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Five Key Areas That Will Shape the Food Industry in 2012
by Shawn Stevens
The past 12 months began under a fog of uncertainty. Food companies were scrambling unsuccessfully to predict and understand how the “historic” Food Safety Modernization Act, signed into law a little more than a year ago, would likely affect the U.S. food supply.
The haze has continued to cloak most industry forecasts and predictions—consuming observers as it shifts continuously, ebbs, intensifies, then clears a bit. And, as we enter yet another new year, we find ourselves straining, once again, to see through the murk.
While we could have devoted substantial space in our first column of 2012 to predicting which regulations the FDA will publish next (and in what order), we predicted instead that our readers might be more interested in a broader perspective.
A wide range of factors—other than which specific FDA policy statement will next emerge from the fog—will influence the health of our industry. While there are too many to list here, the most notable factors include food demand, outbreaks, recalls, regulation, and safety. These factors can, and in many instances will, determine the success or failure of any company in any year.
The factor that is likely to influence food companies most in 2012 is the demand for food. Fortunately, we work in a business with inherent longevity. To survive, human beings must eat. As a result, we know that as long as the quality of the food we produce remains excellent and does not injure anyone, our businesses will probably continue to prosper. This is especially good news given the bleak status of our economy. During a period in which numerous companies are reducing or even stopping production, many food companies are thriving.
The demand for food is also forecast to grow. Americans already spend approximately $600 billion each year on groceries, and that figure is expected to increase by 15% to nearly $700 billion in 2015. Food demand is expected to experience significant global growth as well. This means that all food companies should begin looking for ways to increase production and distribution capabilities. Keep in mind, however, that as demand in the U.S. continues to grow, competition from imports will also rise. Thus, U.S. companies should also be looking for ways to distinguish their products from the growing number of foreign food product imports—and to market their food to foreign countries.
The next major factor that is likely to influence the industry in 2012 is foodborne illness outbreaks. Over the past decade, outbreak surveillance has improved significantly. More illnesses are identified, and more outbreaks are reported. By extension, many of these outbreaks are associated with an increasing number of food products—and more companies are affected. These improvements, while helping to ensure public health, have had a tremendous—and sometimes less than positive—impact on the food industry. Whether your product has been associated with an outbreak or not, your company will be affected.
The indirect effects of any outbreak include:
- Increased media scrutiny;
- Decreased public confidence;
- Increased regulation; and
- More federal surveillance, which translates into more outbreaks being detected.
Imagine a dog chasing its tail. Outbreaks also negatively affect the industry by damaging consumer sales, increasing operational expenses (with the onerous changes in food product specifications and auditing requirements they typically cause), and increasing the cost of insurance.
In addition to working within your own company to prevent outbreaks, all food companies should also be working with others in their industry to enhance food safety generally. Sharing best practices as well as mistakes made, and working closely together to develop industry best practices, benefits all food companies within any sector of the industry.
Closely related to foodborne illness outbreaks are recalls. The difference is that while only a few food products this year will be directly associated with an outbreak, a much larger number of food products will be involved with or directly impacted by a food recall. This is because the number of food recalls announced each year is increasing. In today’s world, thousands of “spotlights” in various forms steadily crisscross the nation, searching for problems in foods. These spotlights take the form of verification testing by processors, ingredient testing by customers, finished-product testing by end users, regulatory sampling by the FDA or USDA, and patient isolate testing ordered by concerned physicians. With such vast resources dedicated to looking for problems in today’s food products, the question is not whether a product will be caught in the spotlight, but when.
In addition to working within your own company to prevent outbreaks, all food companies should also be working with others in their industry to enhance food safety generally. Sharing best practices, as well as mistakes made, benefits all food companies within any sector of the industry.
In turn, once a problem is identified, all ingredients used to make that product become suspect, as well as all of the downstream foods in which that product is used. A single recall can easily affect dozens—if not hundreds—of food companies. Moreover, each of the negative effects resulting from outbreaks is amplified by food recalls. To the extent food companies can work together in discrete segments of their respective industries to reduce recalls by improving overall quality and collectively sourcing from trusted suppliers, the better off all companies will be.
No, we didn’t forget. Food regulation will also affect food companies in 2012. The FSMA gave the FDA substantial new powers and directed the agency to use them. Although we will probably see substantial changes in the way the FDA does business this year, the most notable change will occur in July, when the agency begins enforcing its new written food safety plan requirements. Expect the FDA to focus a substantial amount of public attention on the enforcement activities the agency directs toward a select few companies this summer, as it proves to the nation that its new authority is necessary and is working. Work internally to find ways to enhance your relationship with the FDA, and make sure you do not become one of those unfortunate companies.
Finally, expect food safety to continue to influence your company more than ever. From a food safety standpoint, our industry is healthy but, at the same time, arguably frail. Although the challenges we face will continue to grow due to an increasing number of outbreaks, recalls, and reactive new laws, new solutions and opportunities will emerge and multiply. Food safety technologies will be improved, food safety information will be more widely disseminated, food safety regulation will be formalized and understood — and, one hopes, food safety enforcement will become standardized and food safety enhanced.
So let’s not be discouraged by the ground-level fog. Although it may be difficult to predict the exact wording of the FDA’s next regulation, the health and direction of our industry as a whole is more important. As long as we have a general idea of the global factors that will influence our future, we have a better chance to decide the direction we should ultimately go.
Stevens, an attorney at Gass Weber Mullins LLC in Milwaukee, Wis., counsels food industry clients nationally on food safety regulatory and liability issues. He can be reached at email@example.com or (414) 224-7784.