Labeling Issues Making Headlines

Earlier this summer, social media was buzzing with the news that a Whole Foods store was overcharging customers due to a labeling problem. Part of the problem for the Austin, Texas-based grocery chain was that products were being measured out in-store, something that’s not typically an issue for Wal-Mart Stores Inc., which primarily sells prepackaged items.

Still, Walmart took note of Whole Foods’ woes and issued a memo to several consumable goods suppliers. The notice stated that, when it comes to packaging labels, “offering for sale less than the quantity represented is illegal in every state.” The Wall Street Journal initially reported on this memo and there was a minor feeding frenzy as other news outlets attempted to decipher the significance of Walmart’s increased commitment to labeling compliance.

“Shoppers are more savvy than ever when it comes to reading and understanding packaging labels,” said Mike Bentel, vice president of food safety and social responsibility for J&J Family of Farms. “What years ago would have been a story or business-to-business issue, now has a critical consumer component to it. When it comes to food, shoppers trusting your product is not optional.”

The memo pointed out that the consequences of mislabeling packages can be severe and result in fines for both retailer and supplier. In recent months, more than one food manufacturer has faced scrutiny over the amount of product included in a unit. In some cases, suppliers have had to pay large fines and face scrutiny from consumer advocates and journalists.

The concerns go beyond regulatory scrutiny. Trust in Whole Foods was severely shaken when news broke about the packaging and labeling errors. In fact, financial analysts have blamed the controversy for the premium grocer’s declining stock values.

Walmart doesn’t want that to happen, and so it is being proactive in reaching out to suppliers to make sure that steps are being taken to prevent deceptive labeling.

Of course, there’s nothing new about the importance of accurate product labels. As the memo itself said, inaccurate labeling is against the law in every state.

Still, inaccuracies occur and are detected, which is why it’s important for retailers and suppliers to work together to prevent the problem from occurring in the first place.

As was the case with Whole Foods, news spreads fast on social media, and neither Walmart and Sam’s Club, nor their suppliers want that kind of publicity.

Walmart is advising companies to get tough on compliance, which means setting up teams and processes that focus on labeling and ensuring that packages meet retailer and government standards.

This can be crucial for companies that focus on sustainable packaging that may have different fill guidelines than standard containers. It is also a concern for businesses that offer special sizing for Walmart and Sam’s Club stores.

“Some of the larger companies may be able to have in-house capabilities to meet this important labeling and packaging need and requirement, while others will need to have reliable outside assistance,” Bentel said. “However they choose to comply, full compliance will be necessary for ultimate survival.”

What has also been interesting is seeing how this business-to-business issue has been playing out in mainstream media. Consumers are paying attention to the story, which may indicate a greater sophistication about labels, prices and value. This means that both retailer and supplier have a shared interest in making sure that labeling and marketing language is both descriptive and accurate. If an inaccuracy is discovered, the reputations of both businesses are at risk.

Suppliers should be prepared to hear more from Walmart about compliance issues in the future.