LABEL LAW STILL RAISES QUESTIONS

LOUISE KRAMER

ST. LOUIS -- Dazed and confused.

That's been the apparent state of retailers and regulators concerning the new federal mandates for nutrition labeling for items in the in-store bakery and deli.

While there's no question that most food products packaged by manufacturers must bear labels under the 1990 Nutrition Labeling and Education Act, it is still not crystal clear which items sold from bakeries and delis with service counters must bear the prescribed labels.

What is clear is that the labels must be in place by next week, May 8.

"There are a lot of gray areas," said Peter Houstle, executive vice president of the Retail Bakers of America. "It's going to take at least a year if not more for retailers and the Food and Drug Administration to figure it out. The trick is to have patience and do the best you can with what you've got."

At the 25th annual Bakery-Deli Conference of the Retail Bakers of America held here last month, in a special seminar presentation, Houstle helped attendees sort through the labeling regulations, with a special focus on exemptions.

The final regulations put forth by the Food and Drug Administration, published on Dec. 28, 1992, include four basic exemptions applicable to bakeries and delis, Houstle said.

1) Dollar Volume Exemption. Effective May 8, 1994, to May 7, 1995, food offered for sale by bakeries and delis that have $500,000 or less in gross annual sales are exempt from the law. This exemption applies regardless of where it is sold. In this case, Houstle said, the exemption follows the manufacturer.

After May 7, 1995, food offered for sale by bakeries and delis that do $500,000 or less in gross annual sales is only exempt when sold directly to the consumer by the manufacturer.

This exemption applies to gross annual sales based on the most recent two-year average of business activity for the entire company.

2) Unit Volume and Employee Exemption. Between May 8, 1994 and May 7, 1995, product is exempt if fewer than 600,000 units were sold in the United States in the last 12 months, and if the product was manufactured by a company that employed fewer than 300 full-time equivalent employees in the last 12 months.

A "product" is defined as one that has a specific formula, is made in a specific way or is made by a specific company. A chocolate doughnut is different from a glazed doughnut and a sugar doughnut. They

are all viewed as different products, Houstle said.

In subsequent years, the number of units sold in the United States in the past 12-month period to qualify for an exemption decreases, as does the number of employees. After May 8, 1997, foods are exempt if fewer than 100,000 units of product were sold in the United States in the past 12 months and the product was manufactured by a company that employed fewer than 100 full-time equivalent employees in the past 12 months.

3) Location exemption. Products are exempt from the nutrition labeling law if they are served in restaurants or in other places where food is served for immediate consumption.

Supermarkets with food courts would thus be exempt, Houstle said.

Houstle noted that this exemption, in particular, is fuzzy. He explained that an establishment where food is intended for immediate consumption would be a place where there are tables and chairs at which customers sit and eat. Items purchased from a cookie shop in a mall and eaten while the customer walks around would also be exempt.

4) Processed and Prepared Exemption. Foods are exempt that are processed and prepared and sold on the premises. Houstle said the terms "processed and prepared" have been difficult to define. FDA has offered some examples, though, that would make a product exempt from the labeling regulation: bread that is shaped, filled, decorated, assembled, or customized and baked at the establishment where it is sold; cheese that is sliced and portioned according to directions given by the consumer, and salads that are portioned according to directions given by the consumer.

This exemption is most important for those establishments that top the $500,000 annual sales maximum, Houstle said. If the company's bakery or deli department is totally scratch or scratch-mix and everything produced on site is sold at that location, all of the products would be exempt.

Thaw-and-sell items, Houstle said, must have labels, since they are not processed or prepared by the retailer. The first thing retailers must look at, Houstle said, is the form in which the product arrives at the site where it is to be sold. Any product that arrives as a mix or frozen dough at the site it is sold that has to then be processed is exempt. However, prescaled and molded and par-baked doughs may not be exempt. "For example, if all you're doing is getting a prescaled, premolded French bread, pulling it out of the box, throwing it into the proof box, and putting it into the oven, then putting it out for sale, that item is not exempt. You need to do something else to it along the way to qualify it as processed and prepared." 5) Satellite production. For multiunit companies that produce product at one location, sell it there, and also deliver it for sale to satellite locations where no further processing is done, the labeling law applies. This case would only be exempt if total annual company sales are $500,000 or less.

6) Custom-made product exemption. According to Houstle, FDA has agreed that products made to a customer's specifications, a birthday cake, for example, are exempt if they are fully processed and prepared at one retail site but are picked up at another site.