Retail Food Safety Forum

The Impact of FSMA on Private Label Food Retailers

By Dan Okenu, Ph.D.
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February 19, 2015


• Categories: Foodservice & Retail, FSMA, Retail Food Safety Forum

When fully implemented, possibly by the spring of 2016, the new U.S. Food Safety Modernization Act (FSMA) will raise the bar on food safety regulatory compliance both in the United States and around the world. The key provisions of FSMA will shift emphasis from the current reactive approach to food safety and food security, towards a more proactive science-based risk mitigation and prevention strategy. The impact will be felt across the entire global food supply delivery system from farm to fork including private label foods manufacturers, processors, suppliers, importers and retailers.

It has been projected that the sales of private label groceries in the United States alone will grow by 36 percent from $98 billion in 2011 to $133 billion in 2016. This impressive growth may be as a result of the competitive pricing of private label foods and the comparable quality with major brand products, as well as the convenience and customer trust in these in-store retail brands by today’s savvy shoppers. The consumer-friendly collaboration of private label manufacturers and retailers, or retailers that own their own private label manufacturing facilities is known to reduce the unnecessary supply chain costs by improving supply chain efficiency, enhances processes and systems, and improves the overall customer experience. These great value-proposition attributes will continue to make in-store private label products popular among consumers and profitable for businesses.

An important question however is how the new FSMA regulatory climate will impact these private label food products amid this growing popularity and in the context of the core business benefits of active management control, competitive prices, considerable return-on-investment and consumer satisfaction. On top of this list is the FSMA requirement for risk-based foreign supplier verification. This is to ensure that imported foods manufactured by foreign third party vendors or by US companies running their own facilities overseas are in compliance with the new FDA requirements, and that the food products are not adulterated or misbranded. Retailers of private label foods will be required to provide documented evidence from an accredited certification entity that shows that their foreign-supplied food products are in compliance. Frequent inspections of these foreign-based facilities and foods imported into the United States will be mandated under the new rule.

FSMA also sets the bar higher for retailers of private label foods in the key areas of food safety record keeping and documentation, traceability/recall programs, upgrading from ordinary HACCP to the more advanced Hazard Analysis and Risk-based Preventive Controls (HARPC), and implementing a verifiable supply chain management program. These provisions have the potential of making it more profitable for companies to manufacture their private label foods here in the United States instead of overseas where they lack active managerial control to ensure full compliance. Although domestic US-based manufacturers and suppliers are already covered under FSMA, retailers of private label food products manufactured in the United States are still advised to consistently verify that their suppliers are compliant, since retailers will also be liable for any infringement or negative outcome from such products.

For private label retailers that have proactively pursued industry benchmarking standards by insisting on GFSI certified facilities and who have an effective verifiable food safety management system in place, the impact of FSMA will be minimal. They will only need to re-examine their processes and systems to identify any gaps within the provisions of the new rule and put corrective actions in place. For others hoping to play catch-up, implementing the new FSMA requirements may become so overwhelming that the obvious business benefits of in-store private label foods like competitive prices and comparable quality with major brands may become severely undermined. The relationship of private label food manufacturers and processors with their retail partners could be impacted, as retailers would need to collaborate to profitably deliver what their customers want, namely, safe quality competitively priced mix of private label and brand food products.

Although the production and sale of safe quality food is mandatory to all food companies, under FSMA, small companies with less than $500k in annual sales and who sell directly to consumers within 275 miles radius of their facility may be exempt from some of the rigorous requirements of the preventive control rule. However, when large companies patronize these small local businesses, they must ensure that they are in full compliance since liability extends to retailers. National food service chains that manufacture their own private label ingredients and condiments or obtain these supplies from third party vendors are also expected to comply with the new rules. Overall, companies will be better off taking proactive steps in evaluating their suppliers’ food safety management system in line with the preventative control provisions under FSMA.

In conclusion, FSMA brings with it, a complete paradigm shift that will impact the entire global food supply chain. Retailers of private label foods must continue to assure their customers that their favorite in-store brands were produced, processed, stored and handled in a safe manner every step of the way. Thus, FSMA readiness and preparedness must include a comprehensive gap analysis to identify provisions of the new rules that must be implemented to stay ahead of the curve by next year when these regulations will potentially come into effect.