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Obama’s administration is taking a bold step in fighting overweight and moreover obesity: requiring chain restaurants and similar food establishments to post information on food calories for their items or dishes on menus and menu boards. The new directive published in November 2014 by the United States’ Food and Drug Administration (FDA) is mandated by the Affordable Care Act passed by Congress in 2010. The expectation is that restaurant customers will consider the nutritional values, particularly calories, of  food items on the menu if the information appears in front of them, inducing them to make more healthy choices. It is estimated that Americans consume a third of their calories dining out. But will consumers, who are not voluntarily concerned about healthy dietary, change their eating behaviour away-from-home just because the information is easily and promptly available?

The new requirements of the FDA apply to restaurant chains with 20 or more outlets, including fast food chains — likely a primary target of the new directive. Detail of total calorie content of food items should appear on print menus (e.g., at full-service restaurants) and menu boards positioned above counters for ordering (e.g., at fast-food restaurants). The rule covers meals served at a table or taken to a table by the customer to be consumed, take-away food like pizzas, and food collected at drive-through windows. Also included are sandwiches-made-to-order at a grocery store or delicatessen, coffee-shops, and even ice-cream parlours. (1)

  •  The FDA directive also refers in a separate section to food sold through vending machines by owners or operators of 20 or more machines.

Calorie content in a food item (actually kilocalorie) indicates the amount of energy it provides. Usually the energy intake of consumers from meals, snacks and refreshments is more than the body requires, and the surplus not “burned”   accumulates and adds to body weight. The rule maintains that additional information on components such as calories from total and saturated fat, sodium, carbohydrates, protein, and sugars should be made available on request in writing. Critics could argue that while a summary measure of energy is an important nutritional factor, other nutritional values as those mentioned by the FDA, and more (e.g., fat in grams, Vitamins A and C), also need to be transparent to consumers. Practically, loading menus, and foremost menu boards, with too many nutritional details may be problematic for both business owners and their customers. Therefore, there is logic in focusing on an indicator regarded of higher priority. Nonetheless, restaurants should offer a supplementary menu with greater nutritional values to customers who are interested. Again, the question is how many customers will request and use that extra information.

The food service industry overall reacted positively to the new rules. The National Restaurant Association in the US (representing 990,000 restaurant and food-service outlets) is satisfied with the way the FDA has addressed its major concerns. Contention remains over food sold in amusements parks and cinemas, and regarding fresh sandwiches and salads and ready-to-eat meals made by supermarkets for individual consumers (i.e., single-serving). In fact,  several restaurant chains have already been displaying nutritional information on menus voluntarily for several years to cater for more health-conscious customers and improve their retail-brand image (e.g., Starbucks, McDonalds, Subway). Some chains also provide detailed nutrition information and assistant tools for customers to plan their meals on the chains’ websites. It should further be noted that regulations for posting nutrition information in food-service establishments are in place at the level of local authorities in various cities and counties across the US. Business and regional administrative initiatives are not new in the US as well as in Canada and other countries. However, such measures will be obligatory in the US at a country-level within a year ahead.

Consumers are likely to have some general guidelines (a schema of rules) in memory that they can consult on what is more or less healthy to eat and how much to eat of different items (e.g., “high levels of calories, fat and salt in hamburgers and french fries”, “cream cakes are rich with calories and sugar”). When arriving to a restaurant or coffee-shop, the more conscious consumer may apply those guidelines to compose one’s meal with greater care for his or her health. Yet, the ability to extract accurate nutrition values of food items offered on the menu is likely to be rather limited — our memory is not accurate and retrieving information may also be biased by prior goals or hypotheses. Even if we consider only total calories, we would recall gross estimates or value ranges for general food categories. Consumers furthermore tend to take into account only the alternatives explicitly presented and attribute information available on them in a choice setting (a “context effect”). Information not provided (e.g., has to be retrieved from memory) is likely to be ignored. Customers anxious enough may pull out a mobile device and look up some more accurate nutritional information from an app or a website of the company or a third-party source. But for most consumers, it should appear, there is strong logic as well as justification to provide the nutrition information on specific food items easily accessible at the food outlet to allow them to consider it on-the-spot in their choices.

A probable cause of resistance from consumers to take into account the nutritional content of the food they are about to order is that this might spoil their pleasure of eating the meal.  People commonly prefer to concentrate on which items to order that will be more enjoyable for them on a given occasion. The negative nutritional consequences of the desired food could be considered as ‘cost’, just like monetary price and perhaps even worse, a notion consumers would like to avoid. There is also a prevailing belief that healthier food is less tasty. To make consumers more receptive they would have to be persuaded beforehand that this belief is false or that nutritional components have both positive and negative consequences to consider. Surely consumers have to account for constraints on their preferences; health advocates have to help and ease any barriers to embracing health constraints, or turn pre-conceived constraints into consumers’ own preferences.

