EN

Brussels, 30.1.2008

SEC(2008) 94

COMMISSION STAFF WORKING DOCUMENT

accompanying the

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the provision of food information to consumers

IMPACT ASSESSMENT REPORT ON NUTRITION LABELLING ISSUES

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{SEC(2008) 92}

{SEC(2008) 93}

{SEC(2008) 95}

TABLE OF CONTENTS

1. Executive summary (...)4

2. Procedural issues and consultation of interested parties (...)6

2.1. Consultations (...)6

2.2. Consumers survey (Focus Group) (...)7

2.3. Data collection on behalf of the Commission (...)7

2.4. Ad hoc consultations (...)8

2.5. Inter-Service Steering Group (...)8

2.6. The Impact Assessment Board (...)9

3. Problem identification (...)9

3.1. Relationship between the revision of the general labelling and nutrition labelling legislation (...)10

3.2. Background on nutrition labelling (...)10

3.3. Stakeholder needs (...)12

3.4. Rationale for the revision of the legislation (...)14

3.5. Policy Issue 1 – Disparity in inclusion of nutrition labelling on prepacked foods (...)15

3.6. Policy issue 2 – How much nutrition information should be included on the label (...)16

3.7. Policy issue 3 - Nutrition labelling on front of pack (...)17

3.8. Policy issue 4 - Legibility of information (...)18

3.9. Regulatory approach (...)19

3.10. The right of the Union to act – Subsidiarity test (...)23

4. Objectives (...)24

5. Major policy options (...)25

5.1. Baseline projection (...)25

5.2. Policy Issue 1: Disparity of provision of information - Voluntary or mandatory nutrition labelling? (...)26

5.3. Policy Issue 2: Nutritional elements to be included in the nutrition information (...)26

5.4. Policy Issue 3: Nutrition labelling on front of pack (...)27

5.5. Policy Issue 4: Legibility of information (...)28

6. Analysis of impacts (...)29

6.1. Approach taken in assessing the impacts (...)30

6.2. Food Labelling Process (...)30

6.3. Administrative burden (...)33

6.4. Impact on employment, equal opportunities, private life and access to social protection, health and educational systems (...)34

6.5. Environmental impacts (...)34

6.6. Policy Issue 1: Disparity of provision of information - Voluntary or mandatory labelling? (...)34

6.7. Policy Issue 2: Information to be included as part of nutrition labelling (...)44

6.8. Policy Issue 3: Nutrition labelling on front of pack (...)50

6.9. Policy Issue 4: Legibility of information (...)53

7. Comparing the options (...)56

7.1. Do nothing (...)57

7.2. Voluntary mechanisms (...)58

7.3. Regulatory approach (...)60

7.4. Optimising the regulatory approach (...)64

7.5. Preferred option (...)65

8. Monitoring and evaluation (...)66

ANNEX 1 - Structure of the European food and drink industry (...)67

ANNEX 2 - Distribution of nutrition labelling on different food products in four European countries (...)70

ANNEX 3 - Nutrition Labelling Objectives (...)71

ANNEX 4 - Extract of RAND Questionnaire – Questions on labelling costs (...)72

ANNEX 5 - Food labelling – estimation of administrative burden and labelling re-design costs (...)74

ANNEX 6 - Summary of results of assessment of Administrative Burdens associated with food labelling in Denmark, the Netherlands, Sweden and the United Kingdom (...)79

ANNEX 7 - Comparing the options (...)82

1. Executive summary

The recently published White Paper on a Strategy for Europe on Nutrition, Overweight and Obesity related health issues [1] stressed the need for consumers to have access to clear, consistent and evidence-based information when deciding which foods to buy. Nutrition labelling is an established way for information to be passed to consumers to support health conscious decision making in relation to food purchases. There is wide agreement in Europe today that the effectiveness of that nutrition labelling can be strengthened as a channel for information to consumers to support their ability to choose a balanced diet.

The Commission has conducted specific consultations of stakeholders on the revision of the legislation in 2003 and 2006 along with input from various discussions within Commission Committees and Advisory Groups. The feedback is that there is dissatisfaction among stakeholders on the current legislation but there are divergent views on how the legislation could be improved. For example, many consumers find nutrition labels hard to use but the research has not indicated whether the cause of the problem is the amount of information or other factors such as format of the presentation, lack of understanding of terms, placement of the information, type size, etc.

What is clear is that labels can be complex and most consumers would like simple, clear, understandable, standardised and authoritative nutrition information. Whilst the industry would support such an aim, they express concerns about the prescriptive nature of the current legislation and the costs implications of any potential changes. Not least as, depending on what is proposed, theoretically all labels in Europe might need to be changed.

Four main issues that were identified for possible review in the legislation and form the basis of the following policy issues are considered in this impact assessment:

Policy Issue 1 – Disparity in inclusion of nutrition labelling on prepacked foods - consideration of whether nutrition labelling should remain in general voluntary or become mandatory

Policy issue 2 – How much nutrition information should be included on the label – consideration of the nutritional elements that should be included in the nutrition labelling

Policy issue 3 - Nutrition labelling on front of pack

Policy issue 4 - Legibility of information

The main objectives of any changes to the nutrition labelling legislation are:

to make key nutrition information more widely available and more easily understandable to the consumer

to create a level playing field for companies to compete

The possible regulatory framework was considered and it was concluded that the options to deregulated completely and to have regulation only at national level would not have been effective in achieving the main objectives of the nutrition labelling legislation. Therefore, these regulatory approaches were not considered in relation to the individual policy issues. However, the options of not changing the legislation, taking a voluntary approach or including specific requirements in the legislation were considered for each of the policy issues.

The first policy issue (disparity in the availability and provision of nutrition information) was examined on the basis of doing nothing, allowing for a voluntary approach and the possible introduction of mandatory nutrition labelling. The introduction of mandatory labelling was examined on the basis of applying to all the industry or with exceptions for SMEs as a whole or only exceptions for microbusinesses. In terms of the potential impact on industry the application of mandatory nutrition labelling across the board would have a major impact is applied immediately, however, with a transition period of 3 years it was estimated that the costs would be reduced significantly to around €1.2 billion. Whilst for the objective of making information more widely available to the consumer, the option that would lead to the most widespread inclusion of information was the mandatory labelling of all prepacked foods with the exceptions of microbusinesses expected to lead to around 90% of prepacked food being labelled. It is anticipated that the more widespread availability of nutrition information would lead to changes in consumers' behaviour with potential benefits on public health.

The second policy issue related to the information that should be included on the label. Any change from the existing requirements would have a potential impact on businesses needing to collect different nutritional composition information for their products. There could be potential benefits to the consumers if the information that was included covered the nutritional components that are most frequently looked for by consumers and those that are important in public health terms as being associated with the risk of development of certain non-communicable diseases.

The third policy issue concerned the inclusion of nutrition information on the front of food packs. This is an issue because this presentation is not specifically covered by the existing legislation and there is an increasing variety of schemes being introduced. From the analysis, the options to do nothing or leave to voluntary approaches would mean continuing proliferation of different schemes that could eventually impede the free movement of such goods within the Community. There is a need for clarity of the situation, however, the ban of such labelling would potentially have negative consequences for the industry and consumers. Therefore the provision of a framework for front of pack labelling would benefit to consumer (reducing the risk of confusion) and benefit the industry (reducing the risk of the creation of barriers to the free movement of goods).

The final issue was the consideration of the legibility of information on the label. This is one of the main reasons for complaints by consumers. In the analysis of the options it appeared that doing nothing or leaving to a voluntary approach would not lead to a significant improvement in the situation. The inclusion of a minimum font size for the type on food labelling would help to address the main complaint from consumers and would impose less burden on the industry than including requirements for all aspects of legibility in the legislation.

2. Procedural issues and consultation of interested parties

2.1. Consultations

The Commission wrote to the Member States on 21 January 2003 seeking their views and experience on the implementation of Directive 90/496/EEC on Nutrition Labelling of Foodstuffs [2]. Fifty responses were received from 14 governmental organisations, 2 consumer groups, 4 public health NGOs and 30 food industry organisations or companies [3]. In addition, the Commission organised meetings with Member States and stakeholders in 2003.

On 29 November 2005 the UK Presidency held a meeting on nutrition labelling with Member States [4].

DG SANCO launched a public consultation process on labelling on 13 March 2006, by means of a consultative document [5] dealing with different areas of labelling, and among others, identifying the major questions to be addressed in review of the nutrition labelling legislation. As part of the consultation process there were discussions within the following groups: the Advisory Group on the Food Chain and Animal and Plant Health; the European Consumer Consultative Group; the Consumer Policy Network of senior consumer officials; and the Health Policy Forum.

The public consultation formally closed on 16 June 2006 and a total of 175 contributions were received. Ninety five of the respondents provided views on the nutrition labelling aspects of the consultation. The breakdown of organisation were: 22 governmental organisations, 10 consumer groups, 7 public health NGOs, 51 food industry organisations or companies and 4 from individuals. A summary of the responses is available on the Commission website [6].

2.2. Consumers survey (Focus Group)

A qualitative study on labelling was carried out by an external contractor (OPTEM) in 2005 in order to assess consumers’ attitudes with respect to labels and their information content, and to analyse consumers’ expectations [7].

