Imagine finding out you've run out of milk immediately after pouring a bowl of cereal. Or maybe realizing you don't have eggs while in the middle of baking a cake. We've all been there, and it's frustrating, to say the least. And this scene has been playing around the globe over the last couple of years for many foods and products. One day it's microchip shortages, and the next, it's baby formula.

Unfortunate as it is, it's one thing for consumers to cope with an empty car lot because of chip shortages. It's another to cope with a hungry infant because store shelves that once contained baby formula are now bare. For those parents and caretakers, their emotions are beyond feeling frustrated. They feel anger and panic, the sort of emotions that they share with their friends and colleagues on social media and forums. The kind of expression that can change the public's sentiment about a company, which in turn can move markets.

This Alternative Data Trends post will examine web data concerning the baby formula shortage. We'll analyze articles, social media, and forum conversations culminating in the U.S. crisis as the news reaches national exposure. We'll also highlight red flags investors could've seen had they monitored the situation with an AI-powered text analysis tool like SESAMm's TextReveal®.

Early warnings: When baby formula supplies began to run dry vs. when it became a national crisis

If we compare absolute and relative volumes—relative being mentions about the topic compared to our entire data lake—the term "formula milk market" yields parallel results. Mentions spike in May when the crisis reaches national coverage (see Figure 1).

However, comparing absolute and relative volumes for the term "formula milk shortage," we find red flags as early as January 2022, four months before the crisis receives national attention (see Figure 2). Relative mentions spike on three occasions before absolute volumes register any significant noise. The fourth instance matches a ripple on the absolute chart.

These articles provide an example of the content published around the times of those rises in mentions:

1. Jan. 12, 2022: "Baby Formula Is Hard to Find. Brands and Stores Are Divided Over Why.," WSJ
2. Feb. 9, 2022: "Baby formula shortage has some families scrambling," WCAX-CBS
3. Mar. 7, 2022: "Baby formula shortage and recalls affecting families," KGUN-ABC
4. Apr. 11, 2022: "A shortage of baby formula is worsening and causing some stores to limit sales," WHYY-PBS

Analyzing the sentiment and polarity of the formula milk market

In short, the e-reputation of the formula milk market has been negative since the beginning of 2022 (see Figure 3). Positive sentiment drops and reflects the opposing negative sentiment almost exactly until May, when the news about the crisis breaks. Likewise, polarity trends downward over the same period.

Note: Polarity represents a company's aggregate of positive and negative sentiment (opinions, reviews), ranging from -1 to 1. A zero score means that there is as much positive as negative sentiment. High e-reputation brands can have polarity scores of more than 0.5.

The web data shows that some articles correlate with sentiment and polarity changes. For instance, in February, AboutLawsuits.com posted, "Similac and Enfamil Baby Formula Shortages Create Infant Feeding Challenges." And in May, HealthDay, a prominent syndicator of health news, posts, "U.S. Baby Formula Shortage Worsens."

Analyzing formula milk brands

In the U.S., four brands produce the bulk of formula milk: Abbott, Mead Johnson, Nestlé, and Perrigo. Abbott and Nestlé hold the largest share of the formula milk market.

When we group these four brands' mentions from January 2021 to June 2022, we can see how their mention volumes compare (Figure 4). For example, at the beginning of the graph, we can see that Abbott and Nestlé have more mention-volume relative to their market share. However, at the end of 2021, Mead Johnson and Abbott experience spikes in mentions due to lawsuits against their formulas. Then, in Q1 2022, Abbott mentions increased drastically after its formulas were recalled due to possible contamination, taking more than 75% of the mention volume.

Analyzing ESG risks by company

Evaluating the top four brands' ESG risks reveals red flags as early as May 2021, when Abbott was fined for including a banned flavoring in its baby formula (see Figure 5). And most red flags were raised before the national shortage crisis was publicized widely.

