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Nutrition warning labels prompt reformulation – but this could counteract the policy’s health purpose, warn researchers

Consumers avoid products with nutrition warning labels, a new Chilean study has found, in turn prompting manufacturers to "bunch" calorie and sugar levels just below health-minded thresholds – counteracting the good intentions of health policies.  

The new study, published in INFORMS journal of Marketing Science, sought to review the effects of nutrition warning labels and advertising restrictions by assessing the breakfast cereal market in Chile, which has been subject to a host of governmental reform in recent years.

A press statement noted that the changes in the Chilean market are reflective of ongoing reform around the world, requiring food product packaging to display nutrition warning labels.

"In theory, reformulation could either amplify or counteract the effect of the labelling and advertising regulation," the researchers from the University of Israel and University of Chicago warned.  

"If reformulated and new products induce consumers to switch away from caloric and sugary cereal products, then these supply responses help accomplish the policy objective. However, they may instead pull consumers away from even healthier alternatives."

Shifting consumer preferences prompt manufacturers to adjust

In June of 2016, the Ministry of Health of Chile implemented requirements for products with high sugar, saturated fat, salt and calorie counts to carry "conspicuous" front-of-package warning labels, the authors noted.

Focusing on Chile's $194 million cereal market using data from Nielsen's Global Snapshot on monthly product-level sales, hand-collected nutrition data from two stores in Chile and data from Mintel's Global New Product Database, the researchers found a "clear decline" in both sugar and calorie intake per 100 g of cereal purchased following the 2016 law.

"The results imply a reduction on the order of 17 kcal and 1.3 g of sugar," the researchers said.

The decline appears to have been in part due to changes in formulations by manufacturers, the report suggests, citing the example of Nestle top-selling cereal product, Chocapic, for which the food giant introduced a reformulated version lower in calories and sugar.

The researchers also found that consumers sugar intake from cereals began to decline even in early 2016, before the reform took effect.

"One possibility is that manufacturers and retailers pre-empted enforcement and began to sell reformulated and/or labelled products before the reform," they said. 

Nutrition warning labels: Do the changes help or hurt?

"If warning labels provide a useful heuristic for judging healthfulness, then they might induce consumers to shift their purchases to products that are lower in the targeted nutrients," the researchers said.

Yet, the report also highlights evidence of manufacturer "bunching" the distribution of calorie and sugar content in cereals as a response to the reform, so that they sat just below 2016 thresholds.

"We confirm that there is no evidence of bunching before the reform or at the 2016 thresholds after the thresholds are tightened in 2018. However, it is not clear whether bunching below the thresholds amplifies or dampens the effect of the reform on nutrient intake," they said.

Modest but meaningful reductions in calorie intake

The researchers added that, since warning label requirements focus on a few specific ingredients, products could still contain other ingredients which "may or may not be nutritious," such as artificial sweeteners. "Although these sweeteners may facilitate weight loss, it is unclear how they affect overall health."

The researchers attempted to gauge the potential negative effects of manufacturer reformulations resulting from legislative reform using a "discrete choice model" of consumer demand for breakfast cereals, simulating purchasing without reformulation or new product offerings.

"Our findings indicate that reformulation contributed to modest but meaningful reductions in calorie consumption from breakfast cereals in Chile, on the order of 4%," the researchers concluded.