What brands need to know about California’s new executive order targeting ultra-processed foods

The actions are a harbinger of potential regulations to come as U.S. regulators increasingly eye ingredient lists. In 2023, California banned red dye no. 3 and added more dyes to the list last year, and it’s also requiring more labeling around the presence of heavy metals in baby food. On the federal level, President-elect Donald Trump has nominated Robert F. Kennedy Jr. to be the Secretary of Health and Human Services. The one-time presidential candidate has long been critical of the ultra-processed foods and has put forward the slogan to “Make America Healthy Again” if confirmed. For brands and companies in the CPG world, these recent changes — along with potential major shifts on the horizon — could require major business upheaval.

David Johnson, co-founder and CEO of clean medicine company Genexa, sees the U.S. at a moment of transformation when it comes to what the public will accept in their food and ingredients. The company makes over-the-counter medicines that don’t contain the same artificial preservatives, dyes or sweeteners that may be found in other brands. Since its Target launch in September, it saw week-over-week sales growth through mid-December, Johnson said.

“Consumers want clean label products, and they’re demanding more across every category,” Johnson said.

Some research suggests people are increasingly becoming ingredient-conscious. In October, Nielsen IQ found that 76% of customers think transparent product information is important, compared to 69% in 2018. Nielsen also found that clean-label products are out-performing other products with an 8% increase in the last year, per an April report.

The shift is evident in retailers’ choices, too, Johnson said, like Walmart’s “better for you” Modern Soda set that includes brands like Poppi and Olipop. As for Genexa, the company has expanded its reach from 45,000 retailers in 2022 to 60,000, including Target, by the end of 2025. It’s also in Walmart, Sam’s Club, CVS and Whole Foods.

“The retailer realizes this is the consumer now, and most of them are starting to track this conversation,” Johnson said.

What the executive action means

One of the challenges in looking at the space is the lack of a universal definition of what makes a food “ultra-processed.” In the new order, California is characterizing ultra-processed foods as “industrial formulations of chemically modified substances extracted from foods” with additives to enhance taste, texture or appearance, plus minimal to no inclusion of whole foods.

The upcoming work from the state agencies could include recommendations for new warning labels. It could also lead to potential changes to California’s Medicaid program and school lunch menus to encourage access to fresh food. Some state researchers may also investigate the effects of food dyes on the human body or evaluate food additives in products on the market. Some of the agencies’ responses are due by April 1.

Katie Thomson, a dietician and co-founder of baby food brand Square Baby, said Newsom’s action creates positive momentum for the CPG industry. She appreciated that Newsom’s latest executive action didn’t make a grand change at once but instead called for research and ideas that could lead to stakeholder collaboration. “Expecting more from our food producers and creating some parameters, I think, is a good thing,” she said.

But any eventual regulations, she said, should be made with feedback from brands making products to inform what’s possible in what timeframes. “You have to ensure you don’t put small companies out of business because they have to comply with the same thing the Gerbers of the world need to comply with.”

Potential formulation changes

Whether required by law or not, changing ingredients costs significant time and energy. Thomson worked with Starbucks on revamping its nutritional content and ingredients list over a decade ago. Around 80% of the products had to be reformulated, she said, and it took many conversations with dozens of suppliers and manufacturers that worked with different parts of the company.

There is some lower-hanging fruit that has known replacements. The red dye no. 40 that’s banned in California, for example, can be mimicked with beet juice. “We don’t need to have artificial food dyes; this is not a hard problem to solve,” she said.

But other swaps could be pricier, or lead to different product characterizations like how long it can sit on a shelf. Miguel Garcia Castillo, principal at venture platform Co/Studios, often works with brands that are working to clean up their ingredient list. He said smaller companies can be at a disadvantage to change up formulations whereas corporations with more resources can act faster.

“Right now, it’s about planning ahead and saving your pennies for a rainy day,” he said. “Change burns a lot of capital, and this is going to force people to think about what a launch looks like, or what a product looks like, or where does my product live moving forward.”

Still, Garcia Castillo said that even without government intervention regarding additives and unhealthy ingredients, companies should investigate ways to make products cleaner and healthier. Past pushes regarding ingredients like trans fats or high-fructose corn syrup have changed the way products are formulated today.

“My hope is it will just be table stakes, and the bad players are going to get smoked out as people get selective about ingredients,” he said. “The consumer will win at the end of this.”