Barriers to Entry Stuffed with Regulations

The new nutrition labeling rules proposed by the FDA are a positive idea with implementations that puts enormous strains on smaller companies. The irony is that an administration that thinks more regulation is needed to protect the consumer against herself is handing another leg up to the mega companies that dominate most food and consumer categories.

 

How This Effects Smaller Companies and Start-Up’s

According to the Wall Street Journal, over $88 billion in retail food sales comes from artisinal and smaller food companies. That’s about 10% of the market, but it’s the vital part of the market for new items and low cost producers. Unfortunately as the article points out, new rules around labels are expensive to implement both from the printing point of view and documenting the content. Consumers pay for it (a tax of sorts) through higher prices.

The article points out that larger consumer product companies, whether in food or personal care are always updating labels. They budget new printing plates and the associated costs of compliance, but smaller companies have lower sales over which to spread the new fixed costs. In addition it’s a major compliance effort to document all of the data behind the labels.

We are FDA regulated and often use consultants in addition to stretching our team, but it’s not easy. Deep down every new regulation makes me smile because it’s just harder for the competition to keep up. When you add the FDA, EPA, OSHA and the alphabet soup of what we all deal with to get products on the shelf, it’s amazing that a new company or product can start up.

A question to the readers: Do you smile or cry when you hear about new regulations?