Nestle in talks to buy Pfizer's baby food business
Reuters reports Nestle is closing in on a deal to buy Pfizer's infant nutrition business for up to $10 billion. That's a lot of baby formula.
Bob Moon: There's word today the world's biggest food group wants to expand its grip on formula milk for babies. Citing inside sources, Reuters reports Nestle is closing in on a deal to buy Pfizer's infant nutrition business for up to $10 billion. That's a lot of baby formula.
On the line to discuss the implications is S. Prakash Sethi, author of the book "Nestle and the Infant Formula Controversy." Good morning, sir.
S. Prakash Sethi: Good morning.
Moon: So what would this mean for Nestle?
Sethi: It means a great deal for Nestle. It's already No. 1 in the marketplace, and if it buys No. 5 in the marketplace, its market power clearly increases. So strictly economically, it makes very good sense for Nestle.
Moon: So you say it makes a lot of economic sense for Nestle. What impact might it have on consumers -- prices going up?
Sethi: Not necessarily. It's not a question of prices, but it would increase tremendously their market power. And in that sense, yes, they would have more pricing power. My concern is in terms of public policy and how it affects the poor people in the developing countries where it's the principal growth area -- both for Pfizer and for Nestle. The important issue is now Nestle would be selling Pfizer, which is a pharmaceutical-oriented brand and essentially pushing it as a grocery store product.
Moon: Is that why the infant food industry is so lucrative, is these developing markets?
Sethi: Absolutely, because the product is being sold as a convenient but perfectly healthy substitute for breast milk. So it does have negative health consequences. And what I would suggest the Justice Department to do is not only force Nestle to give up some market share, but deny it the use of Pfizer product brand names. So essentially, it could buy Pfizer's distribution channels, production facilities -- but not the brand name, because when you are marketing that product in that way, it is also being marketed to people who are very poor, cannot afford it and also manipulates people who can afford it but should not use it.
Moon: Prof. S. Prakash Sethi of Baruch College in New York. Thank you for joining us.
Sethi: My pleasure.