Consumers' Use of Nutritional Labels: A Review of Research Studies and Issues

EXECUTIVE SUMMARY Introduction Diet-related health problems have increased dramatically over the last few years. Consequently, nutritional labeling has emerged as an important aspect of consumers' food purchase decisions. Nutritional content in food products is considered to be a credence attribute. However, if trustworthy nutritional labels are available, nutritional labels could function as a search characteristic. The regulatory environment in some countries (e.g. USA, Australia etc.) has long recognized the potential of standardized on-pack nutrition information and has mandated the presence of nutritional labels on all processed food products. Others, like the EU, are contemplating similar mandatory nutritional labeling regulations. The nutritional labeling literature has grown significantly in recent years. Our paper reviews this increasingly important literature and addresses some specific issues regarding the determinants of label use, the debate on mandatory labeling, the label formats preferred by consumers, and the effect of nutrition label use on purchase and dietary behavior. Determinants of nutritional label use There has been no consistency in the results of studies conducted regarding the determinants of label use. For example, there has been no consensus on the effect of age, income, or working status on nutritional label use. However, education and gender (i.e., being female) have been found to positively affect label use. In addition, people with more available time for grocery shopping have been found to be more likely to be classified as label users. It also appears that consumers who are more concerned about nutrition and health are more likely to use nutritional labels. Consequently, consumers on a special diet, organic buyers, and those aware of the diet-disease relation are more likely to search for on-pack nutrition information than others. Type of household also has an effect on label use. Specifically, smaller households and households with young children are more likely to engage in nutrition information search behaviors. In addition, households in non-city or rural areas are more likely to use nutritional labels. Grocery shoppers but not meal planners are also more likely to engage in nutrition information search. Our review of the literature also suggests that consumers who attach importance to price usually are less likely to use labels but those who attach importance to nutrition are, as expected, more likely to search for nutritional information. Finally many studies have found that nutrition knowledge has a significant impact on nutritional label use. Mandatory vs. voluntary labeling From a firm's point of view, provision of nutritional information on food packages is desirable if it can generate more revenues. In the context of effective private quality signalling, government regulation would be unnecessary if higher quality products had nutritional information on their packages and those with lower quality did not. However, if sellers cannot signal quality effectively, the market may disappear completely or only the lowest quality products may be sold. Mandatory labeling is called to fill the void of information provision mainly by correcting asymmetric information or by correcting externality problems. However, prescriptions such as "more information is always better" may not be an optimal policy for nutrition labeling. One cannot therefore unambiguously state that the benefits of new nutrition labeling rules will be greater than the costs, although there is some reason to believe that benefits may be greater than the costs. The U.S.' Nutritional Labeling and Educational Act (NLEA) that went into effect in 1994 can serve as a good reference point for mandatory labeling. Some authors have found no significant change in the average nutritional quality of food products offered for sale by manufacturers and retailers after the implementation of the NLEA, thus suggesting that the benefits from information provision might be more limited than previously thought. …