Coronavirus

Federal Regulations Are Making the Grocery Store Supply Crunch Worse

The FDA has relaxed some labeling laws in order to allow restaurants to sell groceries, but it could do more.

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Seeing empty shelves at your grocery store might come as a shock even in the middle of a pandemic—sometimes capitalism looks like how socialism looks all the time—but the problem isn't a shortage of food. It's that supply chains are struggling to adapt to changing circumstances.

Prior to the COVID-19 pandemic, about half of all American food expenditures (and about 15 percent of consumption) were at restaurants and other commercial dining establishments. Those numbers have shifted dramatically in recent weeks, and "a distribution system that was built to supply restaurants with bulk items is struggling to adapt to far smaller packaging for home use," The Washington Post reported last week.

One complication in reconfiguring those supply chains on the fly to direct more food to grocery stores and less to restaurants: federal regulations.

"Many of the ingredients, processes and regulatory requirements for manufacturing food products destined for grocery stores and restaurants are virtually identical," says Betsy Booren, senior vice president for regulatory and technical affairs with the Consumer Brands Association, an industry group that represents grocery stores and food producers. "What does most often differ is the packaging and labeling of food destined for restaurants versus grocery stores."

Think about a package of hamburger buns. The one you might buy in a grocery store contains the exact same buns that a producer might also send to a restaurant down the street. But there are two key differences in packaging. First, the restaurant isn't buying them in packages of eight or 12 at a time. Second, while the restaurant does have to comply with Food and Drug Administration (FDA) requirements for publishing nutritional information on menus, the buns they are buying don't come with as many specific labels and data on the package.

In March, the FDA waived some of its labeling requirements to allow restaurants to sell their unused food directly to the public. Repackaged, unprepared food from restaurants must contain a description of the product and the FDA's mandatory warnings about potential allergies, but more detailed information—like the "nutritional facts" found on anything you might purchase in a grocery store—can be skipped.

(Of course, even federal regulatory approval has not been enough to prevent some insane local officials in places like Boston and Los Angeles from banning restaurants from acting as impromptu grocery stores.)

"It's not terribly unreasonable to have these sort of minimal safety rules remain in place," says Gregory Conko, a senior fellow with the Competitive Enterprise Institute, a free market think tank. "But from a regulatory perspective, it would be great if that rule could apply beyond restaurants so you could ship that same product to a grocery store."

With the food service industry facing a 60 percent decline in sales due to the COVID-19 outbreak, those labeling requirements have complicated efforts to reroute food from restaurant supply chains to grocery stores.

"Companies are looking for opportunities to divert this food to other supply streams, including grocery stores," says Booren.

Easing those restrictions won't fix all the problems, but it would help. Grocery stores may be unable to accept foods packaged and labeled in certain ways because there is simply no demand from consumers to purchase large bulk containers of certain items, or because it is not cost-effective for grocery stores to break down the bulk food and repackage it into smaller portions for sale, Booren says.

That's one of the reasons why the dairy supply chain has been particularly hard hit. Stories of milk trucks dumping their goods, for example, are likely the result of too much supply and not enough demand. Restaurants consume far more milk and butter than most consumers do, and those products spoil quickly.

Some states have stepped up to the task. Wyoming, for example, passed a new law that allows ranchers to sell cuts of meat directly to consumers. Anything that can be done to ease food supply chain bottlenecks should be considered right now.

Conko says the current mess should put the spotlight on some regulatory issues that have been ignored for years, including some seemingly inexplicable regulatory overlap between the FDA and U.S. Department of Agriculture (USDA)—like the fact that frozen pizzas are subject to FDA regulation unless they have a meat topping, in which case they fall under USDA jurisdiction. Or the fact that an egg-laying chicken is regulated by the USDA, but the egg the chicken lays is regulated by the FDA until it is cracked open and used as an ingredient in another product, at which point the USDA takes over again.

With so many unnecessary or questionable regulations being suspended or abolished during the coronavirus outbreak, Conko sees an opportunity to streamline food supply chains too.

"We really ought to rethink the way we do this across the board," Conko says. "Does this now all of a sudden add weight to those arguments? Maybe a little, but I think they were pretty strong to begin with."

NEXT: A Harvard Plan To Use Massive COVID-19 Testing To Reopen the Economy

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  1. Thank you for this. I’ve thought this was a good idea for an article for weeks.

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  2. While the goal of the article is right, the article itself admits it won’t help.

