The Impact of California’s Food Additive Ban on Food Manufacturing and COGs

The Crusade For Cleaner Eating: A Regulatory Recipe for Change

A Bold Move for Food Safety and Its Impact on Food Manufacturing

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  • California has enacted the first state-level ban in the U.S. on four food additives: brominated vegetable oil, potassium bromate, propylparaben, and red dye No. 3, due to health concerns.
  • The ban, known as the California Food Safety Act, will take effect in 2027, giving manufacturers time to reformulate products.
  • The additives are linked to various health issues, including cancer and endocrine disruption, and are already banned in the EU and other countries.
  • The law could have nationwide implications, as manufacturers are unlikely to create separate products for California, potentially leading to reformulations of up to 12,000 products sold across the country

Navigating New Norms

The Food Industry's Reformulation Challenge


California’s pioneering spirit has once again made waves in the food industry as it becomes the first state in the United States to ban four potentially harmful food additives. This landmark move will require food and beverage manufacturers nationwide to reformulate thousands of products, ushering in a new era for food brands. As manufacturers contend with the far-reaching impacts on costs, operations, and supply chains, it’s imperative to start preparing now to comply with the upcoming regulations.

The ban on these food additives in California is expected to create a domino effect throughout the country. Food and drink manufacturers are unlikely to create separate versions of their products just for California, so they may modify the ingredient lists of up to 12,000 products sold nationwide. It remains uncertain whether other states will follow California’s lead, however, the impact is already being felt as many major food brands have made commitments to eliminate or avoid using these additives in their products.

Signed into law on October 7, 2023, California Food Safety Act officially prohibits food manufacturers from using four ingredients in their products: brominated vegetable oil, potassium bromate, propylparaben, and red dye #3. The new law is set to take effect in 2027, giving companies ample time to revise their recipes and eliminate these chemicals from their products. The impending ban on these common ingredients creates new challenges for the food industry as the additives are prevalent in a wide range of processed foods, from candy to sodas.  The implementation of the law will not lead to any foods being banned from shelves outright, instead, food companies will be required to make “minor modifications” using alternative ingredients, many of which are already in use overseas. The driving force behind this ban is mounting evidence linking these additives to health concerns, including an increased risk of diseases like cancer, as well as rising demand from consumers who seek healthier alternatives.

While companies have until 2027 to adapt, the impending changes are expected to disrupt manufacturers’ costs and operations significantly. Here’s how:

  • A Surge in R&D Spending The ban is expected to prompt a surge in research and development (R&D) spending as companies scramble to reformulate recipes and test alternatives. Developing a new formula with unfamiliar ingredients requires expertise and precision. Food brands will rely on expert R&D teams to explore natural alternative ingredients like beet juice powder and vitamin E as well as novel ingredient innovations derived from insects and other natural sources to replace banned additives without compromising taste or safety 
  • Adjustments in Manufacturing Processes Manufacturing processes will likely require investments in new equipment and training to accommodate ingredients that behave and process differently. These adjustments are crucial to ensure product quality and consistency, but they also come with financial implications.
  • Nationwide Reformulations California’s regulations will not only affect products sold within the state but also have national repercussions. Since brands typically produce uniform products for the entire country, they are expected to remove these additives from all recipes, prompting nationwide reformulations of as many as 12,000 grocery products. This presents a logistical challenge of epic proportions.

Sustainable Food Innovation

Embracing Change

California’s ban on food additives aligns with growing consumer demand for more natural, environmentally-friendly foods without controversial additives. Many brands are responding to this market shift by proactively exploring food innovations. Some of these innovations include:

  • Minimally Processed Offerings: Simpler, less-processed foods with few recognizable ingredients appeal to consumers seeking transparency. Short ingredient lists full of whole foods provide this desired simplicity.
  • Repurposed Proteins: Proteins made from insects, such as cricket flour and mealworms, are gaining popularity as sustainable additions to various foods, including pasta, baked goods, and snacks. These “natural” alternatives require fewer resources than traditional livestock farming.
  • Upcycled Ingredients: Upcycled foods repurpose ingredients like fruit and vegetable pulp and leftovers into nutritious new products instead of wasting them. 
  • Expert Guidance for Success: Manufacturing experts play a pivotal role in helping brands capitalize on these food innovations. They can assist with identifying and sourcing alternative sustainable ingredients, developing new products, optimizing supply chains to access innovative ingredients, and ensuring food safety and quality standards are met.

Companies like Renewal Mill are at the leading edge of food innovation using upcycled ingredients. Renewal Mill fights food waste by taking the byproducts of food manufacturing, like pulp and hulls, and upcycling them into nutritious superfood ingredients. For example, their flagship product Okara flour is made from the fiber-and protein-rich pulp left over after making soy milk. They are also innovating with ready-to-eat products made with their upcycled ingredients, like cookies and baking mixes, to showcase the versatility and great taste possible.

Renewal Mill is showing how creative sourcing of overlooked food materials can benefit people and the planet. Their unique business model and ingredients are disrupting traditional food manufacturing in exciting ways. As consumers demand more transparency and sustainability, food brands would do well to follow Renewal Mill’s lead in exploring upcycled ingredients.

