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Wine and Spirits Industry Contends With New Rules
On Dec. 3, 2004, when he resigned from his post as the secretary of Health and Human Services (HHS), Tommy Thompson succinctly described a pressing issue for the wine and spirits industry: "I cannot understand why the terrorists have not attacked our food supply, because it is so easy to do," he said.
It turns out the Food and Drug Administration (FDA) was also concerned about the vulnerabilities; three days later, it announced additions to the Bioterrorism Act of 2002 that require food and beverage manufacturers to track the origin and final destination of all ingredients they handle. The deadline for large companies -- those with 500 or more employees -- is this month; smaller companies have until Dec. 9, 2006, to comply.
Once companies are in compliance, a wine's manufacturer, distributor and retailer should be able to track all parties who have anything to do with the wine from its creation to its sale. In practical terms, that means each player in the supply chain must be able to query its respective databases to find out who handled each ingredient or who delivered a given bottle.
Focus On: Wine and Spirits |
Top Business Challenge:
Complying with new FDA regulations
At Issue:
Regulations that require meticulous information gathering on every aspect of alcohol production and distribution
How IT Can Help:
Through increased warehouse automation and databases that track ingredients and various alcohol distribution laws
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The burden of compliance is heaviest for manufacturers, which must track the source and lot number of every ingredient, including the grain in liquor or the dozens of types of grapes that might end up in a given bottle of wine. Multiply that by the 3.2 billion bottles of wine purchased in the U.S. last year (up 4% from 2003, according to Impact Databank) and almost 400 million gallons of distilled liquor consumed in the U.S. in 2004 (up 3% from 2003, according to the Distilled Spirits Council of the United States in Washington, D.C.), and that's a lot of data gathering.
The new rules may assuage the former HHS secretary's worries. But for the wine and spirits industry, the new FDA mandate presents a significant burden. The industry is unique among consumer goods because its three-tier distribution system (manufacturers, distributors and retailers) is required by law. When Congress repealed Prohibition in 1933, it gave states the power to restrict or ban sales of alcohol. Most states that didn't ban alcohol required manufacturers to sell to state-licensed distributors. Today, distributors sell to retailers. (In some cases, the state itself is the distributor or retailer.)
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