2.3. Data collection on behalf of the Commission

In 2004 an impact assessment on the introduction of mandatory nutrition labelling was prepared for the Commission by an external contractor [8]. In addition, between 26 October and 8 December 2006 there was a Small and Medium Enterprise Panel on Food Labelling organised by DG ENTR in consultation with DG SANCO which sought the opinions and data from small and medium sized enterprises (SMEs) in 19 Member States on certain aspects of general food labelling and nutrition labelling. Over 800 responses were received during the survey the results of the survey are included where relevant in this report.

Finally, the internal process to develop the impact assessment was supported by an external contract with RAND Europe. The contractors provided an ex ante assessment on the economic impact of the different policy options. As part of the contract, from 22 March to 16 May 2007 RAND Europe carried out an online consultation of the food industry in order to collect information and data on the possible impacts of the revision of the legislation. More than two hundred responses to the questionnaire were submitted. The report of the contractor in support of the impact assessment can be consulted at the web site of the contractor [9]. Unfortunately, requests to the representative industry organisations for information on costs associated with labelling and the detailed survey of individual companies conducted by contractor via the representative organisations produced incomplete cost data making an assessment of representative costs extremely difficult.

2.4. Ad hoc consultations

Since 2004 there have been presentations and discussions on nutrition labelling within both the Round Table on Obesity and the EU Platform for Action on Diet, Physical Activity and Health. In addition, as part of their commitments to the Platform several members have prepared reviews of the nutrition labelling related issues, especially front of pack labelling schemes.

Member State authorities were consulted on the options for the revision of the legislation in the course of four Expert Working Group on Nutrition Labelling meetings between November 2006 and October 2007. Informal discussions and presentations have been held with various stakeholder groups e.g. representatives of the food industry.

2.5. Inter-Service Steering Group

A Commission Inter-Service Steering Group on the Impact Assessment of the revision of the legislation was established. The Group was led by DG SANCO with the participation of the following Commission Directorate Generals and Services: Agriculture and Rural Development, Enterprise and Industry, Research and Technology Development, Trade and the Secretariat General. The group met on 10 January 2007 (planned approach and the identified options were discussed), 27 March 2007 (report from the contractor on progress and collection of data were discussed) and 18 June 2007 (exchange of views on draft impact assessment report). The Group was consulted on the development of the online questionnaire conducted by the contractor and relevant documentation was circulated between meetings.

2.6. The Impact Assessment Board

The draft Impact Assessment was submitted to the Board on 27 June 2007 and discussed at the Board meeting of 18 July. The final opinion of the Board included a number of recommendations for the improvement of the impact assessment report, which were fully taken into account prior to the submission of the Commission proposal.

The key amendments made to the impact assessment following the issuing of the Board opinion:

Clarification of the problem definition by highlighting the main issues that were identified as a concern to various stakeholders during the extensive consultation process and inclusion of a section on the international dimension;

The comparison of the options for the policy issues is presented in relation to the following approaches: do nothing, voluntary action or regulation;

Additional information the expected benefits to consumers were included in the analysis and comparison of the impacts;

Clarification of the administrative burden and possible trade offs were included in the analysis and comparison of the impacts;

The mitigating effects of different transition periods were highlighted in the comparison of the options.

3. Problem identification

There are two Impact Assessments supporting the Commission draft proposal concerning the revision of the existing food labelling Community legislation. The two horizontal pieces of legislation are Directive 2000/13/EC providing for compulsory information on foods and Directive 90/496/EEC setting up harmonised rules on nutrition labelling, which is in principle optional.

The main purpose of this labelling legislation - to inform and protect consumers and to ensure the smooth functioning of the internal market - is still valid and has not been questioned by stakeholders during the extensive consultations. There is a general criticism about the piecemeal approach in the delivery of the entire spectrum of Community labelling legislation (horizontal and vertical). There have not been major issues identified in the implementation of the nutrition labelling legislation but concerns have been expressed about the failure of the current rules to address current stakeholders needs and expectations, which have changed over time.

The process of consultation demonstrated clearly that certain main issues are in need of review. However, stakeholders have very different views on how these issues should be addressed.

The label is an important means for information about prepacked foods to be passed to the consumer. The consumers indicate that they would like clear and better information about different aspects of a food product but there needs to be balanced against the space available on the label and increased burdens on the industry. In considering those interests account must be taken of the fact that much of the information on a label is not required by law but is essentially marketing information. Therefore, improving the legibility of the information is not necessarily incompatible with the addition of any new labelling requirements especially since the legislation provides derogations in case of space limitations on the label.

3.1. Relationship between the revision of the general labelling and nutrition labelling legislation

Currently there are two separate, and in certain aspects fairly prescriptive, measures. Two separate impact assessments have been prepared since it was considered that the presentation of one impact assessment would appear to prejudge the outcome of the impact assessment process as regards whether nutrition labelling should remain voluntary or become mandatory.

In fact both directives are dealing with horizontal labelling issues so it would be important to have a coherent approach in the revision of both legislative measures. Specific areas of overlap between the two impact assessments are:

consideration of the regulatory approaches including the alternative flexible approach of the exchange of information and development of best practice;

the estimation of the fundamental costs associated with food labelling; and

legibility of information on the label.

3.2. Background on nutrition labelling

Nutrition labelling is the declaration of the nutrient composition of a food, for example the energy, fat and sugar content. In 1990 the Council adopted Directive 90/496/EEC on nutrition labelling of foodstuffs [10]. The original basis of the legislation was the harmonisation of the legislation as part of the establishment of the internal market. At the time it was also recognised that there was a growing interest in the relationship between diet and health and that the inclusion of nutrition labelling on foods would assist consumers’ ability to make informed choices.

The framework legislation lays down certain rules on the inclusion of nutrition information on pre-packed foods. The inclusion of nutrition information is voluntary but becomes compulsory when a nutrition related claim is made concerning the food. There is a standardised format in which nutrition labelling must be presented. The mandatory information depends on the nature of the claim made, it can range from:

“Group 1” list of 4 elements (energy, protein, carbohydrate and fat) to

“Group 2” list 8 elements (Group 1 plus sugars, saturates, fibre and sodium) as illustrated in figure 1

Other nutrients (e.g. polyunsaturates, cholesterol and specific vitamins and minerals) can also be included

The information must be given per 100g, per 100ml and may also be given as per portion. However, if the food is sold prepacked as an individual portion it is possible to include the nutrient content in per portion alone.

Figure 1. - Examples of nutrition labelling declaration

Group 1 Group 2 (with per portion)

Nutrition information | | Nutrition information |

Typical composition | per 100 g | | Typical composition | per 100 g | per 30g portion |

Energy | 1640 kJ | | Energy | 1640 kJ | 492 kJ |

| 387 kcal | | | 387 kcal | 116 kcal |

Protein | 5 g | | Protein | 5 g | 1.5 g |

Carbohydrate | 85 g | | Carbohydrate | 85 g | 25 g |

Fat | 3 g | | of which sugars | 35 g | 11 g |

| | | Fat | 3 g | 1 g |

| | | of which saturates | 1.5 g | 0.5 g |

| | | Fibre | 2 g | 0.5 g |

| | | Sodium | 0.5 g | 0.2 g |

3.3. Stakeholder needs

All stakeholders believe that the inclusion of nutrition information is an important source of information for the consumer when making food choices. It supports the consumer education campaigns on healthy eating. However, the extent of nutrition labelling varies between Member States, with many companies voluntarily providing this information (estimates suggest a range of between 30% and 85% for pre-packaged foods). In addition, there is dissatisfaction among stakeholders on the current legislation but there are divergent views on how the legislation could be improved. Therefore, it is important to consider the three main groups of stakeholders – consumers, industry and Member State Authorities – who would be affected by any changes to the legislation.

3.3.1. Consumers

Consumers are a key stakeholder group in the debate about food labelling and there is a high level of interest in nutrition among consumers [11]. The expectations of consumers within the EU vary across regional and national borders, those in Southern France are likely to have different concerns and priorities around labelling than those in Latvia.

Although most consumers claim to look at nutrition information other studies suggest that the use of the information is more limited [12]. Consumers show many differences in how they check for and use nutrition information. Around 35% of people look for nutrition information when they buy a product for the first time. In addition, people needing a specialised diet [13], women, more educated and younger people [14] are more likely to look for and use nutrition information. Some consumers require or prefer a comprehensive overview of the nutrient content, while others have concerns regarding only some nutrients (for example the energy, salt, fat or sugar content of a product).

Even though the current legislation provides some specifications on format, the precise detail of the label is broadly at the discretion of the manufacturer so there are differences in the presentation of the information. Many consumers find nutrition labels hard to use but the research has not indicated whether the cause of the problem is the presentation or other factors such as the amount of information, lack of understanding of terms, placement of the information, type size, etc.. Although it is worth noting that the legibility of the information is a frequent complaint of the consumer. What is clear is that labels can be complex and most consumers would like simple, clear, understandable, standardised and authoritative nutrition information.

