Sprouts Farmers Market 2013 Annual Report Download - page 30

Table of Contents
infrastructure, reduction in capacity and industry-specific regulations such as hours-of-service rules that lead to delays or
interruptions of deliveries could negatively affect our business.
We, as well as our vendors, are subject to numerous laws and regulations and our compliance with these laws and
regulations, as they currently exist or as modified in the future, may increase our costs, limit or eliminate our ability to sell
certain products, raise regulatory enforcement risks not present in the past, or otherwise adversely affect our business,
results of operations and financial condition.
As a retailer of food, vitamins and supplements and a seller of many of our private label products, we are subject to numerous
health and safety laws and regulations. Our suppliers and contract manufacturers are also subject to such laws and regulations.
These laws and regulations apply to many aspects of our business, including the manufacturing, packaging, labeling, distribution,
advertising, sale, quality and safety of products we sell, as well as the health and safety of our team members and the protection of
the environment. We are subject to regulation by various government agencies, including the FDA, the USDA, the FTC, the
Occupational Safety and Health Administration, the Consumer Product Safety Commission and the Environmental Protection
Agency, as well as various state and local agencies.
We are also subject to the USDA’s Organic Rule, which facilitates interstate commerce and the marketing of organically
produced food, and provides assurance to our customers that such products meet consistent, uniform standards. Compliance with
the USDA’s Organic Rule also places a significant burden on some of our suppliers, which may cause a disruption in some of our
product offerings. In addition, the USDA’s Food Safety Inspection Service (referred to as “FSIS”) conducts regular, mandatory on-
site inspections of processing and manufacturing facilities. When violations occur, the agency has broad discretion to withhold FSIS
inspection services, shut down processing facilities and take civil or criminal actions against violators of applicable statutes and
regulations.
As a retailer of supplements, our sales of vitamins and supplements are regulated under DSHEA, a statute which is
administered by the FDA as part of its responsibilities under the FDCA. DSHEA expressly permits vitamins and supplements to
bear statements describing how a product affects the structure, function and/or general well-being of the body. However, no
statement may expressly or implicitly represent that a supplement will diagnose, cure, mitigate, treat or prevent a disease.
New or revised government laws and regulations, such as the FSMA, passed in January 2011, which grants the FDA greater
authority over the safety of the national food supply, as well as increased enforcement by government agencies, could result in
additional compliance costs and civil remedies. Specifically, the FSMA requires the FDA to issue regulations mandating that risk-
based preventive controls be observed by the majority of food producers. This authority applies to all domestic food facilities and,
by way of imported food supplier verification requirements, to all foreign facilities that supply food products. In addition, the FSMA
requires the FDA to establish science-based minimum standards for the safe production and harvesting of produce, requires the
FDA to identify “high risk” foods and “high risk” facilities and instructs the FDA to set goals for the frequency of FDA inspections of
such high risk facilities as well as non-high risk facilities and foreign facilities from which food is imported into the United States.
With respect to both food and dietary supplements, the FSMA meaningfully augments the FDA’s ability to access a producer’
s
records and a supplier’s records. This increased access could permit the FDA to identify areas of concern it had not previously
considered to be problematic either for us or for our suppliers. The FSMA is also likely to result in enhanced tracking and tracing of
food requirements and, as a result, added recordkeeping burdens upon our suppliers. In addition, under the FSMA, the FDA has
the authority to inspect certifications and therefore evaluate whether foods and ingredients
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