yeast nutrients are. It seems to me well accepted over all of the years that it belongs in bread and what its function is.

Mono- and diglycerides are the ingredients that are added to keep bread soft and to make the texture of the bread chew better and feel better to the consumer in the mouth. Now, instead of a simple term we have to go into all the details, sodium stearoyl-2-lactylate, ethoxylated mono- and diglycerides. Calcium propionate added to retard spoilage, this notifies the consumer that this is added to prevent spoilage. Now, we say a preservative.

I submit, gentlemen, that we have a billboard of information that is thoroughly complete. As law-abiding citizens we label them. However, in writing them, and other gentlemen will tell you of the problems it causes, in my mind the question is, have we helped the consumer? Have we helped in providing this information? I know we have taken away much of the flexibility which will enable him to do research for the consumer. There is no flexibility once every detail is spelled out. What is he to do if a new ingredient comes along?

Other aspects of the food industry who manufacture for inventory have mechanisms to do this. They can check out ingredients in their laboratory and put them on different types of tests, but the baker who bakes only on a day-to-day basis and cannot keep inventories, he will have to pass up research on improvements or he has to do something that ends up with bread that is not properly labeled.

I submit to you that the trade-off in advantages to the consumer with all of this information, may be questionable. Against that there has to be a trade-off in sacrificing flexibility. That is the flexibility the baker has to continually improve his product so that today's bread is the unique food of the United States. It is in a unique position. It is the one food, outside of water and milk, that you can eat with any meal, three meals a day, year after year after year. I submit to you that bread is a unique food and it is entitled to the unique labeling requirements that were allowed by the Food and Drug Administration in 1940. And taking this away there have been no hearings held. There is no opportunity for this information to be debated and considered.

Enriched rolls: This is a similar situation. Here is the picture. It is not quite as extreme, but again, it is the same thing. I will not take your time to go into all of these things but again you can see: Enzyme active soy flour, ferrous sulfate. Again, if a baker uses reduced iron as the iron source of nutrition it causes a problem.

Potassium bromate: Is the consumer's best interest served by that? I do not know. In the past it was listed as dough conditioners. There is no consumer who ever asked me for information about how it was reduced.

Finally, enriched bread. Here is another situation. In the past this. designation was often used. Enriched with thiamine, vitamin B1, riboflavin, vitamin B2, niacin, iron, and calcium. In January we will not be able to say that. We have many other forms of iron, reduced iron. It may also be ferrous sulfate, thiamine, and riboflavin.

Gentlemen, that is the picture and that is the illustration of how we will have to put these regulations into effect. It is not clear to my perception that we have given the consumer gainful information which the consumer will benefit from, but it is clear to me that we have taken away the flexibility to the baker to continually improve his product for the consumer.

Thank you.

Mr. BOTTY. Before turning the testimony over to our next panel member, I want to take this opportunity to express the thanks of the Independent Bakers' Association to the subcommittee for this hearing so we can bring this serious labeling crisis to the attention of the Congress and, hopefully, the American public.

Thank you, Mr. Chairman.

Mr. Russo. Thank you. We certainly appreciate your testimony. The next witness will be John J. Fox. Would you identify yourself for the record, please?

Mr. Fox. My name is John H. Fox, chairman of the board of directors of the W. E. Long Co., Independent Bakers' Cooperative. W. E. Long Co. is the Nation's second largest bakery cooperative with offices at 309 West Washington in Chicago. Our group represents 66 member bakeries in all parts of the United States and has annual sales in excess of $600 million.

Also, Mr. Chairman, I am an operating independent baker, serving as president of Fox's Holsum Bakery, Inc. in Wilmington, N.C. Therefore, I feel I know and understand firsthand the practical difficulties that this FDA regulation on labeling creates for all bakeries, but especially the independents, many of whom have joined together in cooperatives such as W. E. Long Co., to survive in the highly competitive bread industry. Both W. E. Long and Fox's Holsum Bakery are active members of the Independent Bakers Association.

Let us look next at the economic effects of the U.S. Food and Drug Administration Order No. 21 CFR 101.4. This is the economic catastrophe unforeseen by the creators of the order.

The lead time for package printing indicates he has now become a captive of "No product change, no formula change." He is at the mercy of specific suppliers, in some cases just one supplier, with no flexibility to maintain stable or reduced prices.

