Despite extensive product reformulation after Chile began requiring warning labels on the front of less-healthy food and drink packages, Chilean consumers saw no significant change in food and beverage prices associated with the policy in the first year and a half. This was the main finding of a new study from researchers at Universidad Adolfo Ibáñez, Universidad de Chile, and the University of North Carolina at Chapel Hill that examined price changes after the Law of Food Labeling and Advertising took effect in 2016.
After Chile began mandating warning labels on products high in calorie density or added sugars, salt, or saturated fat, some food and beverage manufacturers changed the nutritional composition of their products to avoid the label requirement. These reformulations could have led to changes in product prices in two ways, according to first author Guillermo Paraje, professor of economics at the Universidad Adolfo Ibáñez in Chile: “Reformulation could have increased firms’ costs, leading to higher prices if companies passed on the cost to consumers. Additionally, consumers may have been attracted to reformulated products without warning labels, increasing their demand and hence, their prices.”
Researchers compared prices of products with and without warning labels to a control group of products that remained unregulated (did not require warning labels) throughout the study period. They used pricing information from a large database containing prices for packaged food purchases from over 2,500 households from January 2014 to December 2017 (before and after the labeling law took effect). A team of trained nutritionists reviewed and categories all the purchased products by regulation status, i.e., whether they would be required to carry one or more warning labels. Researchers then analyzed changes before and after the law began in both levels and trends of absolute prices using the Laspeyres Price Index.
They found no significant change in prices of labeled products relative to unlabeled products. Rather, prices for both product groups continued to follow their pre-regulatory trends or changed in similar ways following the law. Researchers also compared these price changes within different “shopping baskets” or preferred foods and drinks for different socio-economic groups, and similarly found no significant differences in price changes.
“A common argument we hear from industry is that regulations like this are too costly and hurt consumers and the economy,” said senior author Barry Popkin, W. R. Kenan Jr. Distinguished Professor of Nutrition at UNC-Chapel Hill. “We see here that Chile’s law did not lead to more expensive prices on healthier options, and we’ve seen in previous studies that there was no impact on employment or wages.”
This study adds to a growing body of evidence on the impacts of Chile’s Law of Food Labeling and Advertising, which in addition to requiring front-of-package warning labels also restricts marketing for unhealthy foods and bans their sale or promotion in schools. For example, previous research has found that the policy package was associated with decreased calories, sugar, sodium and saturated fat purchased from regulated foods and drinks as well as significant drops in children’s exposure to TV advertising for regulated products. More long-term evaluations of the fully implemented regulation are expected in the coming year.
This research was funded by Bloomberg Philanthropies.
Guillermo R Paraje
Universidad Adolfo Ibáñez
Daniela Victoria Lucía Montes de Oca Carreño
Universidad de Chile
Universidad de Chile
Barry M Popkin
EVALUATIONS OF PRODUCT REFORMULATION IN CHILE
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