New rules on ingredient labeling that bring transparency to consumers—and headaches to manufacturers—entered the regulatory process this summer.
That means a rulemaking process of about two years has begun, giving federal agencies time to define standards for new labeling for genetically modified organisms (GMOs). The clock also is ticking for manufacturers to implement the revised Nutrition Facts labels.
For retailers, it’s business as usual while the labeling issues are ironed out, but it’s possible, even likely, they will face higher costs for products when compliance takes effect.
“These regulated changes will be a major cost for manufacturers,” says Tom Dempsey, CEO of SNAC International, based in Arlington, Va. “For our products (snacks and candy), a label is the whole package, meaning the whole package must be changed—it’s not just the labels.”
The Nutrition Facts label was introduced more than 20 years ago to help consumers make informed food choices and maintain healthy dietary practices. The FDA decided to upgrade the label to better reflect the science linking diet to health issues such as obesity and heart disease [CSP—Aug. ’16, p. 17].
The Roberts-Stabenow Agreement was signed by President Barack Obama on Aug. 1, pre-empting states’ GMO labeling mandates. The federal agreement establishes a national standard for disclosure of food produced with genetically modified ingredients. Congress enacted the law before Vermont’s labeling mandate was set to take effect July 1. Maine and Rhode Island also had passed GMO labeling laws.
The state mandates required all products sold in the state that contain GMOs to be labeled as such. Some major food producers, such as Kellogg, General Mills and Mars, have begun relabeling all of their products, not just those going to certain states, mainly for cost and distribution reasons.
Compliance for GMO labeling is due in July 2018, while compliance for the new nutrition-fact label takes effect in 2018 for large manufacturers and a year later for those with less than $10 million in annual food sales, Dempsey says.
SNAC (formerly the Snack Food Association) represents more than 400 snack manufacturers and suppliers worldwide, many of them smaller manufacturers. The organization is working to have regulators harmonize the changes for small manufacturers so they take effect at the same time.
At an estimated cost of $3,000 to $4,000 per SKU for new graphics and printing, that adds up to a lot of money. Those costs will inevitably trickle down to the consumer, Dempsey says.
Other Fish to Fry
The National Confectioners Association dismisses much concern over the changes, pointing out that there are a few ways to comply with the GMO labeling, including the use of an electronic digital link or QR Code, on-pack symbol or on-pack text.
“As an industry, we support transparency; it’s a cornerstone of who we are,” says Christopher Gindlesperger, vice president of public affairs and communications for the Washington, D.C.-based association. “We are actively focused on helping our members interpret the regulations.”
What’s paramount to his members is sugar. “It’s our main ingredient, obviously,” Gindlesperger says, and his organization continues to lobby for changes in the U.S. sugar program that restricts imports and subsidizes some domestic farmers.
Why the push for reform? “Sugar is the only commodity that has not been touched since the Depression era. The program props up the cost of sugar and blocks access to sugar on the world market,” again especially hurting smaller manufacturers, he says.
Taking a slightly different twist is Jason English, managing director, equity research, for Goldman Sachs Group, who covers the packaged-snacks industry. Speaking at the McLane trade show in August, he told retailers they need to respect consumer trends but also realize they often do not have longevity.
“Open labeling is inevitable; consumers want full disclosure,” English said. But “the current demonization of sugar” won’t last.
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