Heterogeneous Consumer Responses to Snack Food Taxes and Warning Labels

By Lacanilao, Ryan D.; Cash, Sean B. et al. | The Journal of Consumer Affairs, Spring 2011 | Go to article overview

Heterogeneous Consumer Responses to Snack Food Taxes and Warning Labels


Lacanilao, Ryan D., Cash, Sean B., Adamowicz, Wiktor L., The Journal of Consumer Affairs


The possible effects of targeted snack food taxes on purchase decisions were assessed via computer-assisted intercept surveys in Canadian supermarkets, utilizing attribute-based stated preference methods ("choice experiments"). Participants were asked to choose between high-fat snacks, some displaying a warning label, and healthier snacks. Latent class models explaining choice were estimated. Results show heterogeneity of consumer response, with notable implications for public health. One class heeds warning labels, another avoids less healthy snacks and becomes more sensitive to price when a warning label is present, and a third class is sensitive to price but not warning labels.

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Obesity, and its vast array of associated noncommunicable diseases, has been increasing in North America (World Health Organization 2005). An individual's body mass is affected by the energy they take in from food and the energy their body uses to perform basic functions as well as any additional energy expenditure that might be required (e.g., strenuous physical activity). An excess amount of calories can be easily consumed by eating food that is high in calories but does not provide very much satiety, commonly referred to as "junk food." Obesity has emerged as a policy problem of economic importance because it is very costly to the health care system to treat the vast number of people who have health complications as a direct result of their obesity. For example, it is estimated that the direct and indirect economic cost of obesity in Canada during 2001 was $4.3 billion (Katzmarzyk and Janssen 2004). If consumption of high-calorie, low-satiety foods can be discouraged, it may lead to a decrease in obesity, which would mean less strain on the health care system as well as healthier consumers. A tax on these products, as well as a warning label highlighting the tax and the reasons behind it, is a potential tool for decreasing consumption of these products. This study examines how different groups of consumers respond to such interventions.

A tax on a less healthy food, also know as a "fat tax," may discourage people from buying these products by raising their price relative to healthier substitutes (Brownell and Frieden 2009; Jacobson and Brownell 2000). If the tax is highlighted by a warning on the label of the product, this could induce additional avoidance of the targeted food item. Some researchers have studied the potential impact of a fat tax (e.g., Kuchler, Tegene, and Harris 2005; Schroeter, Lusk, and Tyner 2007), whereas others have looked into the effect of point-of-purchase information on consumer behavior (e.g., Burton and Creyer 2004; Kozup, Creyer, and Burton 2003; Mandal 2010; Tangari et al. 2010). In general, fat tax studies based on cross-sectional food purchase data have shown low own-price elasticities for those foods most likely to be targeted in food price interventions, implying limited efficacy of small taxes as tools for achieving public health goals (Cash and Lacanilao 2007; Powell and Chaloupka 2009).

To date, no studies that we are aware of have investigated how consumers respond to a food price intervention when the imposition of the tax itself is the basis for provision of point-of-purchase information. This study looks at how consumers respond to a fat tax as well as a warning label stating that a fat tax has been imposed. The research questions being addressed in this study are:

RQ1: What patterns of consumer preferences can be observed in response to combined price and warning label interventions?

RQ2: Will the effects of a combined fat tax and warning label be uniformly spread among consumers?

METHODS

Theory

Attribute-based stated preference methods, or choice experiments, were used to investigate this problem. This approach presents consumers with alternative product descriptions, made up of attributes, and asks consumers to indicate which option they would choose (Hensher, Rose, and Greene 2005). …

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