Assessing consumer awareness and usage of food labels and influences on food buying behavior

Assessing Consumer Awareness and Usage of Food Labels and Influences on Food Buying Behavior Abstract Food regulations and increased consumer awareness are forcing food companies acros

Symposium ID: 285

Assessing Consumer Awareness and Usage of Food Labels and

Influences on Food Buying Behavior

Sushil Kumar1

Centre for Food and Agribusiness Management

Indian Institute of Management Prabandh Nagar, Off Sitapur Road, Lucknow - 226013, Uttar Pradesh (India) Phone 91-522-2736987 (O) Fax 91-522-2734027/25

Email: sushil@iiml.ac.in

and

Jabir Ali

Indian Institute of Management Prabandh Nagar, Off Sitapur Road, Lucknow - 226013, Uttar Pradesh (India) Phone 91-522-2736978 (O) Fax 91-522-2734027/25

Email: jabirali@iiml.ac.in

1

Corresponding author: Email: sushil@iiml.ac.in Tel +91 522 2736987; Fax: +91 522 2734027 Prepared for presentation at 21st Annual IFAMA World Forum and Symposium on the Road to 2050: Sustainability as a Business Opportunity, Frankfurt, Germany during June 20-23, 2011

Assessing Consumer Awareness and Usage of Food Labels and

Influences on Food Buying Behavior

Abstract

Food regulations and increased consumer awareness are forcing food companies across the world

to display more and more information on packaged food products However, little is known about consumer response to such information in emerging economies Using data from a questionnaire survey conducted among 373 respondents across three major cities in India, the study assesses the level of awareness about five categories of information generally displayed on food labels The study also examines the usability of such information in purchase decisions of the respondents The level of awareness and the purchase decisions are compared across different socio-economic groups It is found that Indian consumers in these three cities are fairly aware of the information provided on the food labels; though the level of awareness about different types of information varies The results indicate that particular category of information is used more by the consumers while purchasing packaged food products Differences across different socio-economic groups are also significant in many cases The results have very strong implications for regulatory

authorities as well as the food companies

Keywords: Food labels; consumer awareness; buying behavior; India

Target Audience: Management scholars and management practitioners

Assessing Consumer Awareness and Usage of Food Labels and

Influences on Food Buying Behavior

Executive Summary

Information disclosure on food products is a critical aspect due largely to stringent

regulatory regimes and food companies spend hefty sums of money on making this information available to the customers In order for such information to get converted into knowledge, consumers should be able to comprehend this information and make informed choices while buying different food products Present study tries to assess the awareness of consumers about information provided on food labels, by undertaking a survey among 373 consumers in three major cities in India The study further tries to examine whether consumers make use of such information in making purchase decisions

It is found that consumers in India possess satisfactory level of awareness about different types of information on the food labels displayed on packaged food products, however, usage of such information as one of the criteria while purchasing packaged food product

is relatively low They also have very strong preference for brand and the taste of the product This preference makes them purchase a packaged food item even though it may not meet their criteria of healthy food or may contain some harmful ingredients Hence, it becomes very essential for authorities to keep a thorough check on food processing companies as to what they put into in the market At the same time big processing

companies with established brand names in the market, need to be very conscious of their responsibility when introducing new products in the market The results give a clear indication that label information is generally gender and age insensitive though its use assumes significance with the income levels, education and occupation of the consumers Most lifestyle products such as breakfast cereals, readymade dressings etc that would mostly be used by people who have relatively higher levels of income and education would pay more attention to various kinds of label information

Assessing Consumer Awareness and Usage of Food Labels and

Influences on Food Buying Behavior

Introduction

Food product labeling, as policy tool for ensuring provision of nutrition and health

information to consumers and as product differentiation strategy by food companies, has gained importance in the recent past across the globe (Kim, Nayga and Capps, 2001; Marks, 1984) Recent concerns with food safety (e.g., BSE and Biotechnology) have resulted in increased demand for regulatory pressures directed at labeling the ingredients, processing methods, and nutritional content of foods Trend towards healthier and

wellness food has also led to consumer demand for “more detailed, accurate, and

accessible” nutritional information on the packaged food (Abbott, 1997) Consequently, nation states across the globe have come out with legal regulations which require

mandatory nutrition labeling of packaged food products The food labels act as a

signaling mechanism by which food companies assure their potential consumers

regarding their sound quality control practices However, there are many issues and questions related to food labeling One such question that has been raised across

continents is how far the consumers are aware of food labels and can they comprehend the information provided on the labels Further, how far the aware consumers take into consideration food label information while making purchase decisions?

