Priceonomics

A little over four years ago, Glenn Snow was a real-estate broker in Reno, NV. Today he runs what is possibly the largest online marketplace for human milk in the United States.

Snow’s website, Only The Breast, Inc. (OTB), has been called the “Craigslist of breast milk.” That description may strike the uninitiated as intriguing, perplexing, or perhaps simply creepy. But to Snow it’s a point of pride. It’s a sign people are paying attention to his business – a startup that’s not yet paying all the bills, but is big enough to have become a full-time job and to have landed a decent amount of airtime on CNN

OTB began with an unexpected insight. Shortly after giving birth, Snow’s wife Chelly found herself with more milk on hand than she needed. Out of curiosity, she started surfing the web to see if anyone would be interested in buying her surplus. The Snows discovered a large and growing grey market for breast milk. But trading with total strangers felt – even to someone looking to sell in the first place – a little unsavory.

“People were selling milk on Craigslist and on eBay,” says Snow. “There were moms putting themselves out there, with all their contact information, and no way to take it back.”

Perhaps most people would have stopped there. Maybe they’d have written off the extra milk as a small loss. These things happen, after all. But Glenn Snow decided the most rational and obvious solution was to build a website for his wife and for women like her. A site for buying and selling breast milk. A site only for buying and selling breast milk. 

He believed that a classifieds market, designed specifically for nursing mothers, would feel safer and more inviting than the sketchy alternatives – and that accordingly, it would fill a serious need. Maybe someday it would become a big opportunity, but for the time being, it would connect moms with milk to spare with moms in need of a few extra ounces. And that felt like a pretty worthwhile mission.

OTB has since evolved into a membership-based marketplace, in which sellers – primarily nursing mothers – ship their milk across the US, Canada, and UK, commanding an average price of $1 to $2.50 per ounce. Their buyers, who are also required to register, are mostly mothers biologically or financially unable to breastfeed.

Snow considers the milk trade a natural solution to some of the difficulties of motherhood in the modern world. Today’s moms juggle work with childcare, whether due to career ambitions or economic necessity. And the price of milk – a price Snow believes is artificially inflated by nonmarket factors – is becoming a serious burden. Mothers, says Snow, shouldn’t have to choose between the benefits of natural milk and the prospect of financial jeopardy.

Snow speaks about the “stranglehold” that current players in the milk market have over the price of the precious substance. He speaks about “babies in dire need” and about “life or death” situations. Yet, for the most part, he speaks as if presuming his listener’s familiarity with the subject, the way a Los Angeleno might bemoan the lack of public transportation, a Chicagoan might gripe about the weather, or a New Yorker might tell you that the rent is too damn high.

The notion that the price of breast milk is too high, or even that breast milk has a price, came as news to this author. If Snow is correct, however, these are real concerns for thousands of mothers – and the humble foundations of what could one day be a multi-billion-dollar industry.

The Market Today

Human milk isn’t exactly traded on the major mercantile exchanges. But as commodities go, it does look pricey. According to the San Francisco Chronicle, an ounce of breast milk can cost upwards of $3.00 to $5.00. On a per-ounce basis, that’s about 10,900% more expensive than whole milk at the supermarket and 2,627% more expensive than baby formula.

We might expect this sort of price premium on the natural breast milk. After all, it can’t be pumped at scale. Nor is it readily fungible: consistency, quality, and purity depend on hundreds of factors involved in a mother’s diet and lifestyle (even at the individual level, lactation volume changes constantly). Keeping a large quantity of universally suitable milk available throughout the year is a no small feat. Since production and collection are erratic, demand is continuous, and shelf life is limited, the logistics can be extremely challenging.

To solve this problem, ‘milk banks’ first emerged in the early 1900s. These organizations act as hubs and routing points for the national milk supply. The Human Milk Banking Association of North America (HMBANA), a trade group, lists 13 member banks in the US and Canada. These banks operate on a nonprofit basis, taking donations of milk and selling them – with a prescription – to mothers of babies in need. The donors receive no compensation for their samples, though the banks charge a per-ounce fee to buyers to cover the costs of their operations.

The banks’ biggest customers have been hospitals, neonatal intensive care units (NICUs), and mothers who are personally or medically unable to breastfeed. In recent years, however, demand from individual mothers has skyrocketed in light of an ever-increasing body of research touting the superiority of natural milk to formula. The purported benefits run the gamut from enhanced immune and nervous system development to protection from certain types of cancer, probiotics, and the prevention of childhood obesity.

The price of milk at local banks has been climbing with demand. ABC News estimates that a month’s supply from a bank can cost a mother anywhere from $300 to $1,200 (and that’s assuming she qualifies for a prescription in the first place). The price can move substantially higher in more upscale or remote locations, with some mothers paying close to $100 a day.

The Chronicle calculated that HMBANA banks prescribed close to 745,000 ounces of milk to mothers of premature or ill newborns in 2005. These days, Glenn Snow believes HMBANA’s volume is about 2,400,000 ounces per year – but that the total market need exceeds this figure by at least double. (“Last year, NICUs alone needed 9 million ounces,” Snow claims).

If accurate, these numbers would indicate a massive milk shortage. Such low supply, relative to exploding demand, would seem to warrant the high price of the product. But Snow believes “at least 10 to 20 million ounces” of latent supply is on hand each year. The problem, he says, is that all those extra ounces simply don’t come to market in the first place.

Snow believes more mothers would donate if they were paid to do so. Because pumping and donating extra milk takes time and effort, it’s a significant economic burden on individual donors. Simply giving it away is prohibitively unaffordable to a lot of would-be donors.

By relying on an unpaid-donation model, Snow says banks inadvertently capture only the “top 10% of moms” who can afford to nurse, pump extra milk, and give that supply away for free. Everyone else – working-class mothers, career-oriented mothers, and others without the luxury of time – would be more likely to sell their milk than to donate it. If they were able to do so, many would, and supply would surge to meet demand.

Hence, Snow started Only The Breast as a free-market approach to the supply problem: a place where mothers could buy and sell milk directly to one another.

“We are able to see the market for what it is,” Snow says. “Milk banks claim there’s a shortage, but there’s only a shortage because they refuse to compensate the donors.”

The Lean-Milk Startup

Drawing upon an SEO skill set he picked up in the real estate business, Snow started growing the traffic to the site. He claims to have spent nothing on advertising. His sole marketing tactic was getting the site to list in the top of search-engine results pages for such terms as “breast milk,” “buying breast milk,” and “donate breast milk” – a status OTB has maintained as of this writing.

Today, Snow says the average OTB member “has over 800 extra ounces [of milk] to share,” and that many more are starting to pack their home freezers with the hot commodity.

OTB officially claims to have 20,000 members (buyers and sellers) and to be growing at an average rate of 200 members a week. Snow projects that “over 6,000,000 ounces” of milk will have been listed on OTB by the end of 2013. (The author has no precise way of verifying these statements, though certainly thousands of ads are viewable on the site on any given week).

Buyers and Sellers

A glance through the OTB’s classifieds – reminiscent of Craigslist in the simplicity of their layout – reveals a motley assortment of sections. Top-level categories include the chronological (“0-2 Months, “2-6 Months”), the priced-to-move (“Discount $1.00 or less”), the idiosyncratically descriptive (“Fat Babies”), and the no-questions-asked (“Willing to Sell to Men,” in which “pleasure” consumption is a frequent theme). 

The top page of Only The Breast’s classifieds section, with listings current as of Sunday, September 8, 2013.

Many of OTB’s sellers have started marketing their milk. Terms describing the mother’s diet (“organic,” “vegan,” “healthy”) and indications of her baby’s health and appearance (“chubby,” “happy,” “active”) seem to be popular methods of product differentiation.

“Can be used for children or pleasure,” reads this listing from a member calling herself “Iowa Milk Mama.”