We may gain another insight into consumer food choices by considering the comparisons consumers utilise to make decisions. Simonson, Bettman, Kramer and Payne (2013) offer a new integrative perspective on the selection and effect of comparisons when making judgements and choice decisions — how consumers select the comparisons they rely upon vis-à-vis those they ignore, and what information is used in the process. They propose that the comparisons consumers seek have first to be perceived relevant and acceptable responses to the task (e.g., compatible with a goal); these comparisons fall within the task’s Latitude of Acceptance (LOA). They also need to be justifiable. Then, consumers will prefer to rely upon comparisons that are cognitively easier to perform (i.e., greater comparison fluency), given the information available on options. Importantly, even if bottom-up evidence suggests that certain comparisons require less effort to apply, these will be rejected unless they are instrumental for completing the task. Information factors that can facilitate the comparison between options may affect, however, which comparisons consumers perform among those included in the LOA. The following are factors suggested by the researchers that increase the probability that a comparison will be performed: attribute values that can be applied “as-is” and do not need additional calculation or transformation (i.e., “concreteness effect”); alignable input (i.e., values stated in the same units); information perceptually salient; and yet also information that can generate immediate, affective responses. (2)

Let us examine possible implications. Suppose that you visit a grill bar-restaurant of a large known chain. You have to choose the food composition of your meal, keeping with one or more of the following personal goals: (a) “not leave hungry” (satiated); (b) pleasure or enjoyment (taste/quality); (c) “eat healthy” (nutrition); (d) “spend as little as possible” (cost). Calorie values are stated on menu in a column next to price. If the primary goal is to keep a healthy diet you would most likely use calorie information to compare options. However, if “eat healthy” is not a valued goal for you, there is greater chance that calorie information will be ignored — even if values of calories are very easy to read-out, assess and compare. They may be perceived as distraction from considering and comparing, for instance, the ingredients of items that would determine your enjoyment from different food options. Consumers often have a combination of goals in mind, and thus if your goals are nutrition and price, there is an advantage to displaying numeric calorie and price values next to each other across items. It would be more difficult to weigh-in calories with information on ingredients that should predict enjoyment or satiation as your goals. Therefore, it can be important to display nutritional values in a format that facilitates comparison, and not provide too many values. Yet, if “eat healthy” is not one’s goal all those measures are unlikely to have much effect on choice.

  • Some would argue that a salient perceptual stimulus can trigger consumer response in the desired direction even unconsciously. That is a matter for debate — according to the viewpoint above strong perceptual or affective stimuli will not be influential if the consumer’s goal is driving him in another direction.
  • Given the growing awareness to health, justifying decisions based on calories to others may be received more favourably. Can this be enough to induce consumers to incorporate a nutrition comparison in their decision when it is not their personal goal?

A research study performed by the Economic Research Service (ERS) of the US Department of Agriculture (USDA) examined consumer response to display of nutrition information in food service establishments, comparing between fast-food and full-service chain restaurants. The researchers (Gregory, Rahkovsky, & Anekwe, 2014) show that consumers who see nutrition information have a greater tendency to use it during choice-making in full-service restaurants; overall, women are more sensitive to such information than men (especially using it in fast-food restaurants). Furthermore, they provide support that consumers who are already more conscious and care about a healthful diet are more likely to react positively to nutrition information in restaurants:

  • Consumers who inspect always or most of the time the nutrition labeling on food products purchased in a store (enforced in the US for more than twenty years) are more likely to see and then use the nutrition information presented in full-service restaurants (notably, 76% of those who inspect the store-food labeling regularly use the information seen in the restaurant versus 18% of those who rarely or never use the labeling on store-food).
  • Additionally, the researchers find that a Healthy Eating Index score (measuring habitude to using nutrition information and keeping a healthy diet) is positively correlated with intention to use nutrition information in fast-food or full-service restaurants (those who would often or sometimes use the information in full-service restaurants score 57-54 versus those who would use it rarely or never who score 50 on a scale of 1 to 100).

Gregory and his colleagues at USDA-ERS argue that following these findings, displaying nutrition information on menus at food-away-from-home establishments may not be enough to motivate consumers not already caring about healthful diet to read and use that information — “It may be too optimistic to expect that, after implementation of the nutrition disclosure law, consumers who have not previously used nutrition information or have shown little desire to use it in the future will adopt healthier diets.”

A research study in Canada involved an interesting comparison between two hospital cafeterias, a ‘control’ cafeteria that displays limited nutrition information on menu boards and an ‘intervention’ cafeteria that operates an enhanced programme displaying nutrition information in different formats plus educational materials (Vanderlee and Hammond, 2014). The research was based on interviews with cafeteria patrons. A significantly higher proportion of participants in the ‘intervention’ cafeteria reported noticing nutrition information (80%) than in the ‘control’ cafeteria (36%). However, among those noticing it, similar proportions (33% vs. 30%, respectively) stated that the information influenced their item choices. Hospital staff were more alert and responsive to the information than visitors to the hospital and patients. This research also indicates that customers who use more frequently nutrition labels on pre-packaged food products are also more likely to perceive themselves being influenced by such information.

