Issues associated with food labeling are having a significant impact on the food industry (Henley 1992). Several researchers recently have focused on some of these issues. Caswell (1992) conducted a study on the current level of information on food labels. Among the over 850 brands of selected product categories, about 70 percent of brands carried nutrition labels in 1991. This percentage represented a sharp increase during the last decade. In a study by Heimbach and Stokes (1982), processed foods at retail level carrying nutrition labels were reported to be 40 percent in 1977 and 44 percent in 1979. Food labeling is considered an important food policy issue of the 1990s (Padberg 1992). If label information is more usable by consumers, society can greatly benefit from a public health perspective.
Focusing on consumer issues, Moorman (1990) contributed a comprehensive analysis on consumer utilization of nutrition information although she did not particularly address food labeling issues. She pointed out that effectively designed nutrition disclosures facilitate the utilization of nutrition information and that some consumer characteristics such as education affect the utilization. Bass (1991) conducted a study on consumer use of and satisfaction with food labels. She summarized her survey results and found that consumers indeed used food labels for various reasons with various satisfaction levels. Unfortunately, she did not carry out any further economic analysis. Burton and Biswas (1993) examined the effects of changes in labels required by the Nutrition Labeling and Education Act of 1990 (NLEA). Based on their survey sample of 343 nonstudent subjects 18 years of age or older, they concluded consumer attitudes and perceptions of nutrition and self-reported product purchase likelihood were strongly related to additional nutrition information recommended by the NLEA. Jensen and Kesavan (1993) investigated the relationships between nutrition information sources (television and other media) and consumption of dairy products. They found nutrition information affected consumer demand for foods. Navder (1993) contributed an overview of food and nutrition labeling. She pointed out that nutrition labels are the most used source of nutrition information and food labels should be more informative to consumers.
Although the mentioned studies shed some light on food labeling issues, research on consumer use of food labels is lacking (Capps 1992). Padberg (1992) also pointed out that little attention has been given to how and whether consumers use the information on food labels. To date, an econometric analysis of consumer utilization of food labeling using national level data has yet to be reported in the literature. Understanding why and how consumers utilize food labels is required in designing food labeling regulations, improving public health, and enhancing the profitability of the food industry (Lenahan et al. 1973).
In this study, the factors influencing consumer usage of food labels as a source of nutrition information are investigated using the 1987-1988 Nationwide Food Consumption Survey (NFCS) data. Economic analysis is carried out by a qualitative response model. Household socioeconomic characteristics are hypothesized to be the determinants of consumer usage of food labels because these characteristics may be associated with the benefits and costs of consumer information usage. Finally, the empirical results are reviewed and possible implications of the findings are discussed.
A qualitative response model can be utilized in the analysis of consumer decisions of using food labels for nutrition information. This model arises from utility-maximizing behavior of individuals (Amemiya 1981). Consumers, the utility maximizers, make decisions on whether they use food labels for nutrition information based on the utility derived from their choices. The utility level derived from a choice depends on possible benefits and costs of consumer information search and usage (Stigler 1961). …