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Misleading Food Labels – Who Really Wins?
By Michael Schweibinz

A recent study conducted by the Harvard Law School and the Natural Resources Defense Council “found that dates printed on packaged foods, which help retailers cycle through stocked products and allow manufacturers to indicate when a product is at its peak freshness, are inconsistent,” Reuters reported. Consequently, Americans waste billions of pounds of food every year due to the false notion that "sell-by" and "best-before" dates indicate food safety.

Clearly, producers have considered the effect a simpler labeling system would have on their bottom lines, and must have concluded that the current method is profit maximizing. However, it’s reasonable to believe that a company with its long-term self-interest in mind might question the status quo and switch to a more transparent labeling system.

Milton Friedman believed that the free market depends on two key factors: voluntary exchange and information. In the case of product labels, voluntary exchange is met. However, the information requirement comes into serious question. Consumers have a fundamental lack of understanding and access to information that explains the meaning behind the various types of “best-before” and “sell-by” dates. Currently, it seems, companies are using this lack of understanding to boost profits through increased inventory turnover—at the expense of the environment and the consumer. According to a survey by the Food Marketing Institute, “confusion over dates leads 9 out of 10 Americans to needlessly throw away food. For the average family of four, this could translate to several hundred dollars' worth of food being thrown away every year.”

This market failure (lack of information) has created an opportunity for a shrewd company to address the needs of two stakeholder groups that have been left largely unconsidered—environmentally concerned customers and Mother Earth. The planet unnecessarily suffers as “huge amounts of food, not to mention considerable natural resources and labor, go to waste in landfill and taxes.” Further, the needs of environmentally concerned customers go unmet; they are often left confused and unsatisfied as they mistakenly or consciously throw away products that are perfectly fine for consumption.

Imagine a company implementing a smarter label strategy. Such a company could gain competitive advantage as customers would have greater confidence in their buying decisions. The company might also benefit from the brand development opportunity that accompanies a more responsible business model. The brand could be positioned to stand for less food waste and be environmentally friendly. From there, marketing campaigns could be formulated to demonstrate how the company leads the industry towards greener standards.

Embracing smarter labels would be beneficial through these various trickle down effects, all leading to a stronger profit, society, and planet over the long-term. In today’s competitive world, where more and more consumers are becoming conscious shoppers, other stakeholder needs must be met in order to consistently provide positive returns for shareholders. And as shoppers become more cognizant that they are wasting food and money, they are changing their purchasing decisions to respect the natural world that future generations will inherit.

 

At First Affirmative, we understand that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?

 

Posted: May 12, 2014