Food safety drive tough on smaller companies-study

Source of Article:

         Reuters, Wednesday June 24 2009

* New food safety rules could encourage mergers, report says

* Added standards benefit big producers, hurt small players

* Smaller processors, exporters, handlers under pressure

By Laura MacInnis

GENEVA, June 24 (Reuters) - Food safety checks designed to prevent dangerous contamination are making it difficult for smaller businesses to compete against larger rivals, two U.N. agencies said in a report obtained by Reuters on Wednesday.

The Food and Agriculture Organisation (FAO) and World Health Organisation (WHO) study said producers, processors and exporters in developing states were struggling to cope with new and overlapping requirements.

High-profile recalls in response to salmonella in peanuts, pistachios, mayonnaise, alfalfa sprouts and canola meal in the United States and Canada have raised consumer awareness about food-borne diseases and led to new government and industry standards.

China has also tightened its oversight following major scandals including the use of melamine -- a chemical used in fertiliser and plastics -- in milk powder and infant formula. Six toddlers died and 300,000 were made sick.

The report for next week's meeting in Rome of the Codex Alimentarius Commission, a joint WHO and FAO body on food safety, said industry moves to introduce voluntary rules on top of government oversight had produced mixed results.

"To the extent that there are economies of scale in compliance and/or larger firms are better able to access finance and other resources, compliance processes are likely to induce processes of consolidation and concentration," said the study.

The document was also discussed on Wednesday at the World Trade Organisation.

Contamination problems have affected many food majors, including Nestle, whose U.S. baking division last week recalled its Toll House refrigerated cookie dough products after a food safety warning about E. coli bacteria.

PepsiCo's North American snack unit Frito-Lay this year recalled its pistachios in the United States and Canada as a precaution during a broader recall that caused grocery chain Kroger to pull products from its shelves.

Commodities firms have also been affected. Processing plants and shipments at Cargill and Bunge have faced more stringent standards, including third-party laboratory tests to prove products are problem free.

The biggest constraints were being felt in poorer nations. The WHO/FAO study said small players may need assistance to avoid being squeezed out of the market by the drive to sanitise the food chain.

"Exporters of fresh fruit and vegetables, meat, dairy and seafood must comply with multi-tiered requirements including quality grades and standards, traceability requirements, labels of origin, phytosanitary controls and food safety standards, of both a regulatory and private nature," it said.

"It is evident that a number of developing countries, and exporters and producers therein, face challenges in complying." (Editing by Jon Boyle)



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