New FDA Label Rules: Fear Not, Junk-Food Makers!

by James Brumley | February 28, 2014 9:27 am

New FDA label rules were officially proposed Thursday, and for the first time in 20 years, the dietary information on food packaging is likely headed for an overhaul[1] to better explain exactly what consumers are eating.

The knee-jerk reaction from shareholders of food stocks like Pepsico (PEP[2]), Hershey (HSY[3]) and Kellogg (K[4]) wasn’t panic, but understandable concern. After all, while most consumers basically know these companies make food and beverages that are less than totally healthy, those same people have quietly decided to look past the serving size and calorie data just to accommodate the occasional indulgence.

If the new FDA label rules mean the nutritional information is a little more blatantly described — as proposed — junk-food lovers might feel discouraged enough to lay down that sugar-laden snack and opt for a celery stalk instead.

Bluntly, though, current or prospective owners of HSY, K, or PEP stock (or any other junk-food producer) shouldn’t ring the alarm box just yet. Despite the intentions of the new labels, the odds of consumers giving up their sweets is actually quite slim.

Proposed Changes to FDA Label Rules

Truth be told, the planned changes aren’t nearly as dramatic as the media is making them out to be.

The biggest change is the considerably larger font utilized to indicate the number of calories ingested with each serving[5]; it will be the easiest number to spot with either of the proposed revamps.

Proposal No. 1 also suggests something a tad different — that the portion of the sugars found in the food or drink in question will be broken down into the total amount of sugar in a serving, and the portion of those sugars that were added by the company. The idea is to make it clear to consumers that the manufacturer intentionally (perhaps needlessly) added sweetener to a food.

The only other idea put on the table as a potential change to current FDA label rules is the addition of advice that would frame the layout of proposal No. 2. This option would list most of the food’s nutritional contents either under an “avoid too much” category, or under the “get enough” heading.

Though not a “change” per se, the discussion that put the food label overhaul idea into motion in the first place has also danced with the idea of changing the serving size being assumed by the nutritional data on the package[6].

The nutritional (or lack thereof) required by current FDA label rules is based on serving sizes that aren’t even close to the actual amount of food people stuff into their face. For example, the back of a typical 20-ounce bottle of soda suggests there are only 220 calories (all of them empty calories, by the way) in it. A closer look at the packaging, however, reveals that bottle holds two servings of the beverage, each of which packs 220 calories in. That bottle can actually holds a total of 440 calories, and most people tend to drink a 20-ounce soda in one sitting.

By raising the serving size suggested on the informational table to something more realistic, it has been anticipated that consumers will rethink how much of that snack or soda they intend to eat[7].

An Exercise in Futility

For those concerned the impending caloric clarity from revamped FDA label rules could torpedo the likes of soft drink maker Pepsico, cereal producer Kellogg or candy company Hershey … or any other outfit that makes delicious goodies, here’s a bit of advice:

Don’t worry.

To give credit where it’s due, the initiative is pointed in the right direction. Some people actually do look at food labels, and some of the people that do look at them will be able to glean a little more useful information from the new presentation.

Most people, however, have a pretty good idea if something they’re eating (or a quantity they’re eating) is bad for them. Some just don’t care to read the label. Some just don’t care if it’s unhealthy at all.

A study performed by the University of Minnesota in 2011 found that only 9% of shoppers in the experiment[8] actually looked at the calorie count for all the food items they “bought” in the context of the study, while only 1% looked at the other information in the nutritional information table. Those results are far lower than the percentage of people who say they consider the information — roughly half of consumers — when simply asked if they do.

People are equally disinterested in calorie information at restaurants. Only 40% of restaurant visitors even notice when a dish’s calorie total is cited, and only 10% of those visitors deliberately choose a meal that’s low in calories[9].

Point being, we’re not the healthy eaters we like to pretend we are.

It’s possible the interest in such calorie and nutrition information could have improved in the meantime since those studies were completed, but even a significant improvement on tiny portion of the populace is still an insignificant amount.

No, companies like Kellogg, Pepsico, and Hershey have little to worry about with the proposed FDA label rules. Bad habits die hard, and some reconfigured information on the back of package isn’t about to change that.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Source URL: https://investorplace.com/2014/02/junk-food-makers-little-fear-new-fda-label-rules/

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