Second, the baker will be forced to dramatically increase his inventory of packaging materials, since supply will force him to make formula changes and no two product items ever become unavailable at the same time. Thus, his packaging costs, across broad product lines, are continually rising from the obsolescence of packaging inventories. Just one minor inventory ingredient change under FDA's edict will totally destroy the value of thousands of dollars of packaging no longer usable. The inventory cost increase will effect cash flow problems, and the independent baker does not need any additional problems such as restrictions in his cash flow.

Third, any product improvements, whether mechanical or chemical will further make packaging obsolete. The alternative will be to delay or postpone improvements in baking operations that are for the consumers' welfare.

Fourth, employment will be affected. The loss of ingredient flexibility means the baker will be forced to shut down when strikes or natural disasters restrict supply. Label printing lead time averages not less than 8 weeks and in many cases much longer in order to gain maximum economy for the consumer. The loss in flexibility will force the baker to shorten lead times which will raise costs to the consumer. Fifth, baking uses great quantities of new energy in liquification. baking and refrigeration. Energy conservation and shortages can force

ingredient changes that may not be permitted by this labeling requirement.

Sixth, breads and rolls, and other bakery products are so nutritious that they spoil rapidly due to the growth of molds. During moist and warm weather, molds grow more rapidly and the baker needs to be able to make corrective ingredient changes in order to provide the consumer with uniformly fresh products. Otherwise, there would be great economic loss to the consumer due to development of unattractive mold before the bread is fully consumed.

Seventh, special items are supplied as a service to the public, such as low sodium breads that require special wrappers. These are lowvolume times for which we buy wrapping supplies 8 to 12 months in advance in order to keep costs to the consumer low. Loss of labeling flexibility will shorten practical lead times and will raise packaging costs for which the consumer will ultimately pay.

Mr. Chairman, and members of the subcommittee, I submit that this order will hurt most of all the independent baker who operates from a single plant. He lacks the resources of the bakery giants to finance the greater inventories that will be required, and he lacks the flexibility to recover from ingredient shortages that a multiplant operation can accommodate. The end result may well be the accelerated decline of independent wholesale bakeries in this country, a trend too evident without this edict. The employees of the Nation's bakeries and their families may suffer from periodic shutdowns and the eventual closings of plants. And, Mrs. Consumer will end up with a higher priced bread, a higher food, which other witnesses will detail, plus a label that few, if any, will understand or need.

The Independent Bakers Association contends that the FDA Order 21 CFR 101.4; formerly 21 CFR 1.10 is not needed for reasons of health. It is the result of pressure from self-appointed consumer groups for antibusiness action. The 1940 FDA orders under which the baking industry has operated are fair and comprehensive. In the intervening 37 years, they have proven beneficial to anyone. This loss of the bakers' freedom will have three very undesirable effects on the Nation. 1. Unemployment; 2. Higher bread and food prices; and 3. Consumer confusion.

Thank you, Mr. Chairman, and members of the subcommittee, for this opportunity to present our side of this question.

Mr. IRELAND. Thank you.

Mr. BOTTY. Mr. Chairman, I now present Mr. Frank Manno. Mr. MANNO. Mr. Chairman and members of the subcommittee, my name is Frank Manno. I am vice president and general manager of Schafer's Bakeries in Lansing, Mich. Schafer's and its parent company, Perfection Biscuit Co., are both members of the Quality Bakers of America Cooperative, the Nation's largest cooperative of wholesale bakers, with sales in excess of $900 million and just less than 100 bakeries. QBA has been a driving force in attempting to get these bread labeling rules modified, cancelled, or at least postponed so the full implications can be examined. Therefore, I am pleased to represent QBA at these hearings.

Let me state here, Mr. Chairman, how grateful we all are at IBA to you and members of your subcommittee for scheduling this ses

sion. We hope from this hearing will come some assistance for the baker's plight with this new regulation which will unquestionably result in another group of independents giving up the fight by either closing up or selling out to the giants.

As a member of the IBA Labeling Committee I have been particularly interested in the questions of costs, the cost of these regulations in terms of extra packaging needed to conform to these new rules. At my suggestion a committee at QBA has examined this question in detail and the following examples illustrate what their costs would be.

Estimated cost of package changes to comply with the new labeling regulations in a typical 1.0-route wholesale bakery, $44,460 as illustrated by Sy Jackel earlier.

For enriched bread the present label requires five lines. The new label requires eight lines.

Cracked wheat requires four lines. The new label requires nine lines.

