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NEW FOOD SAFETY RULES SPROUT NEW BUSINESS -Wall St. Journal

 

 

When E. Coli Becomes a Business Opportunity

 

As vigilance of food-borne pathogens increases, companies race to capitalize on needs of farms, processors

Dozens of companies are sprouting to help U.S. food makers tackle a wave of new federal safety regulations and intensified enforcement of the nation’s food laws.

The startups are racing to capitalize on the need by farms and food processors to step up vigilance of food-borne pathogens after a string of outbreaks in the last decade have sickened thousands, prompting a major overhaul of U.S. food safety laws and stepped-up criminal prosecutions of executives at companies implicated in the cases.

Some fledgling food-safety companies are getting a boost from venture-capital investors, which pumped $179 million into the segment over the four years through 2014, up 40% from the previous four-year period, according to Dow Jones VentureSource.

“Food companies are hungry for help right now,” said Diane Wetherington, chief executive of Seattle-based iFoodDecisionSciences, which sells mobile applications that enable food producers and processors to collect and analyze data to prevent disease outbreaks and product recalls.

Her two-year-old company is among many startups that use technologies such as cloud-based computing and big-data analytics to create relatively low-cost solutions for food makers that often operate on tight margins. Other food-safety vendors are offering services such as rapid pathogen testing or worker training.

The main federal rules are set to be finalized by next spring for the U.S. Food and Drug Administration’s Food Safety Modernization Act, which Congress passed in 2010 in the most sweeping revision of federal food-safety laws in more than 70 years. 

Food companies also are on high alert after several successful efforts by the Justice Department to prosecute executives linked to deadly outbreaks. In a landmark case last year, a federal jury convicted the former owner of Peanut Corp. of America of conspiracy and other felony charges following a 2008-09 salmonella outbreak that resulted in the deaths of nine people and sickened more than 700 others. Last month, two executives at what was once among the nation’s biggest egg companies were sentenced to three months in prison for their roles in a major salmonella outbreak in 2010.

High-profile food recalls also are serving as a cautionary tale for food companies, the latest of which saw Blue Bell Creameries LP pull its products from stores after health officials linked the Texas company’s ice cream to a multistate listeria outbreak that resulted in three deaths and additional illnesses. 

The federal safety rules, which give greater powers to the FDA to prevent contamination, create extensive paperwork for farms and food processors. That presents an opportunity for firms that want to help companies gather data, boil it down and comply with regulations.

“We saw document chaos out there,” said Ms. Wetherington of iFoodDecisionSciences.

Using her company’s mobile applications, growers and food processors can log data from a field or plant floor and receive instant alerts about hazards, such as the presence of animal droppings in a row of leafy greens or high chlorine levels in a water tank. They then can receive instructions to remedy the problem instantly. The software makes obsolete the clipboards and filing cabinets widely used in the industry and speeds the distribution of information, she said.

For a year-round grower, a monthly subscription to iFood’s data collection and analytics app costs a few hundred dollars a month.

iFood, launched in 2013, has more than a dozen clients, including Mann Packing Co. and Church Brothers Produce, a California firm that supplies vegetables to Wal-Mart StoresInc., Chipotle Mexican Grill Inc. and other food purveyors.

“When a customer calls to say ‘I found some [tree] leaves in my kale,’ I can more readily identify where it came from,” pinpointing the exact field, crew, time picked and prior irregularities at the same location because of the iFood’s app, said Drew McDonald, vice president of food safety at Church Brothers.

Beyond enhancing a products’ traceability, Mr. McDonald said the tool allows him to aggregate data across multiple growing seasons, performing more sophisticated risk analysis, and identifying recurring hazards such as routinely high levels of bacteria like E. coli in a water source used for irrigation.

Some food-safety startups began by happenstance. Juli Ogden, a Washington cherry farmer, started a business shortly after receiving a 328-page set of food-safety standards adopted by her packing house, along with a mandate to comply within 90 days. Overwhelmed, Ms. Ogden said she cut the paperwork for the guidelines sevenfold and developed a one-day training program that prepares farms to meet new production standards—many of which are precursors to the new FDA rules—required by many retailers.

“I started out with one apple farmer,” said the 59-year-old founder of the Farm Plan, who has since trained growers, mostly in her bare feet, from more than 500 farms from California to Florida. “The fear is you either pass inspection or [suppliers] won’t sell your product. The problem is no one has explained to growers how to meet the rules.”

Some big food companies are investing in food-safety startups. General Mills Inc., the maker of Wheaties cereal and Yoplait yogurt, said it has provided funding or expertise to four companies working to develop methods to quickly test foods for the presence of toxic pathogens. New pathogen-testing technology that can be used in-house saves General Mills at least 10 hours, a spokeswoman for the company said, cutting the time that food products must sit in plants or warehouses awaiting test results.

Tougher requirements from food retailers also are helping fuel the boomlet, with industry giants like Wal-Mart demanding more precautionary measures from suppliers before products land on grocery-store shelves. Wal-Mart in recent years has required vendors to comply with globally recognized food-safety requirements, and has enhanced safety standards for its beef and poultry suppliers. It also has developed a hand-held device that allows employees to collect more in-store data, such as deli-case temperatures, to monitor food safety.

Still, it’s an uphill battle, said Frank Yiannas, Wal-Mart’s vice president of food safety. “We’re in a race between the public’s ability to detect and report outbreaks and the industry’s ability to prevent them,” he said. “Right now it feels like detection is outpacing prevention. We’ve got to work to fix that.”

Write to Jesse Newman at jesse.newman@wsj.com

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