In recent years, individual U.S. states have begun to take increasingly assertive stances on regulating food manufacturing practices, ingredient use, and product labeling. A prominent example occurred when West Virginia implemented a ban on seven artificial food dyes, marking a significant shift in state-level policy. This movement towards fragmented state regulations creates a complex landscape for food manufacturers, who must navigate divergent rules across multiple jurisdictions. A groundbreaking study from the University of Illinois Urbana-Champaign sheds light on how food manufacturers decide their strategic responses to such varying state regulatory demands and the underlying economic and operational factors influencing those decisions.
States possess considerable constitutional authority to enact rules designed to safeguard the health and well-being of their residents. However, when many states develop their own food safety and labeling laws independently, the result is a patchwork of regulations that can be challenging and costly for companies operating nationally. This decentralized regulatory environment poses distinct challenges for food producers in maintaining compliance while also managing costs and market access. According to Maria Kalaitzandonakes, assistant professor at Illinois’ Department of Agricultural and Consumer Economics, understanding firm behavior in this regulatory mosaic was a core objective of their research.
Together with her colleague, William Ridley, Kalaitzandonakes developed a detailed modeling framework to categorize and anticipate the variety of strategic responses food manufacturers adopt when confronted with state-specific mandates. The model was empirically validated through interviews and consultations with industry stakeholders, ensuring its real-world relevance. Ridley, an assistant professor specializing in agricultural economics, emphasizes that food manufacturing is a significant sector not only for Illinois but for the entire country, making an understanding of these dynamics essential for both policymakers and businesses alike.
The research identifies four primary strategies food manufacturers use in response to state-level regulation. First, firms might reformulate their products to meet the most stringent state standards and then market this uniform product nationwide. Second, companies may produce differentiated versions of their products, maintaining separate formulations according to regional regulatory requirements. Third, some firms may opt to withdraw their products entirely from states with stricter standards rather than incur compliance costs. Lastly, a small subset may disregard the regulations altogether, continuing to sell non-compliant products while risking legal penalties.
Each of these strategies is shaped by a complex interplay of factors, including the direct costs of reformulation or duplicated production lines, the size and importance of the affected market, anticipated consumer response, and the likelihood and severity of regulatory enforcement actions. The decision-making calculus also incorporates potential reputational risks and long-term brand positioning considerations. Applying their framework, the researchers analyzed three distinct case studies providing real-world context to their theoretical model.
The first case centers on Vermont’s 2014 legislation mandating the labeling of genetically modified (GM) ingredients. Despite the law’s specificity, many firms chose to produce a single product version compliant with Vermont’s standards and distributed it across the United States. This approach was economically rational due to Vermont’s relatively small market size. For firms unprepared for immediate reformulation, temporary withdrawal from the Vermont market was a practical interim measure until compliance adjustments could be completed.
The 2019 enactment of allergen labeling requirements mandating sesame disclosure in Illinois offered a contrasting scenario. Here, the researchers observed that certain manufacturers chose to ignore the regulation outright. The cost-benefit calculation in this case was affected by the relatively low penalties for non-compliance and the logistical challenges of reformulating or separately labeling products. This example highlights how the specifics of enforcement mechanisms and penalty severity critically influence firm behavior.
California’s recent legislative ban on several food additives presents a third illustrative example. Enacted in 2023 and slated for full enforcement in 2027, California’s large consumer market significantly shifts the strategic landscape for food manufacturers. Firms are unlikely to cease sales to California given its market size and economic importance. Also, producing multiple product versions to comply with differing state rules can impose substantial operational complexity and cost. Thus, many companies favor reformulating their products to comply with California’s standards and then marketing the reformed products nationwide, which simplifies logistics but requires significant investment in product development and testing.
However, this single-solution model becomes less viable as more states enact varying regulations affecting similar ingredients or additives. The proliferation of non-harmonized regulations—where differences exist in the scope of ingredients, exemptions, or timelines—exponentially increases complexity for manufacturers. This evolving regulatory landscape demands sophisticated strategic decision-making and may drive calls for greater regulatory harmonization at the federal level to ease interstate commerce burdens.
The study also underscores that state initiatives sometimes act as precursors prompting federal government action. Legislative efforts at the federal level, such as the national mandate for labeling genetically modified ingredients or expanded allergen labeling requirements including sesame, often follow period of state-level regulatory experimentation. These federal policies aim to create uniform standards and alleviate the complexities companies face when selling nationwide.
Kalaitzandonakes highlights that state-level regulations serve not only to protect public health directly but also as a powerful lever to influence national policy and corporate behavior. As advocacy for stricter food safety and labeling persists at the state level, these combined pressures shape the trajectory of federal food regulation more broadly. The increasing patchwork of requirements reflects a dynamic regulatory environment that manufacturers must navigate with agility.
The research featured in the Journal of Food Distribution Research offers valuable insights into how firms balance regulatory compliance costs, market considerations, and enforcement risks in their strategic planning. This nuanced understanding is essential for stakeholders across the food supply chain, including policymakers aiming to design effective yet practical regulations, and manufacturers striving to maintain competitiveness and consumer trust amid growing regulatory complexity. In an era where both consumers and regulators express heightened concern over food safety and transparency, the interplay between state and federal regulation will remain a defining challenge for the food industry.
As states continue to pursue diverse regulatory agendas, the food manufacturing sector faces increasing demands for adaptive innovation in product design and compliance strategies. This study marks an important step toward comprehensively analyzing these trends and providing a framework for anticipating future industry responses. The evolving regulatory mosaic will require ongoing research and policy dialogue to balance public health goals with economic feasibility and national supply chain efficiency.
Ultimately, the insights generated by Kalaitzandonakes, Ridley, and their colleagues underscore that food regulation in the United States is at a crossroads: a decentralized patchwork system encouraging localized public health interventions contrasts with the need for harmonized federal standards to support interstate commerce and operational scalability. How this balance unfolds will significantly shape the future of food manufacturing and the broader food system.
Subject of Research:
Not applicable
Article Title:
Food Manufacturers’ Decision Making Under Varying State Regulation
News Publication Date:
9-Apr-2025
Web References:
https://www.fdrsinc.org/wp-content/uploads/2025/04/JFDR56.1_1_Kalaitzandonakes.pdf
References:
Kalaitzandonakes, M., & Ridley, W. (2025). Food Manufacturers’ Decision Making Under Varying State Regulation. Journal of Food Distribution Research.
Image Credits:
College of ACES
Keywords:
Economics, Food production, Economic decision making, Food policy, Food industry, State law, Food additives
