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The CN Label What’s it Worth to You?
Changes and Costs Patricia Phillips, Phillips Resources Jeff Rowe, ES Foods Barry Sackin, SNS, B. Sackin & Associates
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Overview of Changes Require approval of Quality Control Plans
Require monitoring of QC Plans Label approval moved to Agriculture Marketing Service from FNS Charges assessed for all of the above services
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Quality Control and Monitoring
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Manufacturers must have an approved Quality Control (QC) program
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Overview of QC Program Guidelines
1. Cover Page 7. Maximum Cooking Yield 2. Detailed Information 8. Non-Conforming Product 3. Formulation Control 9. Label Control 4. Component Weight Control 10. Monitoring Procedures 5. Lotting Record-Keeping 6. Subgroup Size (weighing) Procedures 6 6
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CN Program Verification Services
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CN Program Verification Services
CN In-plant Monitoring Program (CN-IMP) CN Quality Control Verification Program (CN-QCVP) 8 8
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CN In-Plant Monitoring Program
Requires an AMS/NMFS representative to be present in the plant during all shifts of production of CN labeled product The AMS representative may perform quality control (i .e. weighing, sampling) at the manufacturer’s request 9 9
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CN Program Verification Services
CN Quality Control Verification Program Four unannounced reviews per year - A thorough review of manufacturer’s records - Observe at least one CN production run Frequency is reduced to semi-annual after 4 successful consecutive CN reviews Frequency is increased to monthly if the manufacturer receives an automatic failed CN review. 10 10
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AMS Service Fees (hourly)
Dairy Programs $68.00 Processed Products (non-meat) Livestock & Seed (meat plants) Poultry Programs National Marine Fisheries
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An Industry Perspective
What It Means An Industry Perspective
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Challenges – Inspection Costs
“Smaller” manufacturer – CN IMP (in-plant monitoring) AMS grading cost - $92/hr plus expenses 8 hour production day, 50 units produced per minute Product: pizza widgets ( 50 units / min ) * ( 50 min / hr ) * ( 7 hrs in production ) = 17,500 units Grading: ( $92 / hr ) * ( 8 hr production schedule + 4 hr travel ) + ( exp ) = $1138 Cost per unit for CN: $0.065
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Challenges – Inspection Costs
“Larger” manufacturer – CN QCVP Less frequent oversight, visit four times per year (can go to two) Review records, and if in order, continue with quarterly or semi-annual oversight
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Challenges – Inspection Costs
How can a small manufacturer “graduate” to the quarterly reviews? A smaller manufacturer is very similar to a smaller district; employees need to wear many different hats (i.e., the plant manager might also be the HR person, scheduler, oversee production, and have limited line responsibilities on the production line) Requires hiring a qualified specialist to maintain the documentation properly and completely – assess whether the costs for the specialist(s) exceed the cost of IMP
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Challenges – Inspection Costs
How much did the “old” system cost? If running under FSIS inspection or cross utilization, ZERO additional cost for CN
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Challenges – Documentation Costs
Ingredient declaration changes Inconsequential, non-CN related ingredient change, MUST get a new approval and CN # Seasonal fluctuations in ingredients, e.g. flour Cheese is cheese, unless ingredients vary Ingredient stream changes CN ingredient supplier, such as pepperoni, change requires new label, update all references in QC program 1. a. Swap salt and natural flavors as last two ingredients, or change artificial color to Apo-carotenal b. Fluctuations – if did not build a slight range into the formulation, would not be able to produce under CN c. Challenge even with varying USDA vendors 2.
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Challenges – Yields and Pricing
Food Buying Guide (FBG) offers inconsistent yield equivalencies Pricing and portion sizes for CN equivalent servings can vary to significant degrees
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Challenges – FBG Example
Pork, Ground, fresh or frozen, no more than 20% fat, Includes USDA Commodity 1 lb = 0.74 lb cooked lean meat. Pork Shoulder, Picnic, fresh or frozen, without bone, ¼-inch trim, Includes USDA Commodity 1 lb = 0.57 lb cooked, trimmed sliced lean meat. Practical implication: 80% lean ground pork is credited at 74% of the raw formulated weight of meat Unground pork picnics – which are typically about 85% lean – are credited at 57% of the raw formulated weight of meat Interestingly, if a manufacturer grinds these same pork picnics, they would then receive the 74% credit for ground pork
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Challenges – FBG Product Application – #1 Shredded Pork BBQ vs #2 Sloppy Joe
#1 – Serving size using A632 picnics – 4.6 oz = 2 m/ma #2 – Serving size using A632 picnics, but first grinding the meat – 3.7 oz = 2 m/ma (20% less product!) Practical implication: A reasonable goal of the CN labeling program would be to ensure that products with equal protein nutrition get equal meat/meat alternate credit. A suggestion to accomplish this: base the meat/meat alternate contribution on the lean content of the pork, not on the processing technique. Top example is shredded pork BBQ, 2nd is Sloppy Joe
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Impact on Schools Companies may legitimately decide to drop CN labeling Costs of producing CN labeling have increased Lag time to get new labels approved Due to cost or due to complexity, arduous to get QC plan written, CN label approval Sophisticated cost accounting allows companies to track specific expenses to a product category Lag – in some ways better/some ways worse – alternative is generic label
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An Operator Perspective
What It Means An Operator Perspective
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What’s changed? Transfer from FNS to AMS It’s all about the money
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When It’s already done
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What is a CN Label? insurance policy CRE adverse finding
District is held harmless
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What are the costs? Label fees Inspection fees Yields
Plant plan and approval On-site inspector during CN runs Scheduling an inspector Yields Food Buying Guide vs. commercial yields
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What are the benefits? Reduced risks Federal standards and inspections
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What’s the cost/benefit?
Example: 500 lunches /day Served twice/month = 5000 lunches/year 5 year CRE cycle = 25,000 servings @ ½ ¢/serving = $125 @ 4¢/serving = $1000 @ 7¢/serving = $1750 500 $2.00 reimbursement = $1000
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Make an informed decision
What to do? Compare cost of commercial vs. CN Run your own numbers Calculate the cost of the premium Make an informed decision
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