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Obama’s Calorie Display Rules Delayed by Grocer Blowback
The lobbyist for grocers including Kroger Co. (KR) and Safeway Inc. (SWY) is calling on President Barack Obama to curtail a U.S. health law provision that mandates the companies display the calorie content of all their foods.
The Food Marketing Institute, an Arlington, Virginia-based trade group, said Obama should step in before the Food and Drug Administration puts the new rules into effect, intervening as he has with other provisions of the Affordable Care Act that carry unintended consequences.
The proposed rule is unpopular among some restaurant chains such as Domino’s Pizza Inc. (DPZ) that complain about the cost of new signage and grocers that say the diversity of their products creates a logistical nightmare. The industries have backed legislation that would limit the rules to only provide the data online in some cases, and apply the labeling only to stores with more than half their revenue from food prepared on site.
The mandate “was slipped into the ACA without debate and hearings,” said Erik Lieberman, regulatory counsel for the institute, in a phone interview yesterday. “There are options to minimize costs and to quantify the burden on industry.”
The White House Office of Management and Budget “is charged with reviewing these regulations and they have an obligation” to do it in this case, he said. “They can put a check on the FDA, and the president should make sure they do that.”
While FDA commissioner Margaret Hamburg told lawmakers in April she sought to issue a final rule this year, the agency has since declined to give a potential schedule. Michael Taylor, the FDA’s deputy commissioner for foods, said that’s because they’re still wrestling with the potential fallout.
“Implementation raises complex issues that FDA is working to address in a practical way that achieves the congressional objective of providing information consumers can use to choose healthy diets,” Taylor said in an e-mail response to questions.
The Obama administration is opting to delay some aspects of the 2010 health-care law. It temporarily backed away from restrictions on coverage for executives and a promise to offer small businesses greater choices of health plans.
Movie theaters and bowling alleys have lobbied for an exemption and the White House budget office, in a report last year, called menu labeling among the most burdensome paperwork requirements in the health law.
The budget office should push back within the confines of the law by promoting options that contain cost and quantify the burden on industry, Lieberman said.
“The cost to the grocery industry would be $1 billion in the first year,” Lieberman said.
The FDA may also impose criminal penalties on retail executives if stores fail to comply, he said.
Mary Lynne Carraway, who owns 72 Domino’s Pizza stores, said she already spends about $60,000 a year to continually update calorie totals on menu boards at 10 of her stores in Montgomery County, Maryland, where the government requires such displays. She said expanding the practice to all her locations because of the new federal rules will be too burdensome.
“This is just confusing and a big expense to us,” Carraway said in an interview.
The pizza and grocery industries are seeking help from Congress, backing legislation introduced in March that would limit the FDA’s ability to regulate food stores. The proposed legislation would let nutrition information be provided via the Internet when the majority of consumers aren’t walk-in, and labeling would only apply to stores that get more than half of their total revenue from restaurant-style food prepared on site. A convenience store that sold gas, for example, may be exempt.
“The goal is to get some common sense menu provisions,” Representative Cathy McMorris Rodgers, a Republican from Washington state who sponsored the bill, said by telephone. “To display on menu boards the hundreds of pizza combinations is really impossible.”
The aim of the rules is to provide nutrition information on food purchased outside the home amid an obesity epidemic that led to $147 billion in medical costs in 2008. Americans spend almost half their food dollars on meals and snacks eaten outside the home, according to the advocacy group National Consumers League.
The industry backlash is nonsense and calorie counts will help consumers make healthier choices, Margo Wootan, nutrition policy director at the Center for Science in the Public Interest, a Washington-based consumer advocate, said by telephone. Industry groups are hyping the costs, she said.
“Pizza has to be one of the most irresponsible segments of the restaurant industry,” Wootan said. “They want out of menu labeling. They talk about how it will cost like $50,000 a menu board, and it’s just not true.”
Pizza restaurants, convenience stores, restaurants, fast-food operations, and grocery stores would have to display calories on menus and boards under the initial plan, including drive-through menu boards. Movie theaters would be exempt under the proposal, as would alcoholic beverages.
Establishments would also have to provide written nutrition information on request, including calories from fat, trans fat, sodium, dietary fiber and protein. More than one third of U.S. adults are obese, according to the Centers for Disease Control and Prevention in Atlanta.
Kroger (KRG), the largest U.S. grocery chain with more than 2,400 grocery stores in 31 states, said in a July 2011 comment letter to the FDA that the proposal would cost the company more than $15 million to set up the program and more than $4 million a year to maintain. The Cincinnati-based chain said it would need to have thousands of items undergo laboratory tests to determine nutritional content of products such as sushi, bagels, hot soups, and olive and salad bars.
For Domino’s putting calorie counts on menu boards that must be frequently changed would cost as much as $4,800 a year per store, said Melissa Cummings, who works in legislative affairs at the Ann Arbor, Michigan-based company and is secretary of the American Pizza Community, a coalition of pizza businesses.
“That’s 10 percent of profits,” she said. Domino’s has 5,000 stores in the U.S. owned by 1,100 franchisees.
Other food retailers back the main thrust of the proposal. Wegmans Food Markets Inc., a supermarket chain based in Rochester, New York, already provides nutrition information and sees it as a cost of doing business, Jane Andrews, who manages the company’s nutrition and product labeling, said by telephone.
“People need information in order to make decisions and most consumers care about what they eat,” Andrews said.
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