With the right partners, forward-looking brands have the opportunity to align compliance with California’s new regulations with proactive investments in food innovations that cater to changing consumer preferences. The combination of these efforts can set companies apart in a rapidly evolving and competitive food industry.

Navigating Higher Ingredient Costs

and Sourcing Challenges

Higher costs for natural ingredients represent a substantial obstacle for food manufacturers as they navigate the transition away from harmful additives. This challenge underscores the critical role that platforms like Manufactured play in helping companies manage costs effectively so they can sustain their profitability.

The shift toward natural ingredients is undeniably a step in the right direction, aligning with consumer preferences for healthier and more transparent food options. However, the economic realities of this transition are not to be underestimated. The potentially higher costs associated with natural replacements for artificial additives can have a direct impact on a company’s Cost of Goods Sold (COGs), which is a key financial metric that significantly influences a brand’s bottom line.

Natural colorants, preservatives, and alternative ingredients often come with a higher price tag for several reasons. Firstly, the sourcing and processing of these natural elements can be more labor-intensive and time-consuming compared to their synthetic counterparts. For instance, obtaining a vibrant red color from beet juice powder may require more beets and processing steps than the straightforward chemical synthesis of a synthetic red dye.

The challenge of higher costs for natural ingredients is an unavoidable reality in the journey toward healthier and more transparent food products. However, platforms like Manufactured (MFD) not only offer smart solutions but can also serve as a critical lifeline for merchants and manufacturers navigating the financial and operational hurdles as the industry evolves. The team’s intricate understanding of the manufacturing processes, ability to harness a vast network of vendors, and substantial purchasing power make MFD an indispensable partner in managing costs effectively. This enables food brands to thrive, even in the face of economic pressures associated with regulatory changes, and ensures that the transition to safer and more sustainable food products remains economically feasible.

The Road to Compliance

How Brands Can Prepare

To navigate these transitions smoothly while maintaining quality and controlling costs, food manufacturers need to start preparing now. Here’s how they can do it:

  • Auditing Product Lines A thorough audit of all product lines is essential to accurately identify where reformulations will be necessary. Prioritizing high-volume products for immediate R&D focus is a strategic move.
  • Small-Scale Product Development Begin small-scale product development trials in test kitchens to perfect recipes with new ingredients. Conduct taste-test consumer focus groups to gather feedback on the acceptance of these changes.
  • Supply Chain Optimization Review manufacturing equipment and processes to pinpoint any required upgrades, adjustments, or employee training to smoothly accommodate new recipes. Partner with supply chain experts to source cost-effective, scalable suppliers of replacement natural ingredients, avoiding shortages or price hikes.
  • Partnering with Experts Leverage manufacturing consultants and experts in product reformulation to develop and introduce reformulated products quickly and efficiently. This step can help mitigate the impact on operating budgets.

Navigating the Transition with Manufactured (MFD)

The demand for natural ingredients has been rising steadily, driven by the changing regulatory environment and the increasing consumer preference for clean-label products. This heightened demand can lead to supply shortages and, consequently, higher prices. The complexities of sourcing, quality control, and certification processes for natural ingredients further contribute to their elevated costs.

It’s within this challenging landscape that Manufactured’s platform shines as a beacon of support for food manufacturers. Manufactured leverages a vast network of vetted vendors, deep manufacturing expertise, and significant purchasing power to negotiate on behalf of their customers. Here’s why this is so crucial:

  • Cost Reduction: By collaborating with a multitude of vendors and leveraging their collective purchasing power, Manufactured can secure natural ingredients at more competitive prices. This results in a reduction of the overall ingredient procurement costs for food brands, helping to mitigate the financial burden of transitioning away from artificial additives.
  • Better Unit Economics: Manufactured’s expertise in the industry allows them to optimize unit economics for their clients. This means that companies can maintain or even improve their profit margins despite the higher ingredient costs. This is pivotal in ensuring that manufacturers remain financially viable while adhering to new regulations.
  • Profitability Boost: The ultimate goal for any food brand is to remain profitable. By successfully negotiating better pricing and terms for their customers, Manufactured plays a central role in preserving and even boosting the profitability of food brands during this transition.

For food and beverage brands feeling overwhelmed by the massive impending changes, specialized manufacturing platforms like Manufactured provide end-to-end solutions to help brands navigate the evolving regulatory environment while developing compliant new product formulations. Our platform offers a range of services:

  • Ingredient Sourcing: Identify and procure cost-effective natural replacement ingredients that satisfy safety goals without sacrificing taste and texture.
  • Supply Chain Optimization: Improve logistics infrastructure to manage inbound alternative ingredients and outbound shipments efficiently.
  • Inventory Financing Assistance: Redirect more funds into essential R&D, rebranding, and marketing during the transition period.
  • Growth Strategy Consulting: Improve unit economics to ensure profitability amid the marketplace disruption.

Brands that proactively prepare with the right partners will gain a competitive advantage as the entire industry enters a new era focused on safety, sustainability, and removing controversial additives from America’s food supply. With expert guidance and support, food brands can expertly adapt their inventory with compliant new formulations while controlling operational costs. This marks the beginning of a new chapter in the food manufacturing industry, one that emphasizes safety, sustainability, and the removal of controversial additives from our food supply.

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