    “Grocery stores may be unable to accept foods packaged and labeled in certain ways because there is simply no demand from consumers to purchase large bulk containers of certain items, or because it is not cost-effective for grocery stores to break down the bulk food and repackage it into smaller portions for sale, Booren says.”

    Which is 100% right. Unless the sellers put it in consumer sized package, which isn’t something they are prevented from doing, they just don’t want to, grocery stores cannot sell them. Government isn’t the issue.

    1. Well, there is the small problem of the sellers not necessarily being able to pull consumer-sized packages and packaging lines straight out of their asses, either. When your production line is specifically set up to handle bulk packaging, there’s no switch on the side you can just flip to set it to handle retail packaging, it’s quite an expensive re-tooling operation.

      1. The restaurants were handling that part, using takeout containers or maybe even just plastic bags/cling-wrap depending on the product. Considering all of the food handling/safety training that restaurant kitchen workers should have and the fact that the customers coming to buy groceries are probably largely customers who trust that same staff to sell them cooked food, the idea of a major safety issue seems unlikely. Probably not so much with milk, but for produce and dry goods (pasta, rice, beans) or bread it’s not a big stretch for them to do it.

        I hadn’t considered that the sticking point between a “restaurant” license and a “grocer” license might be related more to the labelling requirements than to any concern that could be keeping anyone meaningfully safer. The thing I can’t get over about the friction in L.A. is that if the restaurant owners had been selling from the sidewalk in front of their business rather than from inside the building (in the parts of town where the sidewalk space wasn’t already staked out), they’d be subject to almost no regulation since “street vending” of anything including food no longer requires any kind of permit/license and as such can’t really be subjected to much regulation of almost any kind.

    2. Yes, government is the issue, as it almost always is.

      What are retail stores supposed to do with bulk goods? Repackage them into retail packages, you say. And what about all those nutrition labels, where do they get them? How do they divide into equal sized retail packages, or do they have to recalculate all those retail statistics per package? What do they do about entering all those new custom UPC codes into the cash registers — they have to invent brand new ones that don;t clash with existing ones.

      This is PRECISELY the kind of fuck up that governments create, except that usually they are so bloated and slow that stores have time to get ready.

      You could not ask for a better example of how governments fuck things up. And you seem to be exactly the kind of damn fool statist who can’t imagine any way for a government to fuck things up. Let this be a lesson to you — literally.

    3. some local stores work by allowing customers to do their own packaging under the false premise that they are saving materials mean while Costco and others have been selling bulk to the public for years. do reason writers never get out in public even before shelter in place

  3. Restaurants consume far more milk and butter than most consumers do, and those products spoil quickly.

    Milk might spoil quickly, but butter? Not so much.

    1. they can can milk and save it for the next pandemic

  4. Or the fact that an egg-laying chicken is regulated by the USDA, but the egg the chicken lays is regulated by the FDA until it is cracked open and used as an ingredient in another product, at which point the USDA takes over again.

    Which came first, the USDA or the FDA?

    1. I’d rather not see the government attempt to “solve” this. Their most likely response would be to create a new third agency tasked with regulating the process of egg-laying by the chickens as a liason to facilitate the handoff from USDA to FDA, and a fourth to regulate the cracking process to handle the transition back to USDA. Both agencies would of-course be cabinet-level agencies with their own appointed secretaries and full departmental beuarocratic structures so as to not allow them to get muscled out of the process by the USDA.

  5. “With the food service industry facing a 60 percent decline in sales due to the COVID-19 outbreak, . . . ”

    A touch of honesty; it is not due to the C19 itself, but to the bungled, incompetent, panic driven response of fascist politicians.
    Had the governments, local and state and federal simply recommended following good sanitation practices, this would be past the peak now. And there is really no way to ever know if the deaths would have more or less. But the economic catastrophe would have much much less, like the flu each year.

    1. “A touch of honesty; it is not due to the C19 itself, but to the bungled, incompetent, panic driven response of fascist politicians.”

      ^This.

  6. Yes I suppose federal regulations gummed up workable solutions. But we would not be in need of that if the fucking government hadn’t shut a lot of shit down for no reason. All for a TFR of 0.1 to 0.2. Seriously, there has got to be repercussions in the next few elections to remove these Karens from office.

    1. “But we would not be in need of that if the fucking government hadn’t shut a lot of shit down for no reason.”

      True. But if we are going to do anything about it at the ballot box, people need to remember that it was the state governors who did this, not the feds.

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