Vanderlee and Hammond subsequently found lower estimated levels of calories, fat and sodium in the food consumed in the ‘intervention’ cafeteria than the ‘control’ cafeteria (using secondary information on nutrition content of food items). In particular, customers at the ‘intervention’ cafeteria who specifically reported being influenced by the information consumed less energy (calories).(3)

Actions to consider: Fast-food restaurants may place menus with extended nutrition information, beyond calories, on or next to the counter where customers stand for ordering. Full-service restaurants may place extended menus on tables, or at least a card inviting customers to request such a menu from the waiter. It may be advisable to add one more nutrition value next to calories as a standard (e.g., sugars because of the rise in diabetes and the health complications it may cause). Notwithstanding, full-service restaurants could be allowed to implement the rule during the day (e.g., for business lunch), but in the evening spare customers the pleasure of dining-out as entertainment without worries. Nonetheless, menus with nutrition information should always be available on request.

Nutrition information displayed on menus and menu-boards can indeed help consumers in restaurants, coffee-shops etc., to make more healthy food choices, but it is likely to help mostly those who are already health-conscious and in habit of caring about their healthful diet. Information clearly displayed has a good chance to be noticed; yet, educating and motivating consumers to apply it for a healthier diet should start at home, in school, and in the media. A classic saying applies here: You can lead a horse to the water but you cannot make it drink. Nutrition information may be a welcome aid for those who want to eat more healthy but it is less likely to make those who do not care about healthful diet beforehand to use the information in the expected manner.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) Overview of FDA Labeling Requirements for Restaurants, Similar Food Retail Establishments and Vending Machines, The Federal Food and Drug Administration (US), November 2014 http://www.fda.gov/Food/IngredientsPackagingLabeling/LabelingNutrition/ucm248732.htm; Also see: “US Introduces Menu Labeling Standards for Chain Restaurants”, Reuters, 24 Nov. 2014. http://www.reuters.com/article/2014/11/25/usa-health-menus-idUSL2N0TE1KP20141125

(2) Comparison Selection: An Approach to the Study of Consumer Judgment and Choice; Itamar Simonson, James R. Bettman, Thomas Karamer, & John W. Payne, 2013; Journal of Consumer Psychology, 23 (1), pp. 137-149

(3) Does Nutrition Information on Menus Impact Food Choice: Comparisons Across Two Hopital Cafeterias; Lana Vanderlee and David Hammond, 2013; Public Health Nutrition, 10p, DOI: 10.1017/S136898001300164X. http://www.davidhammond.ca/Old%20Website/Publication%20new/2013%20Menu%20Labeling%20(Vanderlee%20&%20Hammond).pdf; Also see: “Nutrition Information Noticed in Restaurants If on Menu”; Roger Collier; Canadian Medical Association Journal, 3 Aug., 2013 http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3735740/

 

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Brick-and-mortar stores remain a primary meeting point for consumers with brands of manufacturers. Direct marketing channels, enhanced in the previous decade by the Internet, have allowed manufacturing brand owners to establish a direct contact with some consumer segments to buy products directly from them. Still, consumers largely continue to seek consumer goods at retail stores. Retailers are at the front of commercial activity; they are facing the shoppers and introduce them to a variety of branded and unbranded products. They have different methods for interacting with consumers available to them that manufacturers or national brand owners do not have. This should have allowed retailers, particularly the large retail chains, to get to know their customers and understand them better than they appear to do.

Over the years, manufacturers and retail chains have invaded each other’s territory: retailers introduced private labels or store-owned brands; manufacturers established online stores; and retail chains returned a fight by operating online stores on the Internet (i.e., e-tailing) in parallel to their brick-and-mortar stores. While some manufacturers have gone straight into Main Street (or mall) to open their own stores, selling their original products (e.g., Apple tech stores, Burberry fashion stores), these make the exception rather than the rule. Especially national brands of food and other grocery products (i.e., household maintenance goods) remain dependent on retailers, foremost the larger retail chains of supermarkets and other sorts of outlets.  This condition can be the source for lots of tension but also pose a potential for positive co-operation between the  manufacturers and retailers. In practice, it seems to produce complex relations between those two parties that do not necessarily hold the consumers at their centre nor benefit them.

Finding a staff member in large chain stores to ask for help in locating a needed product is often a frustrating task. It is particularly true in food chain stores — cashiers are stranded and busy at their positions and in the aisles the shoppers are usually all on their own. Not all stores work like that — for example, in a local Israeli DIY retail chain, staff members in red overall outfit walk around the floor ready to answer questions by shoppers and give consultation. The management of many chain stores have perfected the methodology of self-service, giving shoppers the feeling that the retailers’ job is just to spread the products in the store according to some logic reserved to them, and it is the duty of shoppers to find and collect the products.  But shoppers occasