Understanding the Food Business Risks of Non-Compliance with Food Labelling

Keywords: FSSAI, Food Business, Food Business Risks, Food Labelling

In the food industry, accurate and transparent food labelling plays a vital role in ensuring consumer safety, meeting regulatory requirements, and building trust with customers. In India, the Food Safety and Standards Authority of India (FSSAI) is responsible for regulating and enforcing food safety standards, including labelling and claims requirements. Non-compliance with FSSAI regulations related to food labelling and claims can pose significant risks for businesses operating in the food industry. This can be understood by the recent active enforcements that FSSAI has been carrying out such as action against misleading claims by Food Business Operators. There are also ways to mitigate these risks and ensure transparency towards consumers. Let us explore this in detail.

Food Business Risks due to Non-compliance

1. Fines and Penalties

Non-compliance with FSSAI regulations can lead to hefty fines and penalties. The FSSAI has the authority to impose financial penalties on businesses that fail to comply with regulations, labelling and claims requirements. The fines can vary depending on the severity of the violation and may significantly impact a company's profitability. In some cases, repeated non-compliance can result in the suspension or cancellation of the FSSAI license, leading to the closure of the business. Some of these fines are:

Source: Chapter IX Offences and Penalties, FSSAI Act

To mitigate the risk of fines and penalties, businesses should prioritize compliance with FSSAI regulations. This involves staying updated on the latest labelling and claims requirements, conducting regular internal audits to ensure compliance, and seeking professional guidance if needed. Implementing robust processes and systems for labelling compliance can significantly reduce the chances of non-compliance and subsequent financial penalties.

2. Consumer Complaints and Legal Actions

Non-compliant food labelling and claims can result in consumer complaints and legal actions. Consumers in India are becoming increasingly aware of their rights and are more likely to question and report any misleading or incorrect information on food labels. Recent example is that of the Bournvita case, wherein due to an influencer video on the claims made on the pack targeted for children the National Commission for Protection of Child Rights (NCPC) sent a legal notice to Mondelez on the same.

These kinds of consumer complaints can lead to investigations, legal actions, and reputational damage. Negative publicity, social media backlash, and word-of-mouth can spread quickly, impacting sales and long-term business viability. Rebuilding a damaged reputation is a difficult and costly process, often requiring extensive marketing and public relations efforts.

To minimize the risk of consumer complaints and legal actions, businesses should ensure accurate and transparent labelling practices. This includes providing complete and correct information on food labels, avoiding misleading claims. Regular checks can help detect any potential labelling issues before products reach the market. Establishing a mechanism to address and resolve consumer complaints promptly and effectively can also help mitigate the risk of legal actions

3. Packaging Costs

Non-compliance with labelling requirements may necessitate redesigning and reprinting packaging materials, resulting in additional costs. If the existing labels do not meet FSSAI regulations, businesses may need to invest in new packaging or relabel existing products, which can be expensive, particularly for large-scale manufacturers. These unforeseen expenses can strain a company's budget and profitability, especially if a substantial quantity of non-compliant products is already in circulation.

To mitigate the costs associated with non-compliant packaging, businesses should invest in thorough research and development before finalizing packaging materials and designs. Engaging with packaging experts who are well-versed in FSSAI regulations can help ensure compliance from the outset. Regular reviews and updates of packaging designs can also help stay compliant with evolving regulations, reducing the need for costly redesigns.

4. Food Recall Costs

In situations where non-compliant products have already reached the market, businesses may be forced to initiate a product recall. A product recall involves removing and replacing non-compliant products, which can be a complex and costly process. A food recall can have devastating financial and reputational consequences for a company. The costs associated with a recall include product and supply chain expenses, investigation fees, legal costs, non-compliance penalties, crisis management fees, lost revenue, communication with consumers, transportation, destruction or reprocessing of recalled products and damage to brand reputation. Recent example of this is the notification from FDA on presence of Salmonella in Everest Sambhar masala and Everest Masala. Preventative action and a strong focus on food safety are essential for companies to avoid the significant impact of a recall, both in terms of financial loss and damage to their brand image in today's complex and global food industry. Product recalls not only lead to financial losses but also erode consumer trust and brand loyalty.

