Reckitt braces for sales slump after tornado hits infant formula warehouse

Reckitt Benckiser Group, owner of infant formula maker Mead Johnson Nutrition, has said that a third-party warehouse in Mount Vernon, Indiana, has been rendered inoperable after a tornado struck it on July 9.

Reckitt reported the site is ‘important’ for the Mead Johnson Nutrition business and contains a mix of raw and finished product. When approached by DairyReporter about the extent of the damage, a company representative said the company has only had partial access to the building and are still assessing the situation.

There is also no information on which materials and finished products were inside at the time of the storm and how they may have been affected. Mead Johnson Nutrition produces Enfamil and Nutramigen, the former holding a US market share of around 35% according to Euromonitor. 

Mount Vernon is one of several logistics facilities the company operates throughout the US, in addition to manufacturing plants which are running as normal.

Reckitt did not provide information on how much product is typically stored at the tornado-hit premises. However, Mount Vernon is a key distribution hub for Mead Johnson Nutrition in the US. Mead Johnson also runs a production facility in nearby Evansville, where the company has had a presence for more than a century. Other premises are located in Michigan and Nevada.

A statement obtained by us reads:

“Mead Johnson quickly implemented business continuity plans which has positioned us to meet consumer demand at this time. While some Nutrition SKUs will likely be affected in the short term, we are partnering with customers and suppliers on expedited recovery efforts to minimize disruption by leveraging our global supply chain and managing inventory at our other US warehouses.”

A short-term issue

Mead Johnson Nutrition's parent company has played down the likely impact on future sales, despite not yet knowing the full extent of the damage to supplies. The company said it had gained partial access to the facility on Saturday, July 13 and has diverted all inbound deliveries to other hubs around the country.

“Whilst Nutrition sales will likely be affected in the short term, we are working closely with all our stakeholders including customers and suppliers, to minimise disruption, by leveraging our global supply chain and managing inventory at our other North American Nutrition warehouses and held by our retail partners,” the company said in a statement.

“Additionally, Reckitt holds comprehensive property damage and business interruption insurance, which we currently expect will largely offset the impact on earnings.”

The company is set to update investors on the situation during its half-year results announcement on July 24.

An industry vulnerable to supply shocks

The situation is going to be closely followed given Mead Johnson Nutrition’s significant market share footprint in the US (estimated at around 40%, second only to Abbott Nutrition).

The US infant formula market is vulnerable to distribution and supply shocks because several large players dominate the space. In 2022, an Abbott recall of Similac, Alimentum and EleCare formulas over Cronobacter sakazakii contamination and the subsequent temporary closure of the manufacturer’s affected production plant compounded supply chain shortages caused by the Covid-19 pandemic, leading to stockpiling and empty shelves.

According to CDC data​, more than half of infants in the US depend on infant formula.