Besides Abbott, most brands' risks remained low during 2021. However, ESG risks increase during Q1 2022 for all four major formula milk brands. The FDA warned consumers against using specific Abbott formulas during an investigation of infant illnesses possibly caused by Abbott's formulas. Perrigo settles a lawsuit from the State of California over baby formula lead levels. And a panel of federal judges centralizes many baby formula lawsuits into one federal court, including cases against Mead Johnson. Nestlé stays below the 5% threshold throughout, with little to no controversies found.

Three tactics and a summary

The baby formula market in the U.S. has been volatile for many reasons, which we won't get into in this article. However, this volatility could be seen and planned for. In this case, here are some tactics you can take to minimize your investment risks:

1. Employ a tool like SESAMm’s TextReveal to evaluate web data for insights into your investments. With premiere NLP technology, you can uncover sentiment and ESG insights about your industry, portfolio companies, or current investments.
   
   
2. Expand your research term for deeper insights. In this study, the term "formula milk market" had matching absolute and relative volumes. From this view, nothing looks out of place, and there aren't any red flags. However, when we expanded our research with the term "formula milk shortage," we found many controversies before the crisis gained national attention.
   
   
3. Dig into the controversies' causes. It's not enough to acknowledge a red flag. It would be best if you looked into what the potential reason is. Is the controversy caused by external factors or internal ones? Maybe both? Is the issue a one-time occurrence, or is it a pattern? So it's essential to avoid black-box tools. With solutions such as TextReveal that allow you to see beyond, you can access the underlying articles triggering the red flags.

Stay in touch with SESAMm

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The rapid growth of social media companies has created significant ESG challenges, particularly in the areas of data privacy, content moderation, and corporate governance.

Meta and ByteDance, in particular, have been hit with lawsuits and fines related to data breaches, privacy violations, harmful content affecting minors, labor practices, and antitrust, with regulatory bodies across the US, EU, and Asia increasing scrutiny of their data collection practices.

Let’s dive into some of the key ESG challenges facing the social networking industry.

Meta Platforms Inc.: Privacy Breaches and Regulatory Scrutiny

Meta, the mother company of some of the most used social platforms, Facebook, Instagram, and WhatsApp, has faced numerous ESG challenges over the years, including privacy breaches, data misuse, and content moderation issues. 2025 is off to a rocky start, with the company facing a new lawsuit over personal data usage for targeted ads. In 2024, Meta was fined €251 million for a 2018 data breach and faced fines in South Korea and Nigeria for unlawful data collection and antitrust trials regarding Instagram and WhatsApp. In 2023, it addressed issues related to minors and employee treatment. Previous years included fines over the Cambridge Analytica scandal and minors' privacy violations, highlighting ongoing governance and privacy risks amidst regulatory scrutiny.

Key Controversies:

• Meta Faces Lawsuits Over Targeted Advertising and Data Use
• EU Fines Meta €251 Million for 2018 Data Breach
• Meta Settles $1.4B Privacy Lawsuit Over Facial Recognition
• Meta Faces Antitrust Trial Over Instagram and WhatsApp Acquisitions
• Meta Fined for Violating Consumer and Data Laws in S.Korea and Nigeria
• Meta Censors Pro-Palestinian Content Amid Global Tensions
• Content Moderators in Kenya Sue Meta Over Working Conditions and 'union-busting'
• Meta Settles $725M Lawsuit Over Cambridge Analytica Privacy Scandal

ByteDance Ltd (TikTok): National Security Risks and Content Concerns

In recent years, TikTok has faced significant ESG risks as U.S. politicians labeled it a national security threat, leading to data privacy concerns and investigations in the EU. By 2022, it incurred major fines, including a £27 million penalty in the UK for data breaches. In 2023, child safety and harmful content lawsuits increased, prompting government bans on official devices in the U.S., UK, and EU. In 2024, TikTok lost its appeal against a U.S. ban, while countries like Canada and Albania imposed restrictions. A 2025 Supreme Court ruling heightened the risk of a complete ban, highlighting ongoing legal challenges.

