Rochelle Bohm, vice president of marketing for CMI Orchards, warns that the impacts of extended producer responsibility, or EPR, laws will be significant. On “The Packer Podcast,” she says any additional expenses will be catastrophic to an industry with already tight margins.
Bohm says some of the largest publicly traded produce companies have around 2% margins, and for some companies, that figure is even lower.
“We don’t have the capacity to absorb any additional fees without risking more growers going out of business and more major consolidations, which we are already seeing in a big way in Washington state,” she says.
Bohm deliberately refers to the EPR fees as a tax, calling it “one more nail in the coffin for growers” who already have high labor costs and weather extremes. She argues that EPRs are applied at a rate based on the type of packaging material used and its weight.
“You’re assessed based on what you’re shipping into that state,” she says. “So, that to us is a tax.”
Bohm says for CMI Orchards, the tax for selling into Oregon will be between $10,000 and $20,000, which she says is low because the company doesn’t sell a lot of produce into the state. But with California, it’s another story. While she says the produce industry is awaiting the state’s final fee structure, based on the draft structures, the numbers are significant.
“We’re [potentially at] half a million to a million dollars in taxes, depending on how we look at it,” she says. “That’s our estimate for that one state.”
Bohm says those staggering figures are not something produce industry businesses have budgeted for and can easily absorb.
“I don’t think there’s a single grower commodity group out there who has budgeted this for materials going into that state, especially when we’re in most cases not the ones making the decisions for what our produce is packed into,” she says.
Bohm says it’s not just a simple solution to switch to more sustainable packaging. Often, the sustainable packaging options are two to three times the cost, which makes the EPR fees less of a cost than converting packaging.
“Let’s say the pouch bag is 10 cents, the fiber tray is 20 cents,” she says. “If the intent of this tax is to forge innovation, the tax is cheaper for us to pay than innovating into a more sustainable material because there’s nobody who wants to cover that cost.”
She says consumers want to see what they’re buying, and plastic plays an essential role in produce, from showcasing the produce to preventing food waste. CMI trialed a fiber package for sweet cherries, Bohm says, but the challenge was that the consumer couldn’t see the cherries.
“Not surprisingly, the sales just really tanked on that item, so it was nixed and we were back to plastic,” she says.
Bohm also notes that even fiber-based packaging will still be subjected to EPR taxes.
“It’s still taxed,” she says. “It’s just taxed at a lower rate with the cost structures that have been established in some of the states that have published the final cost structures. So, you’re still taxed even if you’re in the most sustainable package out there.”
Bohm points out that despite opposing EPRs, the produce industry is very sustainability-focused.
“We care more than any other industry about sustainability, and we’re investing deeply into soil health in the places that it really matters so that we can have sustainable harvests into the future,” she says. “And a lot of us have consistently presented sustainable innovations as far as packaging as well and that’s been limited by state infrastructure to be able to process it.”
And ultimately, Bohm warns that these EPR taxes that growers face will end up being passed down to the consumer, as growers can’t absorb the additional costs.
“One supplier can’t make a decision to go out and innovate sustainable materials without it impacting the entire category and also the cost, and the bottom line is it’s going to come back to the consumer,” she says. “They will end up paying this.”
With growers facing steep EPR taxes and cost increases, Bohm says the industry knows that it will directly impact the consumption of fresh produce.
“Consumption is what we need to be focused on if we want America to be healthy and for people to be able to eat produce,” she says. “We need to support our farmers; make sure they’re staying in business and make sure our land is sustainable into the future.”
