WASHINGTON, D.C. — With typical produce industry profit margins hovering under 2%, the sweeping expansion of Extended Producer Responsibility (EPR) legislation could prove financially devastating for suppliers of fresh fruits and vegetables.
That was the urgent message at the International Fresh Produce Association’s recent Washington Conference, where panelist Rochelle Bohm of CMI Orchards, warned the “exorbitant taxes” associated with EPR compliance will quickly swallow up what little financial breathing room produce companies have left.
EPR essentially shifts the financial and operational burden of packaging waste management away from local municipalities and taxpayers and directly onto the “producers,” the definition of which is still unclear, but would typically include brands, grower-packer-shippers, or importers who introduce packaged goods into the marketplace.
IFPA has expressed concerns that EPR laws impose new financial and administrative burdens across the entire fresh produce supply chain — from growers and distributors to retailers and consumers. The association warns that these regulations could ultimately undermine food security by raising prices and reducing access to fresh, nutritious fruits and vegetables.
“[To] those of you who think EPR doesn’t affect your business … or that it’ll go away, or that someone will fight it and we won’t have to pay this tax, the reality is it’s here,” the vice president of marketing for CMI Orchards told the audience. “We need to band together and talk to our local trade associations, talk to Congress and fight this fight for programs that protect produce from having to pay this tax, because the tax is exorbitant and it’s not something that we have margins to cover.”
While most produce companies operate with razor thin margins compared to CPG companies that operate on 15% to 20% margins, produce is paying the same EPR rates as CPG, she says.
“Right now, it’s tough times,” Bohm says. “For us, Oregon is about $10,000 to $20,000 depending on how we classify and categorize some of our packaging, and we’re looking at a million, maybe more, in California,” she says. “There are 17 states right now with either active legislation or legislation that’s in draft. We’re anticipating all 50, because why wouldn’t states want free money to fund infrastructure and operating costs for the state?
“This is here, [and] we all need to be fighting this any way that we can, because it’s not going away unless we band together,” she says.
IFPA’s EPR policy position is that because fresh produce operates on these thin margins, EPR laws must be evaluated not just through an environmental lens, but as food and supply chain policy.
“There are millions at stake,” says Max Teplitski, IFPA’s chief science officer, and panel moderator.
To date, seven states — California, Oregon, Colorado, Maine, Minnesota, Maryland and Washington — have enacted packaging EPR laws, with over a dozen more states considering similar legislation. Adding to the complexity: each state has different EPR rules, he says.
This lack of a harmonized national standard means a grower shipping berries or tomatoes across state lines must navigate a logistical soup of conflicting state definitions and reporting metrics.
And the financial stakes for non-compliance are sky high. While penalties for EPR regulations vary by state, daily penalties range from $1,000 to $50,000 per day for failing to register, report or pay fees. California at $50,000 a day and Oregon at $25,000 have the highest penalties. In many states, these fines escalate for repeat or multi-day violations, threatening to quickly put companies out of business for non-compliance.
An Inadvertent Innovation Penalty
Teplitski says he’s spoken with many produce companies that have invested millions of dollars and spent years optimizing alternative packaging, such as cardboard and ultra-functional PET. However, because these materials are highly innovative, they are forced to carry a No. 7 or “other” catch-all classification inside the chasing arrows recycling symbol.
Ironically, under EPR laws, the No. 7 category often carries the highest fees in most states, he says. As a result, companies are essentially being penalized for their sustainability innovations.
“How do you operate under these conditions?” Teplitski asked panelists.
“It’s hard, Max, because produce packaging can’t just be changed overnight,” says panelist Aaron Fox, executive vice president for Fox Packaging, who adds that produce packaging requires time for rigorous functionality testing to ensure it will protect highly perishable product throughout the supply chain.
