‘Vermont, Naturally’ – The Irony For Food Manufacturers

May 15, 2015
Food Manufacturing

Types : Bylined Articles

On May 8, 2014, Vermont approved Act 120 – becoming the first state to require that foods with genetically engineered (GE) ingredients be labeled in a “clear and conspicuous” manner that they are “produced with genetic engineering” or “partially produced with genetic engineering” – unless the manufacturer can prove otherwise. 9 V.S.A. §3043.

According to this law, labeling GE foods as “natural,” “naturally made,” “naturally grown,” “all natural,” or with other similar descriptors is inherently misleading, poses a risk of confusing or deceiving consumers, and conflicts with a general perception that “natural” foods are not genetically engineered. 9 V.S.A. §3041, §3043. The law takes effect on July 1, 2016. Under §3044, certain foods are exempt (including meat or milk from animals fed a GE-free diet; food sold in restaurants; and packaged foods whose GE material is less than 0.9% of total product weight), and retailers are “not liable for the failure to label a processed food as required, unless the retailer is a producer or manufacturer of the processed food.” 9 V.S.A. §3045.

Vermont’s law confronts the huge vacuum of any statutory or regulatory approach to the meaning of the ever-popular “natural” language on food labels. The FDA has consistently avoided both courts’ and the food industry’s requests to define “natural.” Now, a “natural” definition as “GE-free” is on Vermont’s books. The Grocery Manufacturers’ Association and other food industry groups are challenging the constitutionality of Act 120. But whether the food associations win or lose their attack on the new law that defines “natural” to exclude GE foods, the mere fact that Vermont passed this statute will have repercussions for the food industry. For example:

If the food groups win, this is not necessarily the happy ending for which manufacturers might hope:

1. Given the media attention that Act 120 has received, food manufacturers are now operating within an arena of heightened public scrutiny of GE issues. Whether or not GE labels are required by a law, consumer perception might still prefer food products that can bear “GMO-free” language. To keep their market share, manufacturers might have to consider sourcing their ingredients from non-GE items and manufacturing them with non-GE processes. Consider the fact that many manufacturers have changed their ingredient sourcing and production processes to affix “gluten-free” labels to foods, in order to claim a slice of the explosive revenue growth in this market segment over the past few years. Now one might query whether GE-free products are on a parallel track.
2. GE issues are not the only criterion by which consumers have challenged the meaning of “natural” on food products. Class actions over the past several years have claimed, for example, that foods containing artificial sweeteners are not “natural” and that synthetic ingredients like maltodextrin render food products “un-natural.” So, just because GE may be off the table as one basis for challenging “natural” labels, a cornucopia of other food characteristics, ingredients and manufacturing processes remain fruit for the picking by consumers under state consumer protection/fraud laws.

If the food groups lose the challenge to Vermont’s meaning of “natural”:

1. Manufacturers who must affix “produced with genetic engineering” labels under Vermont’s law could stand to lose market segments among a consuming public who believes (regardless of scientific evidence) that GE-free products are “healthier” – in much the same manner that public perception assigns “healthier” values to “gluten-free” products.
2. Vermont’s law raises risk exposure concerns for companies headquartered or having manufacturing facilities outside Vermont. Under Act 120, “manufacturers” subject to the law include persons who “produce a processed food or raw agricultural commodity under its own brand or label for sale in or into the State[,] sells in or into the State under its own brand or label a processed food or raw agricultural commodity produced by another supplier, [or] owns a brand that it licenses or licensed to another person for use on a processed food or raw commodity sold in or into the State.” This throws open the floodgates of exposure for food manufacturers who sell products on a national basis. If a company sells into Vermont, it must comply with the GE labeling law – including responsibility for (a) investigating the GE content of its ingredient suppliers, and (b) tracking whether those to whom the company licenses its brand sell into Vermont. In light of the nationwide sales scope of most U.S. food manufacturers’ businesses, one can reasonably query whether the net result of Vermont’s law – governing all food sold in or into Vermont – is effectively to impose its GE labeling requirement on a nationwide basis.
3. Food groups could face the prospect of a patchwork of differing state laws on what “natural” means, if other states elect to legislate “natural” as Vermont has done but choose to do so by criteria other than GE. For example, based on the strength and resources of certain industry lobby groups or the particular interests of public watchdog groups, one state’s legislature might be persuaded to define “natural” as artificial ingredient-free, whereas others might choose to define “natural” in terms of manufacturing processes. Citric acid, ascorbic acid and fruit juice concentrates might be important in one area of the country, while another is concerned with preservatives. Since the FDA has rejected invitations to define “natural,” much less express a preference on the standards / criteria by which it should be defined, the situation is ripe for state law variations — creating compliance migraines for manufacturers selling products in more than one state.
4. Act 120 is only one piece of the national GE stage. GE label laws will take effect in Maine and Connecticut once four other states pass such statutes; and Colorado, Oregon and California have recently considered similar legislative proposals. The briar patch of potential pitfalls for manufacturers is expanding.

Given these market share, revenue and class action concerns at stake, food manufacturers should monitor carefully how the Act 120 challenges play out in Vermont. Industry groups will likely endeavor to accelerate judicial review of the statute before its July 1, 2016 effective date. However, the lead-time requirements and money considerations that would go into July 2016 GE labeling for manufacturers are substantial, such as: evaluating the GE content of product ingredient sources; making advertising investment in revised marketing campaigns; and budgeting for costs of label re-designs to exclude “natural” and affix “produced with genetic engineering,” as applicable. So, the time to contemplate the irony of Vermont’s state slogan – “Vermont, naturally” – is now.

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