The Sweet Smell of Success – Smells Like Pumpkin Pie At KB Ingredients Site Visit
By Les Davies, Region 5 Advocate
On September 11, 2018, The Office of Advocacy visited KB Ingredients in Budd Lake, New Jersey. KB Ingredients has been in business more than 15 years, serving the baking and food processing industry in the United States, Latin America, and the Caribbean from their state-of-the-art distribution and production facility. On the day of our visit, they were mixing dry ingredients for pumpkin pie filling for a major retailer. I love pumpkin pie, and the aroma in their mixing room was, to me, the sweet smell of success. This wonderful smell, along with containers of sweet honey, oils, spices, and other dry food products belie some of the difficulties and challenges faced by KB and other businesses like it in the heavily regulated food industry.
The FSMA Challenge
Addressing a spike in foodborne illnesses, Congress passed the Food Safety Modernization Act (FSMA) in 2010. Prior to FSMA, food contamination was responsive – caught after contamination occurred. With FSMA, the food processors and distributers, like KB Ingredients, are responsible to implement controls and practices to prevent foodborne illnesses and monitor corrective actions and verification activities for each preventive control. The result is a substantial cost to small businesses like KB Ingredients. Small farms and some small businesses were exempted from compliance, but KB’s multi-state and international market put it outside the scope of the exceptions. Maintaining a small lab for collecting, testing, and maintaining samples adds a significant cost to their final product, as it does to all similar businesses.
Feeling the bump
KB Ingredients conducts a significant amount of business in Puerto Rico and has experienced many problems. International business in food presents its own set of unique problems, starting with international standards, but the shipping of products to Puerto Rico is even more of a challenge because the Jones Act requires all goods from the U.S. to Puerto Rico to be shipped on only U.S. built and manned ships. There are only two carriers with U.S. built and manned ships. The cost of shipping is twice as much as shipping to Trinidad and KB shipments are frequently bumped in favor of more vital goods, resulting in delays of up to two weeks. This presents its own unique set of problems where delays in shipping food products could result in unintentional expiration.
KB Ingredients told Advocacy that electronic logging devices have added costs to their shipping, making the shipping of products to KB prohibitively expensive. Shipping expenses amount to more than 3 percent of total sales, and the implementation of electronic logging devices has more than doubled the cost of freight from their preferred suppliers in California. As a result, they now purchase goods from closer suppliers at a higher cost.
Despite the challenges of FSMA, exporting to Puerto Rico, and shipping costs, KB Ingredients continues to grow. At Advocacy we work with businesses like KB Ingredients to learn about their regulatory barriers and take these concerns to the White House, Congress, and the regulatory agencies in Washington. The task at hand is to reduce the barriers to growth and prosperity caused by duplicative and unnecessary regulations. And it makes the task easier when you have the aroma of pumpkin spices surrounding you.
Advocacy was in New Jersey, Pennsylvania, and New York for Regional Regulatory Reform Roundtables September 11-13.
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For more information on Advocacy’s mission, our regulatory reform efforts or to find out where the next Regional Regulatory Reform Roundtables will be held, please visit: https://advocacy.sba.gov/regulation/regulatory-reform/.
Les Davies serves as the Region 5 Advocate for the SBA Office of Advocacy, representing small businesses in Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. Davies works with small business owners, state and local governments, and small business associations to bring the voice of Region 5 to Washington DC. He can be reached at Leslie.Davies@sba.gov.