These questions are very pertinent in today’s business environment when food companies are coming under stringent regulatory pressures to disseminate correct and appropriate information regarding food items These labeling regulations essentially reflect response

to consumer’s right to know the content and nutrition of a particular food product The objective of these regulations is to provide consistent, understandable, and usable labels that can help consumers make informed and healthier food choices (Nayga 1996) Most legal regulations concerning food product labeling are conceived and implemented on the basic premise that dissemination of information in greater quantities and details will facilitate consumers in making better brand choice decisions (McCullough and Best, 1980) This basic premise is in turn based on the assumption that consumers are aware of the information being provided on the product label Further, policy interventions

regarding mandatory disclosure of food product information also assume that consumers can comprehend and interpret the information on the food label However, all these assumptions have been questioned by various researchers (e.g., McCullough and Best, 1980)

In the context of emerging economies, very little is known regarding consumers’

expectations and their response to food label information (Wang et al., 2008) India, one

of the dominant emerging economies, is witnessing unprecedented boom in the organized retail growth Indian consumers are in the process of changing their consumption/buying behavior especially with respect to food items Consumption of processed and packaged food items has grown tremendously in the recent past Demand for healthy and wellness food is also on rise With the change in lifestyle and consumption pattern, food safety

standards are becoming important from public policy perspective2

Compliance to any legal regulations, in this case mandatory food labeling, has a cost attached to it, which either the food company has to bear leading to lowering of its cost competitive advantage or it is passed on to the customer making the food product costlier The expenditure on labeling will be of use only if consumers are aware of and are able to understand, comprehend and make their purchase decisions based partially on the

information given on the label

as well as from food companies’ perspective For commercial interests, food safety and transparency in

dissemination of related information is a factor that contributes to brand equity when marketing food products to consumers in India

In order to maximize benefits from implementation of emerging policy tools in the field

of food product labeling and also voluntary disclosure on the part of food companies, it is imperative to assess the level of awareness among Indian consumers towards such

information and how far the information influences their purchase decisions in the

marketplace Policy makers and researchers have not paid adequate attention to this issue

in the context of Indian food market Therefore, the present study proposes to fill this gap

by exploring level of awareness among Indian consumers regarding content and

nutritional information on food product labels The study also attempts to examine

demographic and socio-economic differences with regard to awareness The outcomes of the study will help Indian policy makers and food companies to understand the

complexity of issues involved in food labeling and design strategies to maximize benefits from resources spent on food labeling

This paper is structured as follows Section 2 provides basic premise of the study and discusses the existing regulatory framework with regard to food labeling in India Data collection and analytical methodology is discussed in Section 3 followed by results and their discussion in Section 4 Finally, we conclude with policy implications of the results

in Section 5

Background

Food labels act as signaling mechanism by which consumers can get assurances on the food quality standards Information provided on food labels can influence buying

behavior of the consumers Several studies have demonstrated a link between the use of food labels and a dietary intake of the respondents Kim et al (2000), in comparing the difference in nutrient intakes of consumers when they did and did not use food labels, discovered that using food labels decreased the consumer’s percentage of total calories

2

In order to ensure provision of accurate and reliable information on content and nutrition of packaged food, the regulations in the Indian context have focused more on voluntary disclosure of information on food labels, but with the coming of the Food Safety Standards Act 2006, which is yet to be implemented, the guidelines on labeling As per these guidelines all packaged food products need to adhere to- that labels borne by them shall not contain any statement, claim, design or device which is false or misleading about the food products contained in that package or concerning the quantity or the nutritive value implying medicinal or therapeutic claims or in relation to the place of origin of the said food products Further, every business operator shall ensure that the labeling and presentation of food, including shape, appearance or packaging, the packing materials used, the manner in which they are arranged and the setting in which they are displayed, and the information which is made available about them through whatever medium, does not mislead consumers

received from fat and saturated fat A similar study that focused on the effect of the new nutrition label established in 1994 found that in 1995 individuals who used the food label most often were about 32% more likely to eat a diet low in fat than individuals who said they only sometimes used the label (Finke, 2000) A study of Washington State residents also found that, even when controlling for other influential variables, there was a

significant relationship between label use and decreased fat intake (Neuhouser et al., 1999) Weaver and Finke (2003) model the effectiveness of the current nutrition label as

a means of reducing the proportion of calories from added sugars in diets among

respondents to the1994–96 Continuing Survey of Food Intakes by Individuals Results show a significant relationship between frequent use of sugar information on the label and reduced added sugar density, suggesting that labeling is effective as a means of assisting consumers to moderate sugar consumption