Key Controversies:

• TikTok Faces Lawsuits Over Harmful Content and Security Concerns
• TikTok Hit with Multiple Fines and Investigations Over Privacy Violations
• Bans and Restrictions Over National Security Risks‍
• TikTok Sued by Parents and States for Impact on Minors' Mental Health‍
• US Government and Several States Move Toward TikTok Ban‍
• CEO Faces Congressional Testimony on Security and Privacy Concerns‍
• TikTok Faces Backlash Over 'Blackout Challenge' and Content for Kids
• Allegations of Discrimination and Toxic Work Culture‍
• TikTok Fined £27M in UK for Data Protection Breach

X Corp: Hate Speech and Misinformation

Since Elon Musk's acquisition of X (formerly Twitter), the platform has faced major controversies over hate speech and misinformation. Legal issues from the $44 billion buyout and a $150 million settlement for security breaches surfaced in 2022, along with fines in Russia and India. In 2023, X received backlash for hosting anti-Semitic content, leading to advertiser losses and lawsuits. The EU initiated investigations into disinformation, and by 2024, X faced fines in Brazil and Australia, GDPR complaints, and class action lawsuits related to age discrimination and mass layoffs, raising concerns about its online impact.

Key Controversies:

• X Faces Multiple Lawsuits and Fines for Hate Speech, Misinformation, and Privacy Violations
• X Under Investigation for Disinformation, and Biased Algorithms
• X Hit with Large Fines for Data Violations and Misleading Practices
• US SEC Sues Musk for $150M Twitter Shareholder Fraud
• X Faces Legal Challenges Over Mass Layoffs, Age Bias Claims, and Former Executives Severance Payments
• Global Boycott of X Grows Amid Rising Hate Speech and Toxicity Since Musk’s Acquisition

KakaoTalk: Privacy and Market Manipulation

Kakao has faced moderate ESG risks, notably privacy issues and market behavior controversies. In 2024, the company was fined $11.1 million due to a KakaoTalk data breach. Additionally, in 2023, Kakao faced investigations over market manipulation linked to its SM Entertainment acquisition and experienced security vulnerabilities enabling fraudulent activities. Despite these concerns, Kakao's service outages and monopolistic practice allegations have had less severe impacts compared to industry peers.

Key Controversies:

• Kakao Faces Privacy Fine Equivalent to $11.1 Million for Data Leak
• Kakao Challenges Record Fine Over Personal Data Breach
• Regulator to review Kakao's acquisition of SM Entertainment
• Kakao Faces Scrutiny Over Fake Business Channels and Security Flaws
• FTC Investigates KakaoTalk's Market Dominance After South Korea Outage
• Hundreds Fall Victim to Major KakaoTalk Pyramid Scheme Scam

RedNote (Xiaohongshu): Censorship and Privacy

REDnote (Xiaohongshu) has fewer ESG issues compared to its peers, facing challenges primarily related to censorship, privacy, and regulatory compliance. In 2025, Texas banned its use on government devices due to security concerns. Earlier, REDnote encountered legal challenges over AI-generated art copyrights (2023), a Taiwan-imposed national security ban (2022), layoffs due to restructuring (2022), and fines by Chinese regulators for inappropriate content involving minors (2021).

Key Controversies:

• Texas Governor Issues Ban on RedNote for Use on Government Devices
• Xiaohongshu Faces Legal Challenges Over AI-Generated Art and Copyright Infringement
• Taiwan issues ban on Xiaohongshu
• Xiaohongshu's Concerns Amid Censorship and Government Compliance
• China's Xiaohongshu Announces Staff Layoffs
• Xiaohongshu Suspected of Compromising Minors' Privacy
• China Fines Tech Giants Including Xiaohongshu for Spreading Soft Pornography Involving Minors

Conclusion

The social networking industry continues to grapple with significant ESG challenges related to data privacy, harmful content, and corporate governance. Major companies such as Meta, ByteDance, X Corp, KakaoTalk, and REDnote face ongoing regulatory scrutiny, fines, and lawsuits, highlighting persistent ethical concerns. While these issues pressure platforms to improve transparency and governance practices, they also underscore the industry's substantial risks and responsibilities to users and stakeholders.

Reach out to SESAMm

TextReveal’s web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or to request a demo, reach out to one of our representatives.