Enriched rolls require six lines. The new label requires seven lines. The compliant lies in the fact we would need new labels. These cost about $300 each. If the entire wrapper has to be redesigned in order to provide sufficient room and proper compliance with regulations, new engravings will amount to $1,200 per wrapper.

A review of typical 100 route wholesale bakeries indicates 114 wrappers requiring changeover with new regulations as follows: Main line white breads, 10 wrappers are involved. Variety breads, 14 wrappers; buns and rolls, 10 wrappers; secondary white breads, 4 wrappers; private label breads and rolls, about 76 wrappers for a total of bread and rolls of 114 wrappers.

Now then, let's assume that we have 90 percent of those wrappers satisfied by new ingredient panel engravings. 90 percent of 114, multiplied by $300 comes out to $30,780.

The rest, or 10 percent, requires full wrapper redesign at $1,200 per for a total of $13,680.

Added together the total is $44,460.

Along with engraving, there is the cost of obsolescence as outlined earlier. Referring to the example of 114 used, not all those are purchased in the same quantity and none are used at the same rate. Therefore, the inventory for each will differ and changing ingredients cannot be timed so that all wrappers will be used up at the same time. For that reason the new labels will cause an impact without recovery.

This is very scary, considering the baking industry uses about 18 billion polyethylene bags per year plus other forms of packaging. This would put the total packaging bill at approximately $500 million. Obsolescence at 10-percent initially would put the annual cost at $50 million plus engraving cost of about $2 million. On a continuing or sustained basis we could expect that obsolescence of $20 million a year would not be uncommon. The total of this would have to be passed off to the consumer.

Mr. Chairman, there are other costs to be considered as well. The costs of specialized transport to make ingredients conform to labels. The hard to measure costs of not being able to take advantage of favorable price changes in ingredients. This could be a staggering hidden

expense to consumers from FDA's new rule. Furthermore, there are indirect costs from emergencies, stoppages, et cetera that will occur with the inflexibility of the regulation adding to the cost.

The economic history proves that when all competition is driven out, and chances are we will be, or substantially reduced the final result is often considerably higher prices for the consumer. I submit that this will be the ultimate bakery industry climate in this country if rules and regulations such as 21 CFR 101.4 are allowed to stand uncorrected.

Mr. Chairman, I thank you for your time and the interest of the subcommittee.

Mr. IRELAND. Thank you, Mr. Manno.

Mr. BOTTY. We now present Mr. Edward J. Derst.

Mr. DERST. My name is Edward J. Derst, Jr. I appear before the subcommittee as president of Derst Baking Co. of Savannah, Ga., an independent wholesale baker affiliated with the Quality Bakers of America Cooperative and the Independent Bakers Association. We manufacture white pan bread, hamburger and wiener rolls, and sell a full line of bakery products under the Sunbeam, Holsum and Captain John Derst.

I fully support what has already been said by the prior witnesses at this hearing, but wish to amplify several points and close with comments about a recent Federal Trade Commission decision which I think may more nearly show the public's true interest in labeling than what the Food and Drug Administration is proposing under Regulation 21 CFR 101.4.

Let's look at the question of the small baker versus the giants and new products. We accept the handicaps of raising capital to finance new items, smaller marketing staffs, fewer areas in which to test markets. With the added burden of present and scheduled new labeling and nutritional regulations one must seriously question the economic feasibility of smaller wholesale bakers developing and marketing new products, where the rewards for a Derst would be "peanuts" and for an ITT-Continental a bonanza.

Mr. Chairman, let me give you a recent example at our bakery operating under existing rules and regulations, and remember, after January 1 the test marketing of a new product with any degree of flexibility will almost be totally destroyed.

We were producing an apple turnover and decided to make a better product by adding raisins to this product and calling it French Apple Turnover. We assumed that this would be a more acceptable product to the consumer. Also we would be able to increase sales. Yet this still could have been a great gamble, for it may not have been accepted.

Before all of these regulations on packaging, the idea of adding raisins to the product would have been a simple matter involving only adding the raisins at the mixer. Now, with the added complications of package identification, this simple new product becomes a tremendous decision.

1. We first have to check on our present inventory of bags so that we will not be left with bags that we cannot use. This may take anywhere from 6 to 12 months to use all present inventory.

2. We use a basic mix in the dough, supplied by another company, so in order to comply with the ingredient labels and the nutritional