3.3.2. Food industry

The food and drink manufacturing and retail sectors are characterised by small and medium sized enterprises. A small number of large manufacturing companies account for a large part of the turnover in (see Annex 1). Although harmonisation of the requirements on nutrition labelling facilitate intra-Community trade, the industry has expressed concerns about the prescriptive nature of the current legislation and the effect in terms of the design of packaging. Even if the information is provided voluntarily, it must still follow a standardised format and this can restrict the scope for company-level innovation, especially as there is pressure to reduce the amount of packaging on foods. In addition, this prescription is seen to be preventing innovation as novel ways of presenting the nutrition information are outside the legal framework. A major concern of the food industry is the cost associated with any changes in labelling legislation.

3.3.3. International dimension

During the consultations the international issues were not identified as a specific issue separate from the general issues for the food industry overall. In fact the basic principle of food labelling means that traders need to ensure that the label is in a language that is understandable in the country of marketing, therefore, manufacturers frequently need to amend their labelling to the local markets.

However, third countries can benefit from the harmonisation of the Community approach to labelling issues as it can make it easier for manufacturers to export their products to the Community as they do not need to accommodate their labelling to different approaches at Member State level.

3.3.4. Member States Authorities

Member States wish to strike a balance between the concerns of consumers and those of the food industry within their country. Member States are aware of the need to reduce barriers to the internal market which is facilitated by a harmonised approach. However, there is increasing pressure from some to have increased flexibility at the national level, in particular, where there are innovative nutrition labelling systems being proposed or in use. However, the need for such flexibility is not shared by all Member States, with many seeing the benefit from harmonisation of the Community rules leading to similar consumer expectations across the EU and the industry being able to more readily market their products across borders.

3.4. Rationale for the revision of the legislation

The recently published White Paper on a Strategy for Europe on Nutrition, Overweight and Obesity related health issues [15] stressed the need for consumers to have access to clear, consistent and evidence-based information when deciding which foods to buy. Nutrition labelling is an established way for information to be passed to consumers to support health conscious decision making in relation to food purchases. There is wide agreement in Europe today that the effectiveness of that nutrition labelling can be strengthened as a channel for information to consumers to support their ability to choose a balanced diet.

Having legislation at Community level supports the internal market which is beneficial for food business and also for consumers. However, the need for a revision has been brought to the fore by consumers and industry, over a period of some years, expressing dissatisfaction with certain aspects of the current legislation. The consultation in 2006 focused on the main issues that had been identified as the most important during the 2003 consultation process, namely: whether nutrition labelling should be voluntary or mandatory; the amount of information that should be included; alternative formats for providing nutrition information; and, the presentation of the information. In addition, in recent years there has been more widespread inclusion of nutrition information on the front of packs. This presentation is not specifically dealt with under the current legislation and questions have been raised whether they meet the existing legislative requirements. There is a divergence in the schemes being used by individual companies, specific sectors or promoted by Member States and there is concern that the proliferation of such schemes can create barriers to trade or increase costs to industry creating a threat to the internal market.

On the basis of the extensive consultations four main policy issues for consideration in the review of the legislation were identified and are considered in this impact assessment.

3.5. Policy Issue 1 – Disparity in inclusion of nutrition labelling on prepacked foods

3.5.1. Summary

The current approach to inclusion of nutrition information means that the extent and quality of the provision of nutrition information on prepacked foods to consumers is variable both between different food categories and the proportion of products with labelling in individual Member States.

Some consider that an increased level of provision of nutrition labelling is essential in order to increase consumer use of such labels, whilst others consider that the latest research shows that this labelling is very little used [16]. There is no doubt that the proportion of nutrition labelling is increasing in the EU, especially on those products which are produced by larger companies but the level of provision is not uniform. For nutrition labelling to be used as a channel to help all EU citizens to make informed dietary choices, which potentially can have an impact on their health, it is important that nutrition information is included on as many foods as possible. This means that the mandatory labelling should be considered.

3.5.2. Background

The inclusion of nutrition information across product categories is not uniform, for example in the drinks sector one study indicated that 23% of cordials or syrups for dilution had nutrition information compared to 56% of soft drinks and 83% of fruit juices [17]. Whilst over 80% of products such as breakfast cereals, frozen vegetables, margarine, milks and soups included nutrition information less than 40% of ice-creams and jams did so. In certain categories, such as chewing gum, coffee and spices, no products included nutrition information although these foods are considered to be of limited nutritional importance in the diet. Further information from this study on the inclusion of nutrition information across different product categories is given in Annex 2.

Research in the United States indicates that the provision of nutrition information on a voluntary basis is less likely on certain products which have negative attributes such as high levels of fat or sugars [18]. In another study the provision of information varied but in some food categories (salted snacks, cereals, yogurts and margarine spreads) almost all products included nutrition information [19].

The uneven distribution of information across Member States is illustrated by one study where the inclusion of nutrition information in tabular form across four countries was investigated. The results show that on average 56% of the products included nutrition information but this varied between the different countries from 41% to 85% of the products surveyed [20]. In the 2006 survey targeted at SMEs across 19 Member States 56% of companies included nutrition information but it varied from 33% to 95% of companies in different Member States.

3.6. Policy issue 2 – How much nutrition information should be included on the label

3.6.1. Summary

The aim of nutrition labelling is to inform the consumer to facilitate their ability to choose a nutritionally balanced diet therefore the question is what information should be included on a nutrition label to achieve this aim. At the moment nutrition labelling must consist of at least energy, protein, carbohydrates and fats. The WHO Global Strategy on Diet Physical Activity and Health [21] noted that the following nutrients were associated with increased risk of noncommunicable diseases: fats, saturated fatty acids, trans-fatty acids, free sugars, and salt (sodium). These broadly coincide with the most frequently mentioned nutritional elements in the 2006 consultation. However, certain stakeholders have called for inclusion of the existing Group 2 elements plus trans fatty acids as they believe that the consumers should have information on all the most important elements. Other stakeholders argue that a long list of nutrients is confusing for the consumer. Although research shows that many consumers find nutrition labels hard to use, it is difficult to know whether the cause of the problem is the amount of information or other factors (type size, format of presentation, lack of understanding of terms, placement, etc.). The balance between providing information on the components most relevant to public health and comprehensive information needs to be considered against consumer understanding and risk of information overload.

3.6.2. Background

In the 2006 consultation the most frequently mentioned elements in relation to nutrition labelling were: energy (calories), fat, saturated fat, sodium (salt) and sugar. Potentially, the restriction of labelling to these five elements would focus consumers’ attention, and that of industry, on the key nutritional elements that are a concern in terms of the overall diet. However, the consumer and health NGOs argue that the nutrition labelling should include eight nutrients. In addition, Members of the European Parliament have called for action on the labelling of trans fats. Therefore, there is no clear consensus on which elements should be included in the nutrition labelling.

Research suggests that consumers often feel overwhelmed by the amount of information on food labels [22], to the extent that one researcher has suggested that “a large list of detailed product information may cause many consumers to disregard the label completely” [23]. Determining which nutrition elements should go on a label requires careful consideration of the information overload issue, while at the same time taking into account nutrients about which, from a public health perspective, consumers should have information. In addition, consideration needs to be given to the accessibility and costs associated with obtaining relevant information by food manufacturers.

3.7. Policy issue 3 - Nutrition labelling on front of pack

3.7.1. Summary

The inclusion of nutrient content information in simplified form, or not in tabular form, has been increasing in the recent years through the promotion of such schemes by individual Member State Authorities and representative industry organisations. The situation regarding such presentations, particularly those being promoted for use on the front of pack, is not clear under the existing legislation leading to a need for clarification. In addition, the application of different schemes potentially could lead to confusion for the consumer and barriers to trade for the industry.

3.7.2. Background

The issue of simplified nutrition information, in particular included on the front of pack, has arisen since the SANCO consultation conducted in 2003 so views on this issue were sought in 2006. The responses indicate there is an interest in the developments in this area but there were divergent opinions on the best way forward and all stakeholders highlighted the need to ensure that any format should be meaningful and easily understood by consumers.

Although not specified in the current legislation, tradition has been for the nutrition label to appear on the back of the pack. However, there is a view that such a location (and there may be some link to presentation) does not engage the majority of consumers. Research suggests that while consumers are keen to have the traditional back of pack nutrition label, the majority use it infrequently or not at all [24]. Reasons given for lack of use were: the label is too complex (too much information); unsure how to use the information; poorly presented (difficult to read); and simple lack of interest. At the moment, stakeholders tend to see back of pack and front of pack labelling as linked, but separate, issues. The latter is a simplified label which is used in addition to, rather than instead of, the traditional back of pack label.

Evidence is emerging from recent moves by parts of industry, and some Governments, to put some nutrition information on the front of the pack. In countries where simplified schemes have been introduced consumers like such schemes [25] and such labelling is apparently leading to changes in purchasing behaviour [26]. However, there are concerns about possible adverse effects, for example the information being too simplistic. Some stakeholders have suggested that confusion could be caused by a proliferation of alternative formats. Some examples of labelling schemes that include nutrient content information of food are given in figure 2.

Figure 2: examples of provision of nutrition information on the front of packs

(...PICT...)

(...PICT...)

(...PICT...)

(...PICT...)

