Warning label leads to higher prices for unhealthy products and healthier choices
In the fight against obesity, more and more countries are opting for mandatory, explicit warning labels on unhealthy products. Consumers who have less to spend react particularly strongly to this, which leads to healthier choices. The measure also has an effect on the behavior of manufacturers. Because labeled products are bought relatively more by less price-sensitive consumers, companies tend to raise the prices for these unhealthy products. When the healthier choices are given the same or even a lower price, the healthy buying effect on consumers is further reinforced.
This is shown in research by Tilburg University, Wageningen University, and KU Leuven, based on a law implemented in Chile in July 2016. This law requires manufacturers to place a warning label on the packaging of unhealthy products, explicitly stating that the product is high in sugar, salt, fat, and/or calories. The study focused on manufacturers of breakfast cereals. It also tracked the purchasing behavior of 2,000 Chilean households, from two years before to one-and-a-half year after the law was implemented.
The results showed that people bought fewer unhealthy products on average. They also showed that the lowest income groups - who usually choose the unhealthy option - went for the healthier option more often. This mostly happened with products with a lot of calories and to a lesser extent with products high in sugars, which people usually already know are unhealthy. The legislation has since been introduced in Mexico, Peru, Uruguay, and Israel. Argentina, Brazil, and Colombia will follow shortly.
Researcher Arjen van Lin (Tilburg University): "The Netherlands and the European Union are also taking measures to encourage healthier choices. Nutriscore is an example of this. Research shows that the effect of warning labels is larger, however. The downside is that the effect on the demand side is partly dependent on the choices made by manufacturers. In countries where warning labels have been introduced so far, income inequality is very high and a price increase has a huge impact on the buying behavior of the lowest income groups. If a manufacturer decides to make healthier products more expensive, this could cancel out the positive effect."
Note for the press
The study entitled How Do Nutritional Warning Labels Affect Prices? by Max Pachali, Arjen van Lin, Bart Bronnenberg (Tilburg University), Erica van Herpen (WUR) and Marco Kotschedoff (KU Leuven) was recently published in the Journal of Marketing Research.
For more information, please contact Femke Trommels, press officer at Tilburg University on 013-466 26 85 or f.j.trommels@tilburguniversity.edu