, build the supply chain, and we had just gotten that FDA registration right before the shortage. We’re grateful that we had reached that point and we could actually launch as only one of five manufacturers at that moment because we had a big job to be done.
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By GlobalDataWe were the first new manufacturer in 15 years. There hadn’t been a new manufacturer in that long. Everyone felt a real sense of purpose to step up in that moment and we were really happy that we could help.
For us, from day one, we understood that we had to have control of our supply chain. Initially, that was about quality. Then we really understood that it also is the only way to ensure reliability of supply.
DB: How resilient do you think the US infant-formula supply chain is?
MF: We hope that our work can create somewhat of a blueprint for others to invest in manufacturing, invest in clinical trials that enable them to innovate for babies. What’s more important than innovating for babies’ health?
Unfortunately, today, there still isn’t a clear blueprint and there also isn’t enough financial support to help companies invest in manufacturing and help fortify the supply chain. We worked with Congressman Chrissy Houlahan of Pennsylvania, Congressman Nunn of Iowa on a bipartisan bill called the Infant Tax Credit Act. That was one good step forward in creating incentives and financial support for manufacturers to invest in manufacturing. We think that’s really critical.
DB: How else could government support the US infant-formula industry?
MF: Well, I think creating incentives and financial support is really important, really creating a blueprint where it’s easier to understand, like, what are the steps? It’s still very complex. Infant formula is the most highly-regulated food in the world. In some ways, it’s a good thing that it is complex because we need to ensure that the companies are committing to that path and are all-in. We support all the necessary steps to ensure highest quality and regulations because we’re serving our babies but I think the industry can come together to create that blueprint, support not just the steps you need to take for building manufacturing, but also on clinical trials, on the FDA process.
Competition is a good thing because competition means that companies have to continue to innovate to stay ahead.
DB: The US Federal Trade Commission has called on national regulators to re-evaluate policies to boost competition in the infant-formula industry. It argues the contracts Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) could create barriers to entry. Do you think those contracts should be more open?
MF: Accessibility is so critical. This isn’t a nice-to-have category. When we first launched, access was at the heart of the company but we were not yet able to become part of those larger government programmes, so we started in our own way by creating what we call Open Hearted. One per cent of revenue goes towards donating formula to families in need and we work with organisations across the country on not only donating formula but also providing resources and education because access is incredibly important.
We follow government programmes with a lot of interest. We can now be part of SNAP [Supplemental Nutrition Assistance Program] through our retailers. Any ability to continue to increase access and to make access simpler, easier and greater, we support. We are really interested in how new entrants to the market can be part of programmes like that because the willingness is there. I think this programme has mostly involved and been structured around those big players and my hope is that we can find a way to expand the programme for additional participants.
DB: Playing devil’s advocate, do you think there are enough suppliers in the US infant-formula market? ByHeart has stepped in and created a broad manufacturing supply chain. You’re an entrepreneur, too, so that’s good for the business. Would you support more players coming into the category? That could help accessibility and make the industry more resilient but also you’ll be facing more competition.
MF: It’s the exact question that everyone needs to be asking and the answer is no. There are not enough manufacturers of infant formula in this country. We became number five. We need more. And so, whether it’s new bills, whether it’s blueprints coming together, sharing insights, we absolutely need more manufacturers.
We think competition is a good thing because competition means that companies have to continue to innovate to stay ahead and that means that parents and babies get better options. The problem with this industry is because three big companies have dominated for so long with no competition, there isn’t a lot of incentive to innovate.
DB: With the new listings ByHeart has won, your products are now available “where more than 70% of US infant formula is sold”. What’s next?
MF: Continuing to invest in our partnerships with these incredibly valuable retailers, working with them on how we can continue to expand, on ways that we can continue to support our customers. The beauty of our truly omnichannel structure is that we have a direct-to-consumer business. We are talking to customers directly every single day. We are listening to them; we understand their needs and we can take those insights and partner with our retailers on ways to continue to show up for parents in better and better ways. So, it’s continuing our distribution, also continuing to innovate.
DB: Have you got spare capacity to take that to distribution up to 80% or 90%? Or would you need to buy a new plant or extend any of the existing factories?
MF: The whole reason we have created this supply chain with three domestic manufacturing plants is that we can continue to expand and we have plenty of capacity. We tripled capacity when we brought on those additional manufacturing sites and we have a lot of runway to continue to grow.
DB: What are ByHeart’s company net sales due to be in 2024?
MF: We haven’t disclosed our revenue and sales figures to date.
DB: Is the business profitable at a net income level yet?
MF: Again, we haven’t shared our economics yet.
DB: Does ByHeart have any ambitions to launch into markets outside the US?
MF: We started with the US because it has the highest regulatory barrier and the most involved process. From here, there is a lot of optionality. There are a lot of other countries who also have had two to three companies dominate the market, who haven’t had as much innovation as they should. We see other countries with a similar need for better innovation to support families.
Now that we have FDA registration and also a network of regulatory experts across the world, we are very much in a position to expand right now. Our focus is on the US market. We’re early into launch. We believe in focus. We see a lot of companies who are getting distracted with other extensions and categories. This is such a critically important category. All we want to do is focus on infant formula so that we can finally change the way parents feel about feeding.
Today, the category, we need to fix it on so many levels. We have a lot of work to do in the US, in this category, but, from there, there’s a lot of expansion opportunity, absolutely.
DB: How do you promote ByHeart’s products to seek to win over parents?
MF: First off, I’ll say we want to support parents so that they feel empowered and informed no matter what feeding decision they make. Our goal is to inform them with clinical data, with transparency around our ingredients and our manufacturing.
We don’t believe in empty marketing claims. We back up what we say with the evidence. We ran the largest clinical trial by any new formula brand in 25 years. It yielded breakthrough results that were published in a medical journal and we want parents and physicians to see that data to help inform their decision.
This is the era of the confident parent. They are demanding more.
The way we approach parents is by sharing our data and sharing also not just the outcomes, which are critical, but also the ingredients in your formula and how this formula gets closer to breast milk than ever before.
The industry has to do more of that: educating customers, giving them the data. Not all formula companies have to do a new clinical trial. If we went through the one contract manufacturer, we wouldn’t have to have done a new clinical trial but we were committed to innovation and to empowering parents with evidence, which is why we chose the path we did.
DB: How do you get that data in front of parents? Is it social media? Is it getting your products into clinics and working with physicians?
MF: We are meeting parents everywhere they are in real life, through community engagements all the way through to connected TV. On physicians, because we’re the only challenger brand with breakthrough data from a clinical trial, physicians are engaging with us. The physician partnership is really important to us and because we have that clinical data, it’s something that we’ve been able to uniquely engage with.
DB: To what extent are parents scrutinising the infant formula they feed their babies? Is it still only a minority of parents that do that?
MF: From our conversations with our customers, I can tell you, this is the era of the confident parent. They are demanding more and they are the ones who are saying ‘Yes, I want clean but I also want clinically proven benefits. I want it all. This is my baby. This is their sole-source nutrition.’ We’re seeing them leaning in, doing their research but also going to their friends and their family and influencers and physicians. Maybe it’s not yet mass but we are incredibly inspired by that confident parent who’s demanding more.
MF: I also think that we’re in the era of health and nutrition. Adults care more about what’s in their food, how it impacts their health. Until now, I don’t think that was really reaching infant food. We’re encouraged to see that parents are now leaning in on infant formula, understanding its critical importance for babies’ health and we’re seeing them demanding more.
