In response to agency regulations and laws enacted last year food & beverage companies are preparing to spend billions of dollars to change their food labels for nutrition and the presence of bioengineered material. Previous food labeling policy discussions centered on country-of-origin labeling, organic labeling and menu labeling. More recently, policy discussions have begun on how to address an estimated $162 billion in food waste each year in the U.S. Thus, in the very near future we may be asking food companies again to change their “best if used by” label.
All the food labeling policy changes in the past few years has lead to the question of whether or not food labeling policy discussions will be ongoing in the future? The answer is, likely “yes.” It is understood that to some extent consumers want transparency about the foods they eat. But there is only so much room on a package for labels and that limited space should be reserved for science-based information related to an individual’s health.
Unfortunately, with median household income for the U.S. at $55,775 it’s most often the consumer’s pocketbook that rules what foods do, or do not go into the pantry. What is more unfortunate is this issue seems to get the least attention in the policy-making arena.
What does all this labeling cost?
First, it should be recognized that technology is playing a role in keeping labeling costs at a minimum. Most consumers have a smartphone and can easily scan a QR code, or bar code, and obtain immediate access to information on the food product including nutrition, bioengineering, traceability and production practices. But keep in mind that there are also costs in managing data linked to the QR code, or bar code.
The Food and Drug Administration (FDA)’s Analysis of Impact on the updates to food nutrition labels estimate aggregated costs to food manufacturers at (a midpoint of) $1.9 billion. This assumes a 2-year compliance time impacting “approximately 60,000 manufacturers and over 700,000 Universal Product Codes (UPC)s covered by the rules.” FDA acknowledges, “Meeting the requirements of the proposed rules would impose costs on both industry and consumers.” They also noted, “Increased prices would reduce consumption of certain food items. Consumers would pay more for this food, requiring some reduction in other, valued consumption.”
Whom Does It Economically Impact Most?
As FDA notes likely some of the increased costs to pay for new labeling of food will be passed on to U.S. consumers. In 2014, Americans spent 5.5 percent of their disposable personal incomes on food at home and 4.3 percent on food away from home according to USDA’s Economic Research Service. But, Americans in the lowest income households spent $3,667 on food, representing 34.1 percent of total income. Food label policy changes that increase food costs even slightly hurt those with lower incomes.
FDA states, “The Nutrition Facts label contains nutrient content information that can help people follow healthy dietary practices. A prime reason behind the new nutrition labeling rule is “The growth in the prevalence of obesity and diabetes and the high rates of chronic diseases such as heart disease and stroke in the United States has elevated the treatment and prevention of these diseases to a top public health concern and a national priority.”
While the new labeling rule may be a laudable public policy goal one thing is certain – It is a goal that can be timely measured by data collected on:
- the assumed reduction in the ailments targeted, and
- consumers use (scanning) of QR codes and bar codes.
For instance, ScanLife by Scanbuy’s 2015 Q3 Mobile Trend Report, shows the average scan of QR codes, MicroSoft Tags and UPC’s was 5 times per user. This is up from 4.3 scans per user in the first quarter of 2015. QR Codes and Microsoft Tags generated 83% of scans, compared to UPC scans accounting for 17%. Industries who saw the most scans included food & beverage, consumer electronics, media, entertainment, and home improvement. The Mobile Trend Report provides insights on 23 million global engagements that gave mobile consumers instant access to product information, savings, video entertainment, mobile apps, and much more.
Timing Is Everything
According to the Food and Drug Administration (FDA), food manufacturers will need to use the new label by July 26, 2018. Manufacturers with less than $10 million in annual food sales will have an additional year to comply.
Without question food companies will need time to change their labels and, while they are at it, they might as well make all required and any anticipated changes to maximize efficiency and reduce costs. From recent actions and blog posts from FDA, one could assume that food label changes are going to be more frequent than in the past. In the interest of keeping increases to food costs due to labeling as low as possible, it makes sense for FDA and food companies to develop a coordinated plan about what future food labels that meet consumer needs for science-based information related to their health.
We urge FDA and food companies to continue working together to find the best, least costly methods to help food companies change their labels and alleviate any negative impacts to those most vulnerable.