In view of the proliferation of front of pack labelling schemes within the EU (either proposed or already in place), there is the expectation that the revision of the Directive will clarify the rules with respect to such schemes. Indeed, some stakeholders have called for a single EU system to be made mandatory.

3.8. Policy issue 4 - Legibility of information

3.8.1. Summary

There is little benefit to the consumer if the nutrition labelling information is hard to read. The question of legibility concerns various aspects of presentation, font size, type and colour, contrast with background etc. The main cause for complaint is font size particularly for the back of pack information. There is a need for consideration whether the legislation should be adapted to give a framework for the general provision that labels should be legible. This issue is of relevance to all information provided on food labels, not just nutrition information.

3.8.2. Background

Nutrition labels have to be clear and comprehensible in order to be useful for consumers to make better-informed food and diet choices. Studies show that the format of labels is an important element in “maximizing the possibility that labelled information will influence its audience” [27]. Although the current legislation notes that the nutrition label ‘shall be printed in legible characters’, the feedback from the consultations suggest that consumers do not find that the information provided complies with this provision. A review of various European studies of label usage amongst consumers found that one of the main causes of consumer dissatisfaction is that the size of print is often too small [28]. There are other presentation issues, for example the colour of the print, contrast with the background and the type face, therefore, there is a need for consideration of clarification of some basic aspects of legibility within the revision of the legislation. The provision of multilingual labelling, either to reduce potential labelling costs associated with marketing products in different countries, might be a factor in leading to small font sizes. Although in some countries multilingual labelling might be necessary due to the rule that the language used on the label should be understood by the consumers in the place of sale.

3.9. Regulatory approach

Within the Commission work programme the revision of Directive 90/496/EEC on nutrition labelling of foodstuffs and Directive 2000/13/EC of the European Parliament and of the Council on the general food labelling [29] have been included as one action in the agenda planning. It will be important to have a coherent approach in the revision of both legislative measures.

It was decided not to follow the so-called ‘basic approaches’ for the design and analysis of the policy options as the specific policy issues that had been identified in the problem definition rather than the regulatory approach are considered to be important aspects for the impact analysis. However, certain basic approaches considered as a means of finding solutions to the main policy issues, as well as the option of no intervention, are considered below.

3.9.1. Do nothing

The baseline of doing nothing would maintain the current situation with the following consequences:

failure of the legislation to adapt to changing stakeholder needs and demands;

confusion and lack of availability of relevant information for the consumer;

continued lack of clarity on the legality of simplified nutrition labelling schemes;

potential proliferation of different schemes which could lead to increase burden on the manufacturing industry with different national or sectorial approaches;

impediment of the internal market due to proliferation of simplified labelling schemes;

effectiveness of labelling as a communication tool not reaching its full potential due to lack of legibility of the information.

3.9.2. Deregulation

The option of deregulation would entail the abolition of the basic policy instruments concerning nutrition labelling rules and would have the following consequences:

direct impact on other legislation that make reference to the framework for nutrition labelling, for example vertical rules and the recently adopted horizontal regulations on nutrition and health claims [30] and the addition of vitamins and minerals to foods [31];

distortion of fair competition through differences in national rules;

potential proliferation of different schemes which could lead to increased burden on the manufacturing industry with different national or sectorial approaches;

inconsistent approach in terms of the content and availability of information potentially leading to confusion for the consumer;

impediment the smooth functioning of the internal market as there is a risk of development of national rules or approaches.

The existing rules have proven their benefits in providing a basic framework for the provision of nutrition information to the consumer and facilitating the free circulation of goods. Removing the harmonised rules would meet strong resistance from the majority of Member States, industry and consumers. Therefore, de-regulation was not considered to be a viable approach.

3.9.3. National legislation

The repeal of the harmonised rules and the creation of national rules for nutrition labelling would have the following consequences:

a proliferation of different national rules that would impede the smooth functioning of the internal market;

distortion of fair competition;

increased administrative burden for industry since operators would have to familiarise themselves with the relevant legislation of each Member State in which they trade;

inconsistent approach in terms of the content and availability of information potentially leading to confusion for the consumer;

lack of common rules that are used as a basis for other Community legislation.

3.9.4. Alternative approach (self-regulation, co-regulation, guidance)

The different features of consumer information and food labelling on the one hand and the current trends towards the development of a “new legislative culture” call for the assessment of a new approach that could strike the balance between flexibility and prescription and between action at the national and action at EU level.

The manner in which information is presented on labels is a good example of a rapidly changing feature of modern commercial practices. Similarly, consumers’ needs and attitudes constantly evolve. Therefore, labelling rules should be able to keep pace with technological innovation and change in consumer’s behaviour.

In particular, recent years have seen an increased development and use by Governments and industry of simplified nutrient content labelling especially on the front of pack (‘signposting’), aimed at making nutrition information easier for the consumer to find and use. However, on the one hand, some of the existing schemes are difficult to reconcile with the legal framework established by the existing legislation; on the other hand, due to the novelty of these systems, there are currently no clear benchmarks against which to measure the efficiency of any given scheme.

Having recourse to a multi-level governance (local/national/community) based on the principle of commitment to formal, measurable best practice and data sharing between involved stakeholders could be a relevant and viable alternative in the area of food labelling. In addition, such an approach would allow sufficient experiments and research to be made in order to provide solid evidence about the best systems for nutrition labelling.

Moving the already harmonised detailed requirements to a more flexible approach would present no added value given that such requirements have proven their merits in allowing free circulation of goods. As far as any new policy issues are concerned, the introduction of a more elaborate and sustainable approach to consumer information emerging from best practices and from a constant dialogue with stakeholders has the potential to achieve beneficial results both for industry and consumers. The new governance model that is being proposed in the framework of the General Food Labelling revision would be a means to achieve the flexibility to allow the evidence of consumer preference and use of nutrition labelling to be used as a basis of best practise that could be promoted throughout the industry.

3.9.5. Prescriptive Regulatory EU Action

Given the need for uniform rules and legal certainty the regulatory approach is the most appropriate framework to address the current problems in the area of food labelling. A level of prescription is frequently asked even by economic operators because detailed rules save industry from the trouble of developing its own policy under its own responsibility. The alternative approach of enhanced cooperation between stakeholders would need to have a framework of operation established in the legislation so that it has legitimacy for all the stakeholders and ensure a level playing field for all. In the context of each of the main issues it is appropriate to consider the effectiveness of alternative approaches in achieving the objectives of the legislation.

3.9.6. Form of legal act

An option on the form of the EU measure would be to change the legal act from a Directive to a Regulation. This would be justified by the fact that the majority of the existing rules of the nutrition labelling of prepacked foods are prescriptive with little flexibility for Member States in how the rules should be applied, thus being more “Regulation-like” than a framework Directive. A move to a true framework measure that allows for potentially different application of the rules by individual Member States would create barriers to trade for both companies in the EU and third countries. It could also lead to a different level of information provision to consumers. A Regulation would give a more consistent approach for the industry to follow, it would reduce the administrative burden on the industry as they would not need to familiarise themselves with the implementation of the regulations by the Member States. Consumers could expect that where nutrition information is provided it would follow certain basic rules. In addition, a regulation would ensure that the rules became applicable at the same time across the EU avoiding problems with delayed transpositions by Member States and consequent infringement procedures by the Commission to assure the free circulation of goods. It would also reduce the administrative burden costs associated with the transposition of the legislation by Member States.

An option that is being considered is the combination of the Directive 2000/13/EC of the European Parliament and of the Council on the general food labelling and nutrition labelling legislation into one measure which would simplify the regulatory framework.

3.10. The right of the Union to act – Subsidiarity test

The proposal is to revise existing legislation so the problem at issue and the objectives pursued by the Union have been already defined. Article 95 of the Treaty, functioning of the internal market, provided the legal basis for the EU legislative measures on nutrition labelling. In addition, it can be considered that nutrition labelling could also be relevant to issues related to informing the consumer (Article 153) and protection of human health (Article 152). The core of the Community action is setting the conditions for the labelling of food within the EU which can not be appropriately addressed by Member States alone if the common internal market is to function smoothly.

The Commission’s recently adopted Strategy on nutrition notes that the individual is ultimately responsible for his lifestyle, while recognising the importance and influence of the environment on his behaviour; and, that only a well-informed consumer is able to make rational decisions. Nutrition labelling is an action that contributes to a better diet by providing the necessary information to inform decision making of EU consumers. It is considered that action at the EU level would deliver better results than a series of individual actions by Member States because:

a harmonised approach across Member States may simplify administrative burden on any food companies operating either trans-nationally or Community wide, and

uniform action will ensure Community wide minimum standards for consumers and thereby reduce inequity for citizens across the EU

A proliferation of different national labelling schemes that are not mutually recognised could undermine the current single market opportunities which could have a major impact on trade given the high volume of intra-Community trade which in 2003 accounted for over 75% of all trade with flows of around €120 billion [32]. The SME Panel survey indicates that 65% of companies trade their products in more than one Member States and over 60% of the respondents favoured harmonisation of nutrition labelling through European legislation.

The problem definition section explains the situation since the establishment of the current legislation in order to identify the policy issues where community action can create added value. The revision would update the regulatory framework for the inclusion of nutrition labelling on prepacked foods to take account of consumer needs and developments in the provision of such information to the consumer.

