URBANA-CHAMPAIGN, ILL. — As states seek to ban food and beverage items containing specific ingredients, a study from the University of Illinois at Urbana-Champaign examined ways manufacturers may respond and continue to operate efficiently. The study was published in March in the Journal of Food Distribution Research.
The researchers identified four options: maintain two separate versions of the same product (one sold to states with regulations and one sold in the rest of the country); update a product to comply with the strictest state standard and sell the new version across all markets; remove the product from the states with regulations; or ignore the states with new regulations and continue selling the original version of the product in those states.
The choice a company makes will depend on several factors, including the cost of compliance, the size of the markets of the states with new regulations, the cost and likelihood of penalties, and consequences for consumer demand.
“States have a lot of power constitutionally to protect the health and well-being of their citizens,” said Maria Kalaitzandonakes, PhD, assistant professor in the Department of Agricultural and Consumer Economics at the University of Illinois. “However, a state-level food regulation approach can lead to a complex patchwork of regulation. That creates challenges for food manufacturers that sell their products across state lines. We wanted to examine how firms adhere to different rules across markets.”
The study brought up three past state regulations.
GMO labeling in Vermont
In 2014, a Vermont law required mandatory labeling of products containing genetically modified ingredients. The Campbell’s Co. (then known as Campbell Soup Co.) re-labeled its products to comply, but General Mills, Inc. reformulated Cheerios cereal, switching to non-GMO ingredients.
The University of Illinois study cited a study from 2015 that showed reformulating to be more expensive than relabeling, although both were costly. Reformulating a low-complexity food, with shelf-stable food being an example, was estimated to range from an average of about $50,000 for a minor non-functional ingredient to about $650,000 for a major ingredient. Costs are high for companies selling both a GMO version and non-GMO version of a product because of segregation, monitoring and certification of non-GMO ingredients. Penalties under Vermont’s law included $1,000 daily fines per product found to be in violation.
In 2014, a Vermont law required mandatory labeling of products containing genetically modified ingredients.
| Photo: ©CARSTEN REISINGER – STOCK.ADOBE.COMVermont’s small size meant option three, foregoing the volume of sales to Vermont’s market to avoid a more costly systematic response, was potentially the most viable option, according to the University of Illinois study. The federal government eventually intervened, creating a bioengineered (BE) law for labels in July of 2016 that superseded Vermont’s law.
Sesame labeling in Illinois
In 2019, an Illinois state law required allergen labeling for products that contained sesame. The costs required to produce and transport separate sesame and non-sesame varieties of a product would have imposed a burden on both manufacturers and distributors, according to the University of Illinois study. The law did not set any penalties for violations or explicitly outline any avenues for legal recourse.
Stopping the sale of products in Illinois, a larger market than Vermont, was undesirable, according to the study. The law’s limited scope for litigation and negligible potential for violators to incur penalties meant option four, ignoring the law, was the most attractive option for some companies, according to the study.
Many stakeholders expected the Illinois state law to bring additional regulation across the United States, which happened. A federal law called the Food Allergy Safety, Treatment, Education, and Research Act went into effect nationally in 2023, which superseded the Illinois law.
California ingredient ban
In 2023, California Governor Gavin Newsom signed a bill into law that bans four additives: Red No. 3, brominated vegetable oil, potassium bromate and propylparaben. Companies must reformulate to comply with the law, which becomes effective in 2027.
Synthetic dyes such as Red No. 3 are cheaper than natural alternatives, according to the University of Illinois study. Separation costs, if companies made one product specifically for California and one product for the rest of the country, would be lower but still high. Two versions of the same product would need to be kept separated during production and distribution.
Since California is the most populous state in the United States, revenue loss would be costly for companies that stopped sales in the state. The California law has civil penalties of up to $5,000 for first violations and up to $10,000 for subsequent violations.
“Consequently, it is probable that most food manufacturers will reformulate their products in response to the law and either sell the modified products only in regulating states (option one) or in all states (option two),” the Illinois study researchers said. “For food manufacturers finding that reformulation would have little effect on their profitability, the optimal reaction of firms would arguably be option two in most instances.”