“Milk Bank Certified” is another popular term, suggesting (though not guaranteeing) that the seller has passed the rigorous health and safety standards of the HMBANA banks. While there is no explicit credentialing system for HMBANA approval, most donors making this claim seem to list their real names and identities. Background checks are theoretically feasible, though the author can find no evidence that running checks is a common practice among buyers.

OTB does allow buyers to rate sellers, and vice versa. (At a glance, however, only a handful of seller reviews appeared to be live at the time of this writing). Snow also suggests that moms who provide evidence of clean bills of health are more likely to get sales. As an added measure, OTB offers information about, and outbound links to, getting blood tests to ensure that donated milk is free of drugs, disease, or other contaminants.

A Business In Search of a Model

Where OTB goes from here, or how it will monetize, is difficult to speculate. Snow, however, seems unconcerned – and perhaps intentionally so. As of this writing, he refuses to take a cut of transactions from the site. Furthermore, he doesn’t charge for classifieds. His only revenue stream comes from charging $5 to sellers who wish to sponsor their ads, thereby boosting them to the front page.

This strategy isn’t exactly printing money.

“I’m making about $200 a month,” Snow says. “Just enough to cover web hosting.”

Snow says he borrowed a page from the Craigslist playbook, deliberately avoiding transaction cuts and ad revenue to spur growth and scale. But he says the peer-to-peer milk market is simply his first move in a much longer game.

Snow intends to transition OTB, eventually, to enterprise sales: distributing milk, or its chemical components, to science and industry. From a superficial perspective, laboratories, biotech firms, and hospitals look like attractive clients. They have big budgets, and they require product in greater supply than the banks can offer them. Snow believes he can bring them the supply at the scale they need more readily than any of the banks in the market.

But supply is only half the battle. For one thing, the unregulated sale of breast milk is still a grey market at best. Health and safety concerns about unscreened milk continue to mount, and the risk of new regulation seems ever present. Second, it’s unclear how much of OTB’s crowdsourced milk would meet the safety and quality standards required by industries so heavily dependent on such. And OTB will almost certainly take on a host of newfound legal liabilities in becoming a direct seller of milk rather than a hands-off marketplace. Snow admits he’ll need to become something more like what he’s been good at outcompeting: a bank.

Meanwhile, competition in the enterprise market is heating up. Prolacta Bioscience, a privately held, for-profit company, has invested “over $30 million in research, clinical studies, and facilities to develop and test…human milk derived products.” The firm distributes a fortified-milk product to neonatal intensive care units. Additionally, it supplies infant formula derived from breast milk to hospitals, milk banks, and charitable organizations. While not a direct competitor to Snow in the consumer space, Prolacta has serious firepower in the business to business game: established distribution networks, a big budget, and partnerships with such noteworthy nonprofits as the Susan G. Komen Foundation and the Make-A-Wish Foundation.

Conclusion

While the road ahead looks tough, Snow seems unfazed. He believes his approach is inherently more scalable than his competitors’ and that the demand for milk will necessitate that scale.

“The end result of my approach,” Snow says, “is a win-win. The mothers win and are better able to provide for their babies’ needs. Their babies win because they get to breastfeed longer, and their mothers get to stay at home longer before returning to the workplace. Finally, thousands of sick and needy babies win by gaining access to milk that was previously inaccessible and in very limited supply.”

Whether Snow succeeds in the long run, he seems to have struck the surface of something very real. The rising demand for natural breast milk is unlikely to slow down. Milk banks seem, at least for now, incapable of keeping up. And there appears to be an opening in the market.

Who ultimately fills that niche is an open question. Competitive pressures, regulatory burdens, health concerns, and big-pharma dollars could very well render OTB a strange footnote in the history of the human milk business. Then again, it’s tough to count out a startup that’s found some traction in such an unlikely place.

Regardless, the online market for human milk emerged before Only The Breast did. It seems likely to persist, in one form or another, whatever its legality or its profit margins. There’s a lot of milk going around, and it’ll be tough to put it all back in the bottle.

This post was written by contributor Jon Nathanson. Follow him on Twitter here. To get occasional notifications when we write blog posts, sign up for our email list.


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