“That’s a big problem,” says Fox. “The bigger problem is the movement of goalposts. A few years ago, we were all discussing compostable materials because that was considered recyclable — that was considered the right direction to go, and there was a lot of investment with people changing their packaging and looking at respiration rates — anything they could to get that lower number … on the recycle scale.”
Now, says Fox, under SB 54, California says that sustainable packaging can’t be called recyclable — even if it is — because the state doesn’t recycle it.
“It’s not about the package anymore,” Fox says. “It’s not about what’s recyclable. It just depends on that particular state and whether they collect it at the curbside, and whether they actually recycle it, and what they do with it at the end. So even if it’s a CAA [Circular Action Alliance]-designed program, [like it is in California], every state may have different capabilities. You gotta have some consistency, and you can’t keep moving the goal,” he says.
IFPA’s position is that EPR policies should not penalize packaging formats that perform well in food protection but lack consistent collection systems for composting.
And where states pursue EPR policies, IFPA says policies should be “carefully structured and material agnostic.” Additionally, it says “EPR frameworks should encourage the use of recycled, recyclable, compostable and novel, but proven, materials, while also supporting investment in the infrastructure necessary to recover those materials.”
Sightline to Increased Consumption
Fresh produce relies on packaging to ensure food safety and quality compliance, prevent spoilage, adhere to labeling and traceability legislation and regulations, and drive fruit and vegetable sales with materials that allow the consumer to see the fruits and veggies inside, industry leaders argue.
“If we want consumers to eat more produce, they have to be able to see what they’re buying,” says Bohm. “Plastic is very important to fruits. It not only protects food waste; it protects quality. But it also makes sure that people can see what they’re buying. They want to see the condition and quality of the produce before they buy it.”
Bohm says that under the EPR rates, there was an incentive to package produce in fiber versus plastic, but the cost to innovate into fiber results in two to three times the cost of that material.
“Even with a lower tax rate, we’re still paying two or three times more for that piece of packaging that produce is packed into,” she says. “So, the incentive to innovate under the current cost structure just isn’t there. We should not be penalized for not bringing innovations to the table at the detriment of consumption.”
Colorado Potato Exec on EPR Impact
Mike Hulett, president and CEO of the Monte Vista, Colo.-based Farm Fresh Direct, a grower-owned shipper and marketer of fresh potatoes, attended the Washington Conference, giving Colorado’s potato industry a voice on the Hill.
“The cost potential is tens of thousands of dollars to hundreds of thousands for our organization alone,” says Hulett. “It depends on how widely [EPR] is adopted, where you ship to and where you ship from and what material you use.”
Hulett further notes the timeline for EPR was “extremely rushed,” and though EPR has existed in some fashion since 2021, specifically in Oregon and Maine, the details were unknown and at best, “unclear.”
With rising food inflation and growing consumer concern around affordability, many shoppers have shifted to more economical 5- or 10-pound bags of potatoes, leaving the produce industry wondering how EPR will impact retailers and consumers.
“Produce is not going back to only bulk sales ever again,” says Hulett. “Value to the customer comes in larger pack sizes made possible by plastic. That affects retailers and consumers equally negatively.”
Hulett foresees EPR impacting retailers from a merchandising standpoint and consumers from gaining access to healthy foods at decent prices.
“Sensibility needs to prevail,” he says. “Producers and retailers alike are doing their best not to pass cost on to consumers. However, the cost will be passed on to the consumer ultimately.”
And as potatoes are an interstate vegetable and currently each of the seven states with EPR in place have different rules, Colorado’s potato companies will need to navigate these complexities.
“This is a compliance nightmare for producer and retailer,” says Hulett. “We already have plenty of retailer requirements and regulatory requirements. All these require people and systems to manage, which adds cost not to mention the use fees in [EPR].”
“We would like to see produce exempted from this on grounds of packaging (mostly plastic) is the major way to get healthy foods to consumers,” Hulett says. “We all must do our part to be sensible on our impact to the environment. Farmers live that daily. We believe there is a smarter way.”
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