A harmonised legislation on nutrition labelling will reduce the asymmetry in the provision of nutrition information and consumers’ expectations. In the light of the different elements outlined, EU action is justified as experience shows that Member States can not achieve a harmonised common market satisfactorily and that the EU can act more efficiently for the provision of information to help consumers make informed dietary choices. This in turn can help them identify a diet that follows healthy eating advice and that can help reduce the risk of obesity and nutrition related diseases.

4. Objectives

The Commission’s strategic objectives and principles of Better Regulation and Simplification, improving the implementation of regulations, facilitating innovation, social equity, environmental protection and international responsibilities while maintaining high level of public health protection should underline the objective of the legislation. The simplification needs that emerged from the consultation of Member States and stakeholders in relation to nutrition labelling was to make the labelling easier and clearer for operators and consumers.

The main objectives of the legislation on nutrition labelling are:

to make key nutrition information more widely available;

to make nutrition labelling more easily understandable to the consumer; and

to create a level playing field for companies to compete.

Taking this objective into account, the broad scope of the revision should meet the needs of consumers and industry, and reflect the following specific objectives:

provision of key nutrition information – which means that the nutritional elements that should be included in the nutrition label need to be reviewed;

increase the availability of information to the consumer with nutrition information included on nearly all relevant prepacked products;

the information to be presented in a way that makes it easy for the consumer to find, understand and use, including its legibility;

clarify the legislative situation of nutrient content information provided on the front of pack;

flexibility, allowing the industry to innovate on nutrition labelling, adapt to different markets and consumer demands, and to take account of the variations in packaging (size, shape, etc.);

to avoid impediment of the single market, and to meet the expectations of consumers and industry, there should be mechanisms in place to control the extent of any flexibility at the national and EU level.

A schematic illustrating the hierarchy of the objectives for the nutrition labelling revision is presented in Annex 3.

5. Major policy options

With a view to achieving the objectives a number of measures have been considered. These have been divided into two categories:

(1) Measures that during the consultations were identified as having a major impact, e.g. major policy actions with potential economic, social or environmental impact. For these a more detailed analysis on the basis of the do nothing, voluntary measures and amendment of the legislation.

(2) Measures that are required to bring the legal text into line with other EU policies and legislation. The impacts of these measures are considered minor and not requiring detailed analysis as they mostly relate to legal updating and clarification. These issues include: defining mechanisms to facilitate the updating of the legislation and the presentation of nutrition content information.

It is intended that the proposal will repeal Directive 90/496/EEC. The provisions of the Directive will be reviewed, for some of the issues there is a need to develop a new policy, whilst for others, corrective measures including updating and clarifying the legal text, can be introduced.

The combination of the Directive 2000/13/EC on general food labelling and the nutrition labelling legislation into one measure would simplify the regulatory framework for these horizontal labelling issues.

5.1. Baseline projection

If the legislation is not changed then it is anticipated that there would be a continued gradual increase in the inclusion of nutrition labelling on prepacked foods from the current levels of around 56% of products across the EU. It is expected that simplified labelling schemes would continue to be developed by individual companies, sectorial parts of the industry and Member State authorities and that there will be inclusion on products across the EU.

5.2. Policy Issue 1: Disparity of provision of information - Voluntary or mandatory nutrition labelling?

Options

5.2.1. Option 1: No change - Maintain current rules (nutrition labelling mandatory if a claim is made)

No change to the present legislation would mean keeping the present system of nutrition information provided on a voluntary basis but it becoming mandatory when a nutrition related claim is made.

5.2.2. Option 2: Encourage inclusion of nutrition information on a voluntary basis

To promote the inclusion of nutrition information by encouraging Member States and stakeholders to promote the inclusion of nutrition information on all relevant prepacked foods. At the Community level this could be done, for example, through encouraging the Members of the Platform for Action on Diet, Physical Activity and Health to make appropriate commitments.

5.2.3. Option 3: Introduce mandatory nutrition labelling for all prepacked food

Introduction of mandatory inclusion of nutrition information of certain nutritional elements for all prepacked foods.

5.2.4. Option 4: Introduce mandatory nutrition labelling for all business, but with exemptions or longer transition times for all SMEs

Introduction of mandatory inclusion of nutrition information of certain nutritional elements for prepacked foods produced by businesses that are not classified as SMEs or allow extended transition periods for all SMEs.

5.2.5. Option 5: Introduce mandatory nutrition labelling for all business, but with exemptions or longer transition times for a limited number of SMEs

Introduction of mandatory inclusion of nutrition information of certain nutritional elements for prepacked foods with the exception of certain SMEs (for example micro businesses or certain categories of foods) or to allow extended transition periods for certain SMEs.

5.3. Policy Issue 2: Nutritional elements to be included in the nutrition information

Options

5.3.1. Option 1: No change – labels have Group 1 list (energy, protein, carbohydrates and fat) or Group 2 list (Group 1 plus sugars, saturated fats, fibre and sodium) additional information can be provided voluntarily

No change to the present legislation would mean keeping the present system of nutrition information being provided on a minimum of 4 elements increasing to 8 or more elements depending on the nature of the nutrition related claim.

5.3.2. Option 2: Encourage voluntary and self regulatory approach to have a consistent approach to the elements that are included in the nutrient declaration

Remove the existing requirements on Group 1 and Group 2 list of nutrients and promote consistent approach to the inclusion of certain nutrients in labelling by encouraging Member States and stakeholders to cooperate and reach agreement on a voluntary harmonised approach. At the Community level this could be done through encouraging the Members of the Platform for Action on Diet, Physical Activity and Health to make appropriate commitments.

5.3.3. Option 3: Specify the 5 key elements - calories, fat, saturated fat, salt and sugars - but allow additional elements from a positive list to be added to the labelling

In the 2006 consultation the nutritional elements that were most frequently mentioned were energy (calories), fat, saturated fat, salt and sugars. It would simplify the basic structure of the nutrition labelling and increase consistency whilst allowing inclusion of additional nutrition elements, for example those that are the subject of a nutrition related claim on the labelling.

5.3.4. Option 4: Change Group 1 labelling to 5 key nutritional elements - calories, fat, saturated fat, salt and sugars - and change Group 2 to labelling 9 elements - calories, protein, fat, saturated fat, trans fatty acids, carbohydrates, sugars, fibre, and salt (with additional voluntary elements from a positive list)

This option would provide information on the nutrients that are of most interest and provide flexibility for the industry to add additional information on the label in a standardised format. The declaration of additional elements would be linked to nutrition related claims.

5.3.5. Option 5: Specify 9 elements - calories, protein, fat, saturated fat, trans fatty acids, carbohydrates, sugars, fibre, and salt (with additional voluntary elements from a positive list)

This would provide information on the majority of the important nutritional elements that have been identified as relevant for consumers to be able to make informed food choices.

5.4. Policy Issue 3: Nutrition labelling on front of pack

Options

5.4.1. Option 1: No change - Maintain current rules – placement of nutrition label left to discretion of manufacturer, no mention of labelling on front of pack in particular

No change to the present legislation would mean nutrition information being provided, in general, on the back of pack. The situation regarding nutrition information on the front of packs would not be clarified.

5.4.2. Option 2: Encourage voluntary and self regulatory approach to have a consistent approach across the industry

Promote a consistent approach to the inclusion of nutrient content information, especially on front of pack labelling, by encouraging Member States and stakeholders to cooperate and reach agreement on a voluntary harmonised approach.

5.4.3. Option 3: Ban nutrition labelling on front of pack

Would clarify the legal situation with respect to the inclusion of nutrient content on the front of packs.

5.4.4. Option 4: Provide a harmonised framework for nutrition labelling on the front of pack

This option would clarify the provisions that should apply to nutrient content information included on the front of packs.

5.4.5. Option 5: Mandatory nutrition labelling on the front of pack

This option would clarify and make mandatory the provisions that should apply to nutrition content information included on the front of packs.

5.5. Policy Issue 4: Legibility of information

Options

5.5.1. Option 1: No change – broad requirement for the label to be legible and some prescription on format

No change to the present legislation would mean leaving the interpretation of the provisions of the legislation to the competent authorities in Member States possibly through case-law.

5.5.2. Option 2: Encourage voluntary and self regulatory approach to clarifying basic requirements on legibility

No change to the present legislation but encourage the development of industry-wide codes of practice or guidance on basic requirements for legibility of the labels.

5.5.3. Option 3: Introduce a minimum text size for information on nutrition labels, other presentation issues left open, although further measures could be introduced via comitology based on experience gained

Whilst only directly addressing one issue of presentation (text size) this would provide a basis of control for this aspect and allow for further regulation, if necessary, of other aspects of presentation that can influence legibility of labels (e.g. colour, contrast, background effects).

5.5.4. Option 4: Introduce clear rules for presentation covering all relevant issues (text size, font, colour, format, etc.)

This option would address, as far as possible, all the aspects of legibility of nutrition information included on the labels.

6. Analysis of impacts

This Impact Assessment combines quantitative and qualitative approaches so that adequate consideration is given to a broad range of direct and indirect social, environmental and economic impacts.

