Beyond Consumer Switching: Supply Responses to Food Packaging and Advertising Regulations
39 Pages Posted: 3 Sep 2020
Date Written: August 21, 2020
This paper studies the effect of nutrition warning labels and advertising restrictions on the breakfast cereal market in Chile. In June 2016, the Ministry of Health required food products that exceed thresholds for sugar (22.5g) and calories (350kcal) to carry conspicuous front-of-package warning labels. Further, these products were barred from advertising on TV programs with high child viewership. Early evidence suggests that the regulation induce consumers to switch to products without warning labels; we show that this change in demand elicits a supply response. In particular, we present evidence of bunching just below the cutoffs. Using a structural model of cereal demand, we find that reformulation tends to reinforce the intent of the reform, in particular, by lowering the calorie content of cereal purchases.
Keywords: Nutrition Labels, Obesity, Product Reformulation
JEL Classification: I18, M38, L51
Suggested Citation: Suggested Citation