Many studies in the context of industrialized nations indicate significant demographic and socio-economic differences with regard to consumer awareness and the use of

information provided on food labels (Food Marketing Institute, 1989; Bender and Derby, 1992; Wandel, 1997) For example, the study of Wandel (1995) shows that women, the highly educated and those who are on special diets, tend to read the food labels to a greater extent than others (c.f Wandel, 1997) Many investigators have also found that the interest in reading the food labels increases with age up to the mid-fifties, and

thereafter it declines The typical food label reader is reported to be a middle-aged

woman with high education (Wandel, 1995) Similarly, an empirical study of Nayga (1996) in the US shows that males are less likely to read labels; people with some college education are more likely to read labels and use the information; people on special diets have a higher probability of using food labels; consumers residing in metros are more likely to use and read labels than those living in non-metros etc Guthrie et al (1995) in their study on nutrition label report that 71% of main meal planners admit using the nutrition labels at least “sometimes.” They further report that women were more likely than men to read nutrition labels Other characteristics which were found to have

relationship with label use included education, previous nutrition knowledge, and

concerns over food safety Studies have also been done to evaluate the positive effect of label use on consumers’ diets The same study by Guthrie et al (1995) showed that meal planners who used food labels had diets lower in cholesterol and higher in Vitamin

Sampling, Location and Data Collection

In order to collect data on people’s awareness and the attention they pay to different categories of information displayed on food labels while making purchase of packaged food items, a structured questionnaire survey was conducted across three major cities in northern India: Lucknow, Delhi and Kanpur The questionnaire consisted of statements aimed to elicit different dimensions of respondent’s awareness about food labels and how far he/she uses this information in choosing different brands of packaged food products Respondents views on following types of information provided on labels were collected:

• List of ingredients or contents of the food

• Short phrases about the food characteristics such as low fat, low cholesterol etc

• Nutrition panel giving information on proteins, vitamins, carbohydrates, calories etc per serving

• Information about the size of serving

• Statements regarding health benefits from the food

The selected cities provided a convenient sampling location both in terms of number and the variety of respondents Delhi is the capital city of India in addition to being a

metropolitan Lucknow and Kanpur too are mini metros Respondents for the survey were selected using convenient sampling technique The survey was carried out in places where there was some kind of food retail presence (both organized and unorganized) such

as in market places, near shopping malls etc However, care was taken to ensure coverage

of different socio-economic and demographic groups of customers

On the whole, 373 responses were collected: 36% from Kanpur, 35% from Delhi, and remaining 29% from Lucknow

Results and Discussion

Table 1 shows salient socio-demographic characteristics of the sample covered in the survey

Table 1: Socio-demographic characteristics of the Sample

Socio-Demographics Percent

Gender

Frequency of purchasing Packaged Food

Age groups

Annual income (INR)

Level of education

Majority of the respondents (64%) were males Of 373 respondents 32% buy packaged

food more than once a week, 12% at least once a week and other 16% once a month

There were around 40% respondents who said that they purchased packaged food

occasionally Sample covered almost all age groups: 18 to 25 years (13%); 26-35 years (26%); 36-45 years (22%); 46-55 years (23%); 55-65 years (11%); and more than 65 years (5%) Around 38% had annual income between Rs 1,00,000 and 2,49,999, 35% between Rs 2,50,000 and 4,99,999, and 10% between Rs 5,00,000 and 7,99,999 Of the remaining respondents 14% had an annual income which was below Rs 1,00,000 and 3% whose annual income was above Rs 8,00,000

In the questionnaire survey, respondents were asked to assign the level of importance they attach to each of the five categories of information generally displayed on the food labels

Table 2: Level of Importance Assigned to Various Categories of Information’s on Food

Labels of Packaged Foods Very

Imp

Somew hat Imp

Undecided Somew

hat Unimp

Not Imp at all

Can't Say

List of ingredients or

contents of the food

240 (64) 95 (25) 8 (2) 6 (2) 16 (4) 8 (2)

Short phrases about the

food characteristics

115 (31) 135(36) 42(11) 40(11) 30(8) 11(3)

Nutrition panel giving

information on proteins,

vitamins etc

190(51) 135(36) 18(5) 11(3) 9(2) 9(2)

Information about size

of serving

134(36) 114(31) 46(12) 40(11) 26(7) 11(3)

Statements regarding

health benefits from the

food

164(44) 115(31) 25(7) 34(9) 22(6) 12(3)