The impact analysis is based on the evidence obtained through a review of the literature (published in peer reviewed journals and non-peer reviewed publications), reports prepared by Member States, data collected through the survey for the 2004 impact assessment report, the SME Panel on Food Labelling in 2006 and the online questionnaire organised in 2007 by the external consultant RAND Europe.

In addition, the impact assessment was reviewed by the experts from different Commission Directorate-Generals’ represented in the Inter-Service Steering Group on Impact Assessment.

Data limitations: There is limited detailed cost information available on the impact of nutrition labelling which makes it difficult to apply the Standard Cost Model. The industry was asked through various fora to provide representative data on costs associated with labelling but such information was not forthcoming. The stakeholder online questionnaire on labelling issues between March-May 2007 included specific and detailed questions on the costs associated with the food labelling process (see Annex 4). Unfortunately, not all respondents completed the questions on costs and due to the overall quality of the responses it was not possible to derive reliable estimates of time spent or costs associated with labelling of products that could be applied in a Standard Cost Model. There is some limited information from the 2004 impact assessment report on overall costs to industry associated with the introduction of mandatory labelling of 7 nutritional elements. On the benefit side, there were problems of attribution of benefits associated with nutrition labelling and how benefits can be monetised. In general the process of the consultations and surveys were not specifically designed to achieve a representative sample of the EU so the results can not be regarded as representative.

Based on these data limitations, the assessment of the options has not been undertaken using the Standard Cost Model. Estimations on administrative burdens using available data from the available studies have been completed and the assumptions for the estimated costs are explained in Annex 5.

6.1. Approach taken in assessing the impacts

The current legislation applies to prepack foods i.e. foods that are not packed at the request of the consumer or that are packed on the same premises of manufacture for immediate sale. The approach in assessing the impacts has been to consider the proportion of labels on prepacked products that might need to change. Although this is potentially a crude measure, it is practically impossible to examine in detail the impacts because of the sheer range of products and labels that exist. Therefore this section starts by providing general information about the labelling process so that the potential impacts can be more readily understood.

6.2. Food Labelling Process

In considering the economic impacts that might occur due to changes to the nutrition labelling legislation, it is important to understand the labelling process, including recognition that even in the absence of labelling legislation, prepacked food would still be labelled. Therefore, whilst changes in food labelling legislation may mean some additional costs associated with including the information required, companies producing prepacked foods will always have costs of labelling that are not due to legislative requirements (for example printing and packaging costs). The various steps that comprise the food labelling process are set out in figure 3.

There are a wide variety of means of labelling prepack foods such as information printed directly on the packaging material or labels stuck on to the package. For example, tins can have paper labels stuck onto the tin or can have the labelling information printed directly on the tin (e.g. soft drinks). In surveys of producers of prepacked foods when asked about costs of implementing changes the responses range from a negligible cost to a substantial cost if there is a need to invest in new equipment. The different packaging materials and methods of labelling have an impact on the labelling costs making it difficult to give a representative figure. However, where available the information collected in the 2004 impact assessment is provided as a benchmark [33].

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Figure 3: overview of the food labelling process

6.2.1. Drivers for labelling changes

A label change can be triggered by various reasons; the most common ones are: changes in regulations, marketing reasons, product reformulation and recipe changes and adding additional information to the label. Food manufacturers have indicated that changes in regulations is the most common reason for labelling changes but changes in the recipe or updating the label are also considered important reasons [34]. Labels are usually changed by producers at regular intervals. These life cycles of a label may range from a few months for highly marketed, branded products such as cereals or soft drinks, or they might be a few years for niche products and commodity products such as sugar, salt or flour.

6.2.2. Familiarisation with the regulations and information to be provided

Before designing/redesigning a label the company needs to be familiar with the legislation to identify the legal requirements for the new label. A UK administrative burden exercise estimated the costs attributed to familiarisation and understanding the General Food Labelling regulations as 13% of all administrative costs across all the food regulations [35]. An administrative measurement exercise conducted in Denmark estimates the costs associated with familiarisation with food labelling legislation to account for 5% of the total administrative burden associated with the food regulations.

If the information to be provided on the label is not readily available within the company, additional costs are associated with the collection this data. In the case of nutrition labelling, there would be costs of obtaining the nutrition composition of the product. The 2004 survey estimated that cost for obtaining information on the nutritional composition of food by analysis of the products was on average €57 for 4 nutritional elements but increased to around €256 with an additional 3 nutritional elements. The costs associated with obtaining the information on the nutrient composition through calculation from the recipe ingredients and food composition tables was generally much less.

6.2.3. Design and printing costs

The design costs vary with the extent of the overhaul of the label, with a complete overhaul being the most expensive option. The 2004 impact assessment indicated that a small change would cost €2000-4000 whilst full resign of a label would cost an additional €7000-9000 if the changes had to be implemented immediately. Although companies may have a range of different products many of the labels have the same basic layout so once the underlying design has been developed the changes to the other labels would be a minor modification and associated costs would be reduced.

Labels are printed by a different method the costs of which vary. There are US estimates of costs associated with preparing the printing plates ranging from $380 (€225) for a minor change up to $16,600 (€14000) for a full redesign. Another cost implication of labelling changes is the write off of existing stocks of labels. Data on the typical stock of labels available for the UK indicates that 69% of companies use their labels within 12 months, and only 11% need more than 24 months to use their labels [36].

The potential impact of labelling changes on businesses can be reduced if the changes are incorporated into the usual lifecycle of a label. Table 1 summarises the frequency of labelling changes reported in two recent surveys [37] [38].

Table 1: Frequency of labelling changes

| Percentage of labels changed |

| Once a year | Once every 2 years | Once every 3 years | other |

RAND Survey | 37% | 26% | 20% | 18% |

SME Panel Survey | 29% | 26% | 25% | 19% |

On the basis of the available information it is estimated that over a 3 year period 80% of companies would introduce labelling changes as a normal part of their business operation. Normally the implementation of new labelling requirements are not imposed immediately and generally there is a period of transition included in the legislation with some flexibility with products that had been labelled and placed on the market before a certain date being able to continue to be sold. The period in which products that do not comply with the requirements can continue to be placed on the market will have an impact on the ability of companies to adapt to the new requirements and the associated costs. Therefore in the assessment of the impacts the effect of different transition times on food business operators is estimated.

6.3. Administrative burden

Standard Cost Modelling measures the administrative burden to industry of complying with regulations. The burden refers to the provision of information to third parties, the regulator and the public. In the case of food labelling, the administrative burden of providing information to regulators will be minimal as the regulator does not require the provision of information from those regulated. In the case of the cost of providing information to the public, the cost of compliance is part of the overall cost of labelling and difficult to disaggregate.

The calculations presented in Annex 5 do not apply Standard Cost Model as required by Impact Assessment Guidelines. It draws from the SCM analysis of Member States, and then combines these data with data collected by the external consultants. It enabled only a rough estimation of overall costs, but this is already useful for the analysis of options.

The administrative burden exercises in the different Member States have tried to establish the current costs of compliance to industry and show that it is not possible to anticipate what the costs to industry related to revisions in labelling regulations might be and in which type of industry specifically these costs will be incurred.

Is should be borne in mind that a food manufacturer would label his food product to be able to distinguish it from his competitors products. Therefore, there is an ongoing underlying costs associated with producing and labelling products even in absence of mandatory labelling legal provisions. Where regulation can have an impact is in the requirements on the information that must be included on the label and the costs associated with providing the specified information. There is an ongoing project to assess the administrative burden associated with the food labelling legislation. The Directorate Generals Enterprise and Industry, and Health and Consumer Protection are working closely together on this project.

6.4. Impact on employment, equal opportunities, private life and access to social protection, health and educational systems

It is considered that social aspects relating to employment, equal opportunities, private life and access to social welfare systems will not be substantially affected by the revision of the legislation so these aspects are not be considered separately during the analysis of each of the policy issues.

6.5. Environmental impacts

The potential environmental impacts could be that the requirements for the provision of certain information on food labels would mean that the manufacturer increased the size of the packaging to provide the information in a legible format. This would lead to increased use of material resources and energy, and an increase in the amount of waste. Under the existing General Food Labelling legislation small packages may be exempt from certain labelling requirements. If similar exemptions were put in place for nutrition labelling, no significant environmental impacts would be expected from the introduction of mandatory nutrition labelling or other aspects of labelling that are being considered as part of the review of the existing legislation.

6.6. Policy Issue 1: Disparity of provision of information - Voluntary or mandatory labelling?

Option 1: No change - Maintain current rules (nutrition labelling mandatory if a claim is made)

Option 2: Encourage inclusion of nutrition information on a voluntary basis

Option 3: Introduce mandatory nutrition labelling for all prepacked food

Option 4: Introduce mandatory nutrition labelling for all business, but with exemptions or longer transition times for all SMEs

Option 5: Introduce mandatory nutrition labelling for all business, but with exemptions or longer transition times for a limited number of SMEs

6.6.1. Economic impacts

6.6.1.1. Competitiveness, trade and competition in the internal market

Broadly speaking, the competitiveness of an industry can be defined in terms of the profitability of its production. In an undifferentiated-products industry, profitability is mainly linked to lower production costs compared to competitors. The introduction of mandatory nutrition labelling requirements to all firms, regardless of market share or size, is likely to impose greater costs on the smaller firms, which might compromise their competitiveness. However, there is conflicting evidence, for example, an analysis of British SMEs, in the wake of the full introduction of European regulation in 1993, found no considerable effects of the labelling regulation on their competitiveness [39]. Whilst, a more recent study of the US situation shows that the introduction of mandatory nutrition labelling increased the likelihood of SMEs – compared to large companies – leaving the food market [40].

