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Retail Trends

Setting the Pace

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Are we entering an era in which food safety is a non-issue and contamination is a thing of the past? Or are we seeing the beginnings of a well-meaning but expensive bureaucratic maze that could put the brakes on the supply chain and raise the price of food while providing little additional protection?

The answer is a little bit of both, according to industry analysts who are wading through extensive new food safety regulations that will impact product availability, quality and traceability from farm to shelf.

At the heart of this debate is the 2011 Food Safety Modernization Act (FSMA). Considered the most sweeping change to the food industry in 70 years, it calls for public-private sector collaboration and a new framework for regulatory oversight that puts the emphasis on prevention of foodborne illnesses at the source.

But the Food and Drug Administration’s regulations are so extensive that they might not be fully implemented for two or three years. Even now, the FDA has extended the comment period for two specific rules within FSMA, coinciding with the deadline for comments on the entire act.

The new regulations widen the FDA’s reach and powers. While most of them are aimed at growers, importers and distributors, they could conceivably have an impact on retailers, including expanded access to a facility’s records; increased inspections at all registered facilities; mandatory recall authority; certification of imported product; implementation and monitoring of all critical control points; and increased requirements for the sanitary transportation of food throughout the supply chain.

The increasingly global economy shouldn’t be a problem — most industry sources are confident that FSMA and other initiatives are capable of being monitored on a worldwide scale. “I think we’ll be seeing a significant level of international interest,” says Kelvin Harris, director of the risk consulting services practice for Pricewaterhouse-Coopers. “If you look at some of the retail reactions to the horsemeat scandal, they are taking similar actions for brands and private label ... It’s having a pretty broad impact on both the retail and CPG environment. We’re looking at a global supply chain and there must be an increased level of visibility and traceability.”

“Most of the feedback so far seems to be in favor of the way the FDA drafted the rules,” says Kevin Payne, senior director of marketing for data monitoring solutions firm Intelleflex. “They’re cautiously optimistic and supportive.”

FSMA is basically common sense that will help retailers protect their business. “I’ve read about growers, distributors and retailers saying it won’t impact them because they’re already doing it,” he says. “But are they doing everything as well as they think they are? Typically they aren’t.”

Symbiotic partners
The worst mistake retailers could make is to push responsibility to their suppliers and distributors, says Jennifer McEntire, senior director of food and import safety with healthcare and food safety consultancy Leavitt Partners.

“Retailers need to be aware of how changes in the supply chain will affect procurement and price,” she says. “One concern, specifically for produce, is the number of exemptions based on the size of the supplier company. You can’t be assured that the produce you buy will be under produce safety regulations, so the responsibility for sourcing safe product comes back to the retailer.”

McEntire cites the case of Jensen Farms, a Colorado cantaloupe grower that filed for bankruptcy following a Listeria outbreak that reportedly caused 32 deaths. “The plaintiffs’ attorneys went to the stores that sold them,” she says. “The outcome is still pending.”

“Despite our best attempts, there will still be outbreaks because no system is foolproof,” McEntire says. “The best thing for retailers to know is who is in the supply chain and evaluate the risks of dealing with them.”

Harris says retailers will be “pushing the supply chain for increased levels of traceability. There’s a symbiotic partnership that has to happen. Everyone realizes there’s an additional cost, but ultimately consumers are demanding it and [it] can supply retailers with a point of differentiation.”

Aside from the possibility of additional documentation — the FDA has the authority to expand recordkeeping requirements for high-risk foods — retailers should be familiar with consumer recall notifications, McEntire says. “It’s not at the top of the FDA’s list but it will be on there. They will be coming out with a standard form that retailers will have to post in a prominent place within a certain period of time.”

Implied liability
Separately, the FDA is continuing its study of retail food safety practices. Private label products are also on the radar, McEntire says. “Retailers who are also manufacturers should invest resources in determining how FSMA will impact them, identify potential gaps and develop programs to insure compliance,” she says.

Harris agrees that the impact on private label will be significant. “It puts additional obligations on retailers to understand the source of ingredients and minerals in their products. For that reason, retailers will take greater ownership roles and ... have to provide a greater level of transparency to customers.”

On another front, the industry is waiting to hear about the foreign supplier verification program. “It says that the importer of record is responsible,” McEntire says. “We’re anxious to see if there are exceptions.”

Payne notes that retailers tend to track and trace at the trailer level, treating as many as 28 pallets as one unit. “In fact, those units can be quite different in terms of where they came from and where the product was grown,” he says. “Each pallet may also have had different experiences in the supply chain. Some of the stuff may have sat around on a loading dock for ... hours. That’s a higher rate of risk than foods which have been continuously refrigerated.

“Everyone needs to understand the entire cold chain. ... The worst-case scenario is if people get sick or die from eating products they bought at your store. It could put you out of business,” he says.

Sanitation will also be getting more attention under FSMA. “It doesn’t address retail per se, but you have to know what growers and distributors are doing — whether it’s sanitary growing conditions or ... runoff from a pasture above the farm,” says Payne. “If a retailer buys from a grower that doesn’t do the right thing, there’s something called implied liability.

“Retailers are captains of the cold chain and they will be the ones that set the pace,” he says.