Food labels & nutrition choices driven by dollars: Episode 121

What’s the relationship between front-of-package food labeling and consumer choice, and how can it potentially impact grocery prices?

Dr. Chen Zhen is a professor in Food Choice, Obesity, and Health Economics at the University of Georgia.  His research focuses on the impact of interpretative front-of-package labeling on consumer behavior and food prices.  In this conversation, Zhen discusses policies that can discourage consumption of less nutrient-dense foods (such as taxation) versus those that focus on access (making more nutritious food more accessible and less nutritious food less accessible), as well as the potential confusion caused by nutrition facts panels.

While a combination of policies may benefit the nutritional intake of lower-income consumers, Zhen highlights a study that demonstrated how a soda tax reduced the consumption of sugary beverages among low-income individuals, while a fruit and vegetable subsidy did not have a significant impact on their overall nutrition score. 

He discussed three categories of policies to address the issue of food prices and consumer choices. The first category is taxation, where the aim is to tax unhealthy food to discourage consumption. However, there are concerns about the potential costs and impact on consumer welfare. The second category is access policy, which involves making healthier food more accessible and less healthy food less accessible. For example, removing sugary drinks from schools. However, there can be compensation effects where people consume more unhealthy food outside of school. The third category is information provision policy, such as nutrition fact labels. Chen mentioned the recommendation for interpretative and summary nutrition labels on the front of packages to help consumers better understand the information. He also mentioned his research on yogurt and consumer confusion with labels.

He referenced a study on yogurt that examined the impact of a nutrition labeling change on sales. The study found that when a yogurt product received a lower nutrition score, its sales decreased. Conversely, when a yogurt product received a higher score, its sales increased. However, the study also discovered that retailers adjusted the prices of the yogurt products to offset the sales effects of the labeling change. After accounting for the pricing effect, it was found that about 40% of the labeling effect was offset by the retailer's pricing strategy. This suggests that the impact of nutrition labeling on consumer behavior can be influenced by pricing strategies implemented by retailers.

Chen mentioned that low-income individuals tend to purchase less healthy foods due to financial constraints. Chen also highlighted the potential impact of labeling and pricing strategies on nutritional disparities. He is now working on a USDA grant that aims to examine the nutrition disparity resulting from nutrition labels. The hypothesis is that if a product receives a lower nutrition score, retailers may lower the price, and low-income individuals may be more sensitive to these price reductions, leading to increased consumption of unhealthy foods. Chen also mentioned a study on pricing policies, where a soda tax was found to reduce the consumption of sugary beverages among low-income individuals, while a fruit and vegetable subsidy did not have a significant impact on their overall nutrition score. He suggested that a combination of taxes on unhealthy foods and subsidies for healthier options may be more effective in addressing nutritional disparities.

Dr. Zhen discussed three categories of interventions that policymakers can make to address the obesity epidemic: pricing strategies (such as soda taxes), access policies (making healthier food more accessible and less healthy food less accessible), and information provision policies (like nutrition labels). Chen emphasized that while taxes can be effective, they come with costs, so labels are often preferred by economists. Chen's research focused on the impact of soda taxes and found that low-income households responded more to the taxes, resulting in reduced consumption of sugary beverages. Additionally, Chen explored the potential unintended consequences of labeling and pricing strategies, particularly in relation to low-income individuals. However, it's important to note that any food taxes are regressive and may face political resistance.

If you’re curious as to how front-of-package labels and food policies can have unintended consequences on grocery prices and his predictions on grocery inflation, listen in for more of Zhen’s research and insights.