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MINDING YOUR
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| VIRGINIA'S NEW CASH COW By Catherine Leitch |
Gordonsville-based PBM Products is a newborn company with a
simple formula for success -- selling baby food on the cheap. Low-cost infant formula
is an untapped retail market, explains PBM Products CEO Paul B. Manning, who previously
owned Able Laboratories, a Freehold, N.J.-based pharmaceuticals manufacturer. |
 Artwork by Michael Goodman |
Baby formula is a $3 billion market dominated by
two national brands: Similac, manufactured by Ross Laboratories, and Enfamil, manufactured
by Meade-Johnson Nutritionals. But from the bucolic pastures of Gordonsville, PBM Products
is challenging them head-to-head with Babymil and Babysoy. Infant formulas are all
nutritionally the same, thanks to strict regulations from the Food and Drug
Administration, so price drives the market. And Manning is convinced that he can turn a
profit by undercutting his big national competitors. |
| Babymil and Babysoy are produced by Radnor, Pa.-based Wyeth Nutritionals
Inc., a division of American Home Products. Two years ago Manning learned that Wyeth
Nutritionals had discontinued its production of baby formula. Seeing an opportunity, he
contacted Wyeth and suggested his deep-discount strategy. Wyeth liked the idea, and
Manning agreed to handle all the sales, accounting and marketing. PBM keeps its overhead low, which is one reason why Manning chose to base his company in Gordonsville. The result is a less expensive product. A 16-ounce can of Babymil costs about $8, compared with $10.70 for the same size can of Enfamil, Manning says. Parents, however, aren't the only ones cashing in on the lower prices. The margins on Babymil and Babysoy are close to 20 percent, Manning says. Enfamil and Similac sales provide stores with little or no profit because retailers are forced to sell close to or below wholesale, he claims. "The situation is a winning one. [The stores] make money while they save customers money." It's a combination that seems to be working for PBM. Manning estimates that the company will generate roughly $30 million in sales in 1999. That's only 1 percent of the overall market, but newborn companies have to crawl before they walk.
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