Wednesday, June 26, 2013

Food Products and UPCs

by Winifred McGee, Extension Educator, Dauphin County

There are so many things for a new business owner to consider as the product moves from a "vision" to reality.  When the food items are created to have shelf life, designing an appropriate package is always part of the process - and whether to include a Universal Product Code (UPC) on that package is always a consideration.  Food products that will be sold exclusively in farmers' markets, specialty stores, or over the Internet (so that they never pass over a scanner) do not require barcodes.  However, if a would-be food entrepreneur envisions the product in a grocery or big box store sometime in the future, having the code on the label will, sooner or later, be a necessity.

UPCs were launched by a 10-pack of Juicy Fruit gum
and a hand-made laser scanner.
Although many of us cannot remember a time when UPCs were not common in the marketplace, the initiation of this system is "relatively" recent.  A UPC produced its first familiar "beep" when a 10-pack of Wrigley's Juicy Fruit gum passed over the prototype scanner at March Supermarket in Troy, Ohio, on June 26, 1974.  The technology is actually 39 years young!

At a 2004 ceremony commemorating the original first scan, Tom Jackson, the president and chief executive of the Ohio Grocers Association, said "(t)he bar code has forever changed the world and the way we do business as an industry."  Although other industries had experimented with barcodes before 1974, the groceries were early adopters of the UPC, since this technology allowed the stores to change from using item-level price tags to shelf tags, and eliminated the keypunch errors at the register.  In an era before the "super store," grocery stores of the 1970s had a finite number of price lookups (PLUs) and the average customer bought a number of items per store visit - this made these retail establishments a "natural" for trying out the concept.  March Supermarket was chosen to be the first to incorporate the technology because of its proximity to Dayton (home of the NCR where the checkout counter was designed).  After a number of years of "trial and error," it was noted that using barcodes resulted in fewer under-rings (reducing revenue loss), and helped keep shelf inventories more efficiently - forever linking UPCs with grocery stores.

Almost 40 years later, food entrepreneurs who visualize their gourmet jams, salsa, or meat rubs on a retail shelf will find that joining the tradition of incorporating a UPC is a must.  For a proactive business owner, including a barcode with the first run of labels may make great sense, so that the product is ready when the demand is right.  Since UPCs depend on company-specific codes, barcodes must be purchased from a vendor.  This is most easily accomplished by going to the non-profit company, GS1 US.  Although barcodes are available at other sources, GS1 US guarantees that each company prefix will be unique, and they provide the tools and training for business owners to get started using UPCs.
This familiar UPC is a "must" for selling through
groceries and big box stores.

The amount a company pays for barcodes is determined by the number of distinct products the company makes (and the number of different sizes of each variety) since each flavor and quantity will need its own code.  A secondary factor affecting the cost of barcodes is the annual gross revenues realized by the business.  New customers can easily estimate the fees that they will likely pay, using the downloadable Barcode and Fee Estimator, available on the GS1 US website.  The smallest purchase increment available is 100 barcodes, and the smallest revenue level is "less than $250,000" - these two factors resulting in an initial fee of $760 and annual renewal fees of $158.  While this may seem like a lot of money to spend before a wholesale contract is in hand, the costs will most likely be greater if an entrepreneur waits to retro-fit packaging (that is, to include the barcode) until he or she actually has an order from a store.

Being ready to respond to the demands and expectations of the customer is the road to business success.  In a marketplace laden with choices, it is much easier to launch an exciting, professional-looking food product that catches the consumer eye.  Food entrepreneurs who are looking for more information about food packaging may reference Food Labeling, a Penn State Extension fact sheet covering basic label requirements, or visit the Penn State Extension's Packaging and Labeling resource page.  For more comprehensive information about starting and growing a food business, look for a Food for Profit workshop near you this fall - bookmark the site and return in July to see upcoming class dates and locations.


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