New Regulations? Food Industry Unlikely to Be Fazed

Tighter food regulations under consideration in the US likely would have little long-term effect on the companies they're geared toward -- and analysts and industry leaders even believe a further recall crisis wouldn't lead to long-term disruptions in consumer behavior.

Lawmakers have been pondering a slew of bills aimed primarily at tightening the processes by which food is imported and inspected in the US.

Among the most groundbreaking proposals are those that would establish one agency to oversee the entire food supply, compress the number of ports where food can be brought in from other countries, and establish a product-tracing system that would identify the origins of tainted food.

Some industry groups, such as the Food Marketing Institute, oppose several of the proposals on the grounds that they would hike costs for consumers and hurt food producers' bottom lines.

By and large, though, analysts say major food producers won’t be raising much of a fuss over increased regulation.

"The food industry is very careful," said Beth Lowey, an analyst at Sturdivant. "Their goal is to have the safest food on the planet. If there’s more regulation, I don’t know if this would be an issue."

But some companies that have been hit by recalls have suffered.

Multiple analysts downgraded ConAgra Foods shares this month after the company had to recall Banquet brand pot pies linked to a salmonella outbreak. The company also recalled generic pot pies under the names of Aldi, Wal-Mart , Kroger and other brands.

Other companies recently hit by recalls include Campbell Soup , Kraft Foods and Supervalu , as well as privately held Cargill and Topps Meat, both of which recalled millions of pounds of ground beef.

It's all added up to a major corporate headache that could be cured by steps the government is contemplating to assuage public fears.

Analysts, though, credit the industry for its own food safety initiatives, even in the area of product tracking, arguably the most expensive of the Congressional proposals on the table. While earnings at many major food producers have been hit this year by higher grain costs, they're not expected to suffer because of more regulation.

"In our experience, the food industry is well aware of the importance of traceability, the risks in the supply chain, and the issues surrounding a contamination or recall, and is actively working on various solutions to these challenges," said Bill Harrison, managing director of Aon’s crisis management practice.

"Traceability is a hot topic with all of our large food industry clients. There is a clear need to identify the root of a problem, make a correction and prevent a repeat in a short period of time."

CONTINUED : 'We Cannot Simply Inspect Our Way to Safety'

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