To minimize the risk and costs associated with product recalls, businesses should establish rigorous quality control procedures throughout the production process. Conducting regular internal audits, implementing traceability systems, and maintaining comprehensive records can aid in early detection of non-compliant products. Developing a crisis management plan that includes clear protocols for product recalls and effective communication with consumers can minimize the impact on consumer trust and mitigate the financial and reputational risks associated with recalls.

5. Knowledge Cost

Information and knowledge on FSSAI regulations is concentrated on a few highly qualified and experienced experts. They bring value and intelligence to a Food company and ensure compliance of all regulations concerned. Migration of such experienced experts is a huge risk to Food Businesses. Apart from that lack of skilled workforce and any contingencies can lead to great Business risks.

To mitigate the knowledge costs, its important for any organization to retain and ensure good skilled experts on the task along with all necessary support and access provided as needed.

6. Other Business risks

Non-compliance with food labelling regulations puts consumers at risk and can harm their health. It can also make it difficult for businesses to enter international markets and compete with compliant companies. Following FSSAI labelling rules is essential to protect consumers, gain market access, and stay competitive.

7. Loss of reputation and consumer trust

The biggest loss is that of consumer’s losing trust in the brand, which can take years and substantial amounts of investment to repair and rebuild brand reputation. Starting with crippling effects on immediate sales, to losing competitive advantage, loss of eco system confidence on brand and business, effects can be far lasting in market and consumer memories.

Conclusion

The importance of compliance with food labelling and claims regulations cannot be overstated. Non-compliance with food labelling and claims regulations enforced by FSSAI in India poses significant risks to businesses operating in the food industry. These risks include financial penalties, consumer complaints, reputational damage, increased packaging costs, and the expenses associated with product recalls, etc. To mitigate these risks, businesses should prioritize compliance by staying updated on FSSAI regulations, ensuring accurate and transparent labelling practices, and regularly reviewing and auditing their products to ensure compliance with applicable standards.

This can be achieved seamlessly by subscribing to India’s 1st Packaged Food Labelling Model to create 100% FSSAI Compliant Labels. To visit the FoLSol website please refer, Packed Food Labelling | FOLSOL (foodlabelsolutions.com)

By prioritizing compliance, businesses can protect their reputation, maintain consumer trust, and minimize the financial and operational risks associated with non-compliance.

About LabelBlind®

Established in 2018 and based in Mumbai, LabelBlind® specialises in the area of Digitising Food Labelling and Regulatory Compliance. FoLSol® by LabelBlind® presents India’s 1st Digital Food Labelling Solution. The SaaS platform supports Food Businesses to be Labelling Compliant and Build Consumer Trust. FoLSol® by LabelBlind® is designed to strengthen the food labelling ecosystem across a wide spectrum of services including, Packed Food Labelling, Menu Labelling, Exports Labelling, Nutraceuticals and Food Supplements Labelling and Labelling for Ecommerce players. FoLSol® Digital Food Labelling Solution is fast, accurate, and cost effective. The company is ISO9001 certified in its processes.

References

• Food Safety and Standards Authority of India (FSSAI). In the Media. FSSAI

• Chapter IX Offences and Penalties. Food Safety and Standards Act, 2006.

• Microsoft Word - FOOD ACT (fssai.gov.in)

• Bournvita sugar content row: NCPCR asks health drink brand to remove 'misleading' ads. India News - Times of India (indiatimes.com)

• Bournvita sugar content row: NCPCR asks health drink brand to remove 'misleading' ads | India News - Times of India (indiatimes.com)

• The Price of Safety: Understanding the True Cost of a Food Recall. Feb, 2023.

• The Price of Safety: Understanding the True Cost of a Food Recall | ESHA Research

• Recall of Everest Brand Sambhar Masala and Garam Masala in the U.S. Due to Possible Health Risk. June, 2023.

• Recall of Everest Brand Sambhar Masala and Garam Masala in the U.S. Due to Possible Health Risk | FDA