As far as the potential impact on the internal market is concerned no significant impacts are foreseen with any of options.

6.6.1.2. Impact on innovation and research

The increase level of provision of nutrition labelling on foods might have an impact on the development of healthier options. It is hypothesised that the mandatory declaration of nutrition information would lead to the reformulation of products which have more negative nutritional attributes but very few studies have been conducted to examine this theory. One study before and after the introduction of mandatory nutrition labelling in the USA suggests that base brands “significantly increased the levels of positive nutrients but did not reduce the level of negative nutrients” but firms appeared to have introduced new ‘healthy brand extensions’. The study results show that as the number of healthy brand extensions increased, the unit sales for base brands decreased [41]. It seems that mandatory nutrition labelling can increase the number of healthier options being offered.

Assuming that there would be a similar effect in the EU if mandatory nutrition labelling was introduced then it would be expected that with the voluntary declaration there would be less incentive to reformulate the products as companies might choose not to include any information. So it is likely that option 1 and 2 would have a limited impact as would option 4 as there would not be a major increase in the number of products including nutrition information. Options 3 and 5 would potentially have the greatest impact on reformulation of products.

6.6.1.3. Operating costs and conduct of business

2003 – 2004 in the EU25 there were:

285,000 food manufacturing businesses with a total turnover in 2005 of €836 billion

– less than 1% were large companies that accounted for nearly 54% of turnover

– around 79% were micro businesses that accounted for around 7% of the turnover

– 889,000 retail businesses in which food, drink and tobacco predominates with a turnover in 2004 of €888 billion

– with 495,000 retail businesses specialised in food retailing that accounted for 13% of turnover

There is limited information on the cost to industry across the EU of the introduction of mandatory nutrition labelling. A survey conducted in the UK to assess the potential impact for business of changes to nutritional labelling requirements estimates that the one-off cost to the UK industry of the introduction of mandatory nutrition labelling of 8 elements would be approximately £185 million, with an additional estimated on-going cost on an annual basis of nearly £38 million [42].

Mandatory nutrition information could also have an impact for companies which market their products in several countries if adding mandatory nutrition labelling requirements had knock-on effects on the number of stock-keeping units (i.e. basic label design for products within a range of products), warehousing, and distribution operations [43] (from the survey of SMEs around 65% of companies marketed their products in another Member State [44]). In this context the use of multilingual labelling could be affected. One study shows that 74% of companies with a turnover in excess of €50 million use multilingual labelling but this figure drops to 14% for companies with a turnover below €50 million [45]. Data from the survey conducted by RAND Europe suggests that large firms are more likely to produce multilingual labels with 40% of large, 25% of medium, 25% of small and 9% of micro-businesses producing multilingual labels [46]. (In some Member States due to the language requirements companies may be obliged to label their products with more than one language.)

Options 1 and 2 are not expected to impose any operating costs on the industry.

The other options are expected to have impacts which will vary depending on the timeframe for the change in the labelling requirements. Based on the assumptions on costs as outlined in Annex 5 it is estimated that the costs associated with redesigning a label for the mandatory inclusion of nutrition labelling with immediate effect (option 3) would be €21.8 billion. Whilst with a 3 year transition period that allowed for re-labelling during the normal redesign of the label it is estimated that the costs would be reduced to €1.2 billion.

Option 3 would have an impact on the greatest number of businesses. Based on the level of inclusion of nutrition labelling at the moment it is estimated that around half of businesses would be affected. Under option 4 there would only be an impact on large businesses that are less than 1% of the food and drink manufacturers of which around 75% are already providing nutrition labelling. Therefore, the impact of option 4 would be limited with potentially, if implemented with immediate effect, having an impact on less than 700 companies. Option 5, extended transition times for microbusinesses, would have an impact, at most, on 20% of companies.

6.6.1.4. Impact on administrative burden

In the context of administrative burden the costs associated with familiarisation with the legislation and obtaining the necessary nutrient content information is assessed. Depending on the nature of any mandatory requirements the costs would not be incurred by companies that already include nutrition labelling on their products. Studies suggest that on average in the EU around half the companies provide some nutrition information on their products but the proportion of products with labelling varies significantly between Member States [47] [48].

Based on the estimates of costs outlined in Annex 5 the estimation of administrative burden associated with familiarisation with the legislation and collecting the necessary information for companies that do not include nutrition labelling are: if mandatory labelling was for Group 1 nutrients (energy, protein, carbohydrates and total fat) the estimated costs of collection of information are €1 billion through analysis of the product itself and €0.5 billion through manual calculation from recipes. If mandatory labelling was for Group 2 elements (Group 1 plus sugars, saturated fats, fibre and sodium) the estimated costs increase to €3.7 billion with analysis of the product itself and €1.4 billion with manual calculation from recipes. Of these overall costs it is estimated that around €0.4 billion is associated with familiarisation with the legislation.

The assessment of the impacts of the different options are similar to those under operating costs. With options 1 and 2 having no impact and options 3 to 5 having impacts on companies in the different categories that do not currently include nutrition labelling information on their products (at the most around half the companies in total).

6.6.1.5. Impact on SMEs

SMEs in Europe constitute the large proportion of the food industry. They range from firms of less than 10 employees or turnover of less than €2 million (micro enterprises) to medium-sized firms of up to 250 employees or turnover between €2-50 million. As a result of these differences, it is likely that not all SMEs will face the same challenges in complying with changes in labelling regulations. In this analysis the information on SMEs is in relation to number of employees.

The evidence suggests that a move towards mandatory nutrition labelling could present particular challenges for micro and small enterprises. This is because larger firms enjoy economies of scale, which lowers the cost per-unit of complying with regulations.

There is limited information available on the voluntary inclusion of nutrition information based on company size. The survey conducted by RAND Europe [49] indicated that 25% of SMEs who responded to the survey included nutrition information. The breakdown by size of company was 4% of medium, 30% of small sized and 2% of micro sized businesses providing information. A recent survey in the UK [50] reported that 46% of SMEs included some nutrition information. The breakdown by size of company was 73% of medium and 42% of small and micro sized businesses providing information. Regarding the analysis of the options, no specific impacts for SMEs are expected with options 1, 2 and 4. Based on the data from the RAND and UK surveys option 3 could potentially have an impact on 56-75% of SMEs companies. Whilst, the impact of option 5 would be less than option 3. Any impact on different categories of SMEs would depend on the criteria for the exclusion of SMEs from having to meet the requirements of the legislation or the period for transition for adaptation to the new requirements. As indicated in Annex 5, extended transition periods (between 3 to 5 years) would facilitate the adaptation to new requirements as a period of 3 years would reduce the costs to industry by 94% compared to immediate implementation and it is expected that a 5 year period would allow virtually all companies to adapt their labels during the normal labelling cycle.

6.6.1.6. Third countries and international relations

The European Union is an importer of food products from non-EU countries. Data from Eurostat shows that in 2005 the United States, Brazil, Argentina and Turkey were the four top EU trading partners in terms of value of imports into the region [51]. The United States introduced mandatory nutrition labelling legislation in 1994, since then, many other countries have introduced mandatory requirements, including Australia and New Zealand, Canada, Brazil and others. Around 30% of the value of imports for the sector that includes food and drink of the top ten trading partners in 2005 was from countries that already have mandatory nutrition labelling of foods.

No significant negative impacts are expected with options 1 and 2 although with option 2 companies may need to take action to follow voluntary agreements. Option 3 to 5 could have impacts depending on the degree of flexibility and nature of the requirements. Mandatory nutrition labelling might be a greater barrier to trade for countries where nutrition labelling is not mandatory (such as China) than for countries where it is (such as Brazil and the USA). It is possible that firms in emerging and developing countries, particularly SMEs, may have difficulty in meeting the requirement for mandatory labelling. It is possible that the introduction of mandatory nutrition labelling could be challenged by third countries under international trade agreements, however, so far the mandatory requirements introduced by third countries have not be the subject of a formal challenge.

6.6.2. Social impacts

6.6.2.1. Impact on availability of information to consumers

Economic theory suggests that firms will disclose information on their products as long as it increases the revenues from the product through increased sales or through a higher premium [52]. This might lead to a spread of labelling information on positive food characteristics and increased information for the consumers. Evidence from the US prior to the introduction of mandatory food labelling suggests that the provision of information is not uniform [53]. This appears to be also the case in the EU as there is variation between the proportion of labelling in different Member States and in the proportion of products in different food categories that include nutrition labelling [54]. Based on the data available it is estimated that over 50% of prepacked foods on the EU market include some nutrition labelling information [55] [56].

The provision of nutrition information is beneficial for consumers, as a means to compare different products on the basis on their nutritional quality, and to make better informed choices about the prepackaged food they purchase. In addition, the widespread availability of comparable nutrition labels could lead to consumers becoming familiar with them, which has been found to be an important factor in label understanding and use [57].

