By: Ryan Sleeper
As we continue to observe strong M&A activity by our private equity and strategic clients within the food and beverage industry, we recognize and advocate the importance of staying on top of relevant regulatory trends. In this article we discuss the potential M&A risks posed by the ever-evolving regulatory landscape surrounding PFAS at large and in the food and beverage industry.
First, what are PFAS?
Per- and Polyfluoroalkyl Substances (PFAS) are a man-made class of 5,000+ compounds which have been detected in the blood of over 97% of Americans(1) and all environmental matrices spanning from the equator to the poles. Dubbed “Forever Chemicals”, PFAS do not break down due to their exceptional chemical stability and can continuously cycle through the environment where they tend to accumulate in biological tissue. Studies have shown that minute concentrations (10s of parts-per-trillion; ppt) in drinking water can cause adverse health effects in humans including immunotoxicity, thyroid disruption, reductions in birth weight, and cancer. These pervasive and potentially toxic characteristics of PFAS have recently captured the attention of federal and (particularly) state regulators, leading to a rapidly evolving patchwork of state (unenforceable and promulgated) and federal-level (unenforceable) criteria, enforcement actions, and interim guidelines. Given the many uses and environmental ubiquity of PFAS, these regulatory actions have touched on many industries, including food and beverage, where liabilities may present themselves.
How might PFAS regulation affect my company/acquisition?
Much of the scientific and, consequently, regulatory focus has been on human exposure to drinking water and its risks for the two most-studied compounds, PFOA and PFOS. Part of this has been driven by the results of the Third Unregulated Contaminant Monitoring Rule (UCMR3) survey of municipal drinking water conducted between 2013 and 2015 which found that 6 million US residents received their drinking water from systems in excess of USEPA’s Health Advisory Level (HAL) of 70 ppt. This HAL has been used as the basis for enforcement actions, a few of which are listed below.
- Certain bottled water brands were pulled from shelves in New England after PFOA+PFOS were detected in excess of the HAL. The bottling company, Spring Hill Pure Water in Haverhill, MA, was able to quickly rectify the issue by installing a new carbon filtration system, but still closed operations due to adverse media attention and shifting regulatory requirements. (2)
- Stoneridge Farms in Arundel, ME was forced to stop selling milk after high levels of PFAS were detected in the milk. The source of PFAS was from the spreading of contaminated biosolids at the farm which ended up not only in the milk but drinking water and hay as well. The farm has since shut down operations. (3)
- A farm in Clovis, NM was forced to stop selling milk and will likely euthanize 4,000 dairy cows after they were fed groundwater contaminated by PFAS from a nearby air force base. (4)
As the science behind defining the risk posed by PFAS in drinking water matures, there has been growing interest in determining the risk posed by PFAS in solid food. In agriculture, preliminary understanding of PFAS fate and transport indicates that it may bioaccumulate in plants and livestock with a greater potential risk posed to operations which spread biosolids or that are close to potential PFAS point-sources, such as airports or military bases. At the consumer-end, limited surveys have been conducted in the U.S., such as a 2017 study which found that 46% of food contact papers tested may contain PFAS(5) and FDA’s 2017 Total Diet Survey (TDS). The 2017 TDS initially detected PFAS in a variety of grocery food items, but these results were recently amended after the application of an updated laboratory method which only detected PFAS in two food items, both meat. Based on these early conceptualizations of risk and limited data, two states and the military have passed bills banning PFAS from food packaging with seven other states proposing to do the same(6); however the FDA has concluded that there is no apparent risk to consumers based on their limited data collected thus far and consequently no food standards have yet been proposed. (3)
The regulatory landscape surrounding PFAS at large and in food and beverage continues to evolve. Decisions at the state-level are rapidly being made based on developing science whereas federal institutions are taking a more cautious approach. As the science behind PFAS in drinking water and other liquid consumables matures slightly, there is growing interest in understanding the risks posed by PFAS in solid foods and a recognized lack of quality data to fully vet and define that risk. Information-gathering initiatives, such as USEPA’s recent infusion of grant funding to study PFAS in agriculture, USDA’s addition of PFAS to FSIS sampling in meat, FDA’s expansion of TDS sampling to include foods from a broader geographic region, and Maine’s biosolids sampling program, are intended to help frame these hazards. Depending on the results of these and other studies we may see a similarly evolving patchwork of regulatory actions taken to mitigate the risks posed to consumers by PFAS in food and beverage.
For more information on the potential M&A risks posed by the evolving regulatory landscape surrounding PFAS in food and beverage, or for other environmental-related aspects concerning food and beverage transactions, please contact Ryan Sleeper at firstname.lastname@example.org or Amy Bauer at Amy.Bauer@ehs-support.com.
(1) Lewis RC, Johns LE, Meeker JD. 2015. “Serum Biomarkers of Exposure to Perfluoroalkyl Substances in Relation to Serum Testosterone and Measures of Thyroid Function among Adults and Adolescents from NHANES 2011–2012”. Int J Environ Res Public Health. 12(6): 6098–6114.
(5) Schaider, Laurel A et al. “Fluorinated Compounds in U.S. Fast Food Packaging.” Environmental science & technology letters vol. 4,3 (2017): 105-111. doi:10.1021/acs.estlett.6b00435