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Sister-and-brother Penn grads open ByHeart baby formula plant in Reading, feeding acute U.S. shortage

Philadelphia Inquirer logo Philadelphia Inquirer 7/7/2022 Erin Arvedlund, Bob Fernandez, The Philadelphia Inquirer

In a converted manufacturing plant in Reading, two University of Pennsylvania graduates and siblings opened America’s newest baby formula factory.

The timing for ByHeart — which was launched in March — was near perfect: A severe baby formula shortage has gripped the nation due to recalls and a Michigan formula plant shutdown earlier this year.

“We are disrupting a category that has not been disrupted in decades,” Mia Funt, 39, cofounder and president, said in an interview with The Inquirer last week. Her brother and cofounder Ron Belldegrun, 36, is chief executive officer.

Four companies control 90% of the U.S. market for infant formula: Abbott, Gerber, Mead Johnson, and Perrigo Nutritionals. Perrigo produces store-brand infant formulas for major stores including Walmart, Target, Kroger, CVS, Walgreens, and Sam’s Club.

ByHeart sold its FDA-approved formula to customers in all 50 states within a week of launch and they are planning on expanding the plant, Funt and Belldegrun said.

It’s a rare new entrant in a highly regulated infant food business that’s controlled by a few big companies.

ByHeart’s founders say they are only the fourth vertically integrated infant formula brand in the United States with end-to-end oversight of production, a stable supply chain, and research and development. ByHeart processes raw, whole milk from dairy farms, turns it into powder formula using a patented blend of the two proteins in breast milk, alpha-lactalbumin and lactoferrin, as well as broken down proteins, and gets the closest to breast milk in the market, the founders said.

Farm to formula

In 2019, ByHeart acquired and updated the manufacturing facility in Reading rather than using a contract manufacturer. ByHeart said the plant cost $40 million, including preventive food safety measures, to convert the plant from toddler food production to infant formula. The company has raised a total of $190 million.

Investors include D1 Capital Partners, OCV, Polaris Partners, Bellco Capital, Two River and Red Sea Ventures and AF Ventures.

In addition, ByHeart was awarded a $1.75 million Redevelopment Assistance Capital Program (RACP) grant, part of $10 million in total that Pennsylvania invested in ByHeart’s Reading facility.

“In addition to supporting good health from birth, this investment in ByHeart will create good jobs, economic impact, and support for agriculture in the commonwealth and, indeed, the entire country currently suffering from shortages in this supply ― it’s an all-around win,” Gov. Tom Wolf said in April, when the plant held a ribbon-cutting ceremony.

“This cutting-edge ByHeart facility is exactly the type of project I’ve wanted to see happen here in Berks County,” said State Sen. Judy Schwank (D., Berks). “This new facility will make an immediate impact on our local economy and provide a boost to Pennsylvania’s dairy industry.”

Formula shortage continues

ByHeart hopes to relieve an acute shortage of infant formula nationwide: According to data analyzed by Axios, 29% of baby formula inventory was out of stock nationally the week of March 13, up from 18% the start of 2022.

America’s shortage is so acute that importers as far away as Australia were quickly approved to send tins of powder here for sale. On Tuesday, a UPS jet with a planeload of Australian formula — the equivalent of two million baby bottles — landed at Philadelphia International Airport to be distributed regionally and nationally.

Federal agencies such as the FDA are taking steps to improve the supply of infant and specialty formula products in the U.S., but shelves remain partly or largely bare in many stores.

The shortage continues, even as Gerber increased the amount of its infant formula available to consumers by about 50% in March and April; Mead Johnson is supplying 30% more product as of May, the FDA said.

ByHeart’s infant formula is available only online at byheart.com, priced at $39 ($1.62 an ounce) for a 680 gram can (roughly 46 four-ounce feeds).

‘Most exciting era in breast milk research’

Funt graduated from the University of Pennsylvania in 2005 and Belldegrun graduated in 2008. Funt worked in the tech industry, while Belldegrun hails from the food nutrition industry as an investor.

The sister-brother duo founded the company in 2016. They said it took five to six years to research formulations, recruit staff, conduct a clinical trial, obtain government approvals, and open the plant.

Belldegrun said the siblings’ “desire to start this came from wanting to truly innovate. Right now is the most exciting era in breast milk research; there’s never been a better time to make formula closer to breast milk.”

But the industry hasn’t kept up with advances, Belldegrun said. Meanwhile, the cofounders had children of their own, injecting their mission with even more personal urgency.

“We spent two years auditing infant formula plants around the world, and realized we had to build it ourselves,” Funt said.

©2022 The Philadelphia Inquirer. Visit inquirer.com. Distributed by Tribune Content Agency, LLC.

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