Under option 1 there would be no immediate change in the provision of information to the consumer although there could continue to be a progressive increase in the number of labelled products. Option 2 would be expected to lead to a more rapid update of voluntary labelling by the industry. However, it is unlikely that all products would be labelled.

The across the board mandatory requirement of Option 3 would lead to a significant increase and more uniform provision of information across the EU. Option 4 could lead to a small increase in the proportion of products with nutrition labelling (possibly between 10-15% on average for the EU). If under option 5 micro businesses were exempted it is estimated that over 90% of relevant prepacked foods would include nutrition information. These three options, especially options 3 and 5, would be expected to deliver results more quickly that a pure voluntary approach.

6.6.2.2. Public health and safety

Third country estimates of costs and benefits associated with the introduction of mandatory labelling

United States

benefits US$4200 million over 20 years

cost to industry US$1500 million over 20 years [58].

Canada

benefits CA$5300 million in direct and indirect costs in 20 years

costs to industry CA$300 million over 20 years [59].

Australia and New Zealand

between 320-460 deaths; costs to the health system of between AUS$47-$67 million, and a lowered value of life by AUS$341-$486 million for every year that mandatory labelling was delayed [60].

While the ex-ante assessment of potential health improvements in the USA, Canada and Australia and New Zealand estimated positive outcomes, the actual causal relationship between food labelling and subsequent diet choice is not well understood [61].

The potential benefits of mandatory nutrition labelling to public health are difficult to quantify. Any impact on public health is based on assumption that the information on the food label will lead to a change in consumers’ behaviour and there is some evidence to support this assumption [62] [63]. One of the few studies assessing the impact of nutrition labelling on consumers’ diet choices tracked the changes in market share of salad dressings before and after the introduction of the mandatory nutrition labelling in the USA. Following the mandatory nutrition declaration there was a decrease in the sales of the salad dressings with the highest fat/saturated fat content [64].

Considering the possible impact on public health in the EU, according to the World Health Organisation (WHO), largely preventable chronic diseases cause 77% of the disease burden in the European Region (Comprising 53 countries (including the EU27)). In 2000 WHO estimated that in Europe approximately 136 million healthy life years were lost, of which 56 million were due to major nutritional risk factors [65]. Using obesity and overweight as an example, for the EU27 as a whole, the adult obesity prevalence was 15.7% in 2005 (ranging from 7.2% in France to 30.3% in Malta) [66]. In terms of costs, extrapolation of the available data on the costs associated with obesity and overweight in certain Member States using 2005 GDP figures gave an estimate of the cost for the EU25 as €40.5 billion a year and when costs associated with overweight are included the estimated costs double [67]. One study estimated that in 2003 the direct and indirect costs associated with cardiovascular diseases in the EU25 was €168 billion [68].

There is no estimate for the EU population of the impact of nutrition information on energy or fat intake and any potential benefit of mandatory labelling would ultimately depend on the impact on consumers’ behaviour and number of people making any positive change in their diet. Studies of dietary interventions suggest that a reduction in fat content by 10% corresponds to reduction in energy intake that would be associated with an average loss of about 3 kg in body weight [69]. At a population level, 3 kg equates to about 5% difference in obesity prevalence [70]. In the report of RAND Europe on the analysis of the impacts of the rising prevalence of obesity it is proposed that knowing the quantitative relation between nutrition and physical activity on the one hand and obesity on the other will enable us to assess the impact of policy. If it is assumed a policy is capable of reducing food energy by x% this will have an effect on obesity of x/2% [71]. Based on these assumptions and using the US estimation that the introduction of mandatory nutrition labelling would lead to a decrease in fat consumption of 1.25% [72] the potential decease in prevalence of obesity could be 0.65%. Using the estimate of the prevalence of cost of obesity and overweight to the EU25 in 2005, and assuming that all consumers changed their behaviour, the change in fat consumption would be equivalent to € 1.7 billion.

Based on the estimate of the benefit used by the UK Authorities to assess the impact of a change in the advertising of certain foods to children [73], gives a rough estimate of potential benefit of between € 2-5 billion based on the assumption that around 4% of the EU population changed their dietary habits and reduced their salt intake by 1 %.

In terms of the potential impact of the different options, under option 1 and 2 there may be an increase in the number of products including nutrition labelling but it is not certain what would be the increase in the proportion of labelled products. Option 4 would have a limited impact as there would be a limited increase in the number of products with nutrition labelling. Option 3 would have the greatest impact on increasing the number of prepacked foods with nutrition labelling. Option 5 would mean nearly all prepacked products would have nutrition information so would have slightly less of a potentially positive impact than option 3. Assuming that the provision of nutrition information would lead to healthier dietary choices then options 3 and 5 would have the greatest potential impacts.

The estimates of the impact to public health that mandatory nutrition labelling could have are subject to the caveat that it is not possible to fully isolate its impact from that of changes in food consumption and health patterns caused by secular factors. There is also the complexity of reliably assessing the counterfactual, that is, what the public health situation would be in the absence of mandatory nutrition labelling.

6.6.3. Impacts on Member State Authorities

It is likely that when changing from one regulatory framework to another government departments move resources between areas based on existing and emerging needs. This makes the costs to public administration of different regulatory framework very difficult to quantify.

Through interviews conducted by RAND Europe, a number of representatives of Member States agreed that the introduction of mandatory labelling is unlikely to lead to a significant increase in the administrative burden to governments, as it could be incorporated into existing systems of control. In fact, some respondents suggested that standardisation might be helpful in that it would make monitoring simpler [74].

In conclusion, in general no significant negative impacts would be expected and some authorities may find that the introduction of mandatory nutrition labelling would make some aspects of enforcement easier. Depending on the systems associated with the voluntary approach (option 2) the Member States Authorities may need to be involved in the coordination and consultation processes.

6.7. Policy Issue 2: Information to be included as part of nutrition labelling

Option 1: No change – labels have Group 1 (energy, protein, carbohydrates and fat) or Group 2 list (Group 1 plus sugars, saturated fats, fibre and sodium) additional information can be provided voluntarily

Option 2: Encourage voluntary and self regulatory approach to have a consistent approach to the elements that are included in the nutrient declaration

Option 3: Specify 5 elements - calories, fat, saturated fat, salt and sugars - but allow additional elements from a positive list to be added to the labelling

Option 4: Change Group 1 labelling to 5 key nutritional elements - calories, fat, saturated fat, salt and sugars - and change Group 2 to labelling 9 elements - calories, protein, fat, saturated fat, trans fatty acids, carbohydrates, sugars, fibre, and salt – with additional voluntary elements from a positive list

Option 5: Specify 9 elements - calories, protein, fat, saturated fat, trans fatty acids, carbohydrates, sugars, fibre, and salt (with additional voluntary elements from a positive list)

6.7.1. Economic impacts

6.7.1.1. Competitiveness, trade and competition in the internal market

In general, no significant impacts are foreseen with any of the options if nutrition labelling remains voluntary. However, under option 2 it is more likely that the large firms would have the resources to participate in voluntary collaborative approaches which might impact on the competitiveness of SMEs.

6.7.1.2. Impact on innovation and research

As mentioned under the analysis of the impact of mandatory nutrition labelling the inclusion of information on certain nutrients can encourage reformulation of products. It is expected that options 1 and 2 would not have significant impacts on research in this area. Whilst options 3, 4 and 5 could have an impact on research into product reformulation by companies, particularly with respect to the five nutritional elements that are common across the options, if they include nutrition labelling on their products. In addition, with option 4 and 5 there could be an impact on the formulation of a product with respect to the other four nutritional elements specified, for example trans fats and fibre.

6.7.1.3. Operating costs and conduct of business

If the labelling remained voluntary then the operating costs would remain the same in general. Companies would need to adapt to new rules if they were introduced and if these were mandatory then there could be additional costs that have already been assessed under the options of the first policy issue.

6.7.1.4. Impact on administrative burden

Under this policy option the costs associated with obtaining the information on the nutrient composition of the product will be used as the basis of the analysis of the impacts on administrative burden. Under the current legislation companies can use the following means to obtain the nutrition information: direct analysis of representative samples of the food; calculation from the nutrient content of the ingredients used in the recipe; or using representative nutrient content information for their products from generally recognised food composition tables. It is foreseen that these alternative methods would be retained in the revised legislation.

The 2004 impact assessment report indicated that while the costs of analysis of obtaining information on the four nutritional elements of Group 1 is relatively modest (a mean of €57), increasing the number of nutrients to seven (Group 1 plus sugars, saturated fats, and sodium) raises costs to a mean of €256 and the analysis for fibre again increases the cost of analysis to a mean of €354. The additional cost of analysis for trans fatty acid composition of an individual food is around €50 so the total cost for 9 nutrients by direct analysis is estimated as around €400. At the moment the content of trans fatty acids is not available for all foods so depending on the availability of such information it may be necessary for specific analysis of foods to be completed. The costs associated with calculation from the recipe and composition tables was from €70 [75] if it was done manually. Although there is some evidence that small manufacturers are using databases and software effectively to calculate the nutrition value of their products; the cost of obtaining informati