Note: Figures in parenthesis denote percentages

Results presented in Table 2 indicate that the majority of respondents attach a lot of importance to the kind of information on the food labels and the ones who give no

importance at all to the information are very few Information about ‘ingredients’

contained in the processed food is considered very important by 64% of the respondents across three cities, information about ‘nutritional content’ by 51%, and ‘statements’ regarding health benefits by 44% Numbers of respondents who consider information about ‘serving size’ and ‘short phrases’ about special food characteristics very important are comparatively low i.e., 36% and 31% The results indicate that the Indian consumers surveyed in three cities assign very high importance to information about food

ingredients and nutritional contents of the food However, as compared to these aspects

of food labels, information on serving size and short phrases has lower priority among these consumers

Literature on consumer behavior shows that consumers’ actual behavior is consistent with their attitude or concerns For example, in a national survey in the US, 50% of the surveyed respondents said that they preferred to buy organically grown fresh fruit and vegetables, yet only 25% admitted that they actually bought them on regular basis

Table 3: Buying Behavior of the Respondents based on the Information Provided on

Food Labels Never Rarely Sometimes Mostly Always Not

aware of List of ingredients or

content of the food

15(4) 24(6) 52(14) 104(28) 170(46) 7(2)

Short phrases about the

food characteristics

29(8) 39(11) 83(22) 118(32) 90(24) 13(4)

Nutrition panel giving

information on proteins,

vitamins etc

13(4) 29(8) 66(18) 126(34) 128(34) 9(2)

Information about size

of serving

37(10) 59(16) 80(21) 93(25) 92(25) 9(2)

Statements regarding

health benefits from the

food

18(5) 45(12) 74(20) 107(29) 116(31) 11(3)

Note: Figures in parenthesis denote percentages

In order to examine consistency between respondents’ attitude and behavior, we asked the respondents about their buying behavior with respect to processed/packaged food items The objective was to see how much attention the respondents actually pay to various categories of information while purchasing processed/packaged food The results presented in Table-3 above show that of the respondents who perceive different kinds of information available on the food label as important not many see or use that information while purchasing Though, on the whole, majority of the respondents do check such information before buying food products Majority of the people i.e 46% always check the list of ingredients in the food item they are purchasing while 34% always check nutrition panel information Of the five categories of information provided on food labels, information about serving size and short phrases about the food characteristics once again get least attention from the respondents (25% and 24% respectively)

Certain food products, based on the food label information, may not meet buyers’ criteria

of a healthy food In order to measure the importance people attach to aspects other than food label information while making purchases, the respondents were asked whether they purchased the packaged even if it did not meet their criteria of a healthy food

Table 4: Preference of Buyers for the Product Attributes in Case of Packaged Food even

if it doesn't conform to Healthy Food Most

Imp

1

Imp

6 Brand 36(42) 22(26) 13(15) 10(11) 5(6) 0

Price 9(11) 15(18) 26(31) 24(28) 8(9) 3(3)

Your peers buy it 2(2) 10(12) 10(12) 16(19) 41(48) 6(7)

Availability 3(3) 11(13) 22(26) 26(30) 20(23) 4(5)

Note: Figures in parenthesis denote percentages

As is evident from the results presented in Table 4, brand of the food product plays the most important role with 42% respondents admitting that this is the most important attribute because of which they still buy the processed/packaged product even if it can not

be categorized as a healthy food product Taste and price of the food product are other attributes in order of importance assigned by the respondents Peer pressure and

availability of such products are the least important reasons for buying them These results indicate that if consumers are very loyal to the brand and really like the taste of a processed/packaged food product, they buy it in spite of its inferior healthy content

Table 5: Preference of Buyers for the Product Attributes in Case of Packaged Food Even

if it Contains Harmful Ingredients Most

Imp

1

Least Imp

6

Price 8(12) 10(12) 17(20) 24(28) 4(5) 2(2)

Your peers buy it 1(1) 7(11) 4(5) 14(16) 35(41) 4(5)

Availability 1(1) 7(11) 18(27) 21(32) 17(26) 2(3)

Note: Figures in parenthesis denote percentages

Most packaged foods are reported to contain certain harmful ingredients such as trans-fats, monosodium glutamate etc Using one item on the questionnaire we tried to assess the level of awareness about these harmful ingredients among our sample In the data it was found that 69% respondents are aware about harmful ingredients in processed

packaged food items It is but natural to believe that these respondents would not be buying foods containing such ingredients given the fact that most people look into the list