What’s red and found in 39,000 food and beverage products? What may seem like the setup for a joke is the on ramp to a riddle, one that’s preoccupying many in the consumer packaged goods (CPG) industry.
The answer, Red No. 40, is among eight petroleum-based synthetic food dyes the U.S. Food and Drug Administration is either banning (Red 3), revoking authorization for (Citrus Red 2, Orange B) or asking companies to voluntarily phase out (Blue 1 and 2, Yellow 5 and 6, Green 3, plus Red 40).
For CPG companies, the associated challenges are many, spanning sourcing, production, R&D, compliance, and even sales and marketing. The good news is, major CPGs have been pondering that riddle for years now, and ERP and other technologies many already have in place can help manage the transition to dyes based on plants and algae rather than the fossilized remnants thereof.
Tariffs will have a massive impact on pricing, demand, business costs, and loyalty strategies for all CPG brands, forcing them to rethink how they do business in order to remain competitive.
The CPG industry has been preparing for such moves. The European Union has already limited petroleum-based synthetic dyes or required warning labels on products using them.
Also, synthetic dyes aren’t in every supermarket product. A Wall Street Journal study found that, while those 39,000 products may contain Red 40, that and its synthetic cousins only color 13% of all food and beverages. But then, the WSJ study found that 40% of those had three or more synthetic dyes.
For CPGs, switching from those dyes to carrot, beet, and spinach powder; turmeric; paprika; spirulina; annatto; and other natural options presents a rainbow of challenges. On the customer-facing side, how will changes in appearance related to recipe reformulation affect the perception of taste and affect sales?
But the bigger challenges lie in sourcing and production.
Light, heat, humidity, and acidity can cause natural food dyes to fade or even change color, often must be kept cool, and have shorter shelf life in general. Natural dyes with different viscosities may require factories to change pumps or equipment. It can take 10 times the volume of natural color to achieve the same effect as a synthetic food dye. Then there’s the matter of the supply chain.
Paul Manning, CEO of Sensient Technologies, one of the world’s largest dye manufacturers which produces synthetic as well as natural dyes, told the Wall Street Journal that natural dyes cost about 10 times more than synthetic equivalents–and that global supply of natural dyes can’t yet handle the demand of a wholesale switch. “It’s not like there’s 150 million pounds of beet juice sitting around,” he said.
Sales of sweet and salty treats are dropping as consumer products companies grapple with shifting consumption patterns.
Given the complexities involved and the breadth of impacts switching from synthetic food dyes to natural dyes has, CPG companies must exploit their ERP capabilities to the fullest.
Given consumer preferences and health considerations, petroleum-based synthetic food dyes were on their way out regardless. The political winds merely filled the natural-dye sails more fully. The CPG industry has seen this coming and has already taken big steps toward phasing out synthetic dyes.
Their progress is once again highlighting the value of the technology investments they’ve made over the years. It also underscores the importance of continuing to integrate specialized CPG-tailored systems with core ERPs to enable teams across R&D, production, and the supply chain to innovate and deliver faster and with greater control. Because ultimately, long-term success relies on their ability to remain agile as consumer preferences and regulatory requirements change.
