impact of HACCP on costs and product exit, The

Journal of Agricultural and Applied Economics, Apr 2002 by Hooker, Neal H, Nayga, Rodolfo M Jr, Siebert, John W

Table 1 presents the three dependent variables examined. One of the dependent variables used is the firm's realized or predicted4 HACCP compliance costs (HCOST). This variable was determined by asking, "What do you project to be your cost of implementing HACCP per pound of product produced?" (Of the 71 otherwise complete surveys, only 64 firms responded to this question). The mean level of cost was just under $0.05/lb. The second dependent variable is a binary variable reflecting whether products will be discontinued due to HACCP or not (DISCONT). The third dependent variable, the number of products which firms predicted would be discontinued due to HACCP (POUT), had a mean level of 1.17. This is about a third of the average number of items currently offered by the firms.

The independent variables are also exhibited in Table 1. To determine the impact of economies of scope we constructed two measures of plant complexity. RANGE is the reported number of convenience prepared goods (e.g., packaged beef with BBQ sauce) produced by the firm. The range of this variable is from 0 to 10. Second, MIX is a count variable taken from a list of seven possible types of products offered by the firm. This list includes sausage, ham, jerky, fresh meats, other smoked products, other (cooked), and other (raw). These two imperfect measures of plant diversity are thought to be indicative of the number of distinct HACCP plans that are required.

Also included as independent variables are a number of dummy variables regarding the plant: the intention, due to HACCP, to add an entirely new facility (BUILD); to expand (ADDFAC), or modify (MODFAC) the current facility, and if the current facility is over ten years old (AGE10). Data for the need to hire new staff (NEWEMP), the mandatory HACCP compliance date of January 2000 (H2000), the intention to drop inspection requirements and go custom exempt (CUSTX), and the demand of customers that the facility be inspected by a Federal or State agency (CUSTIN) are also reported. Other relevant variables include the number of employees formally trained in HACCP (HAEMP), the total number of employees working for the firm (EMP), and the company's annual sales (SALES).

Among responding firms, 78 percent met the "very small" classification and, therefore, faced a HACCP compliance deadline of January 2000. Just over 8 percent planned to switch to custom exempt status in lieu of compliance, while the remaining 14 percent were small firms already in full compliance. One dramatic impact of HACCP is evident from the fact that 37 percent of respondents indicated they would at least modify their facilities to comply with the rule. USDA (1996) suggested that very small plants would, on average, train at least two workers in HACCP techniques. Our measure (HAEMP) averaged just under 2 with per worker training costs reported to be just over $1000. This led to per-- plant training costs that were significantly lower ($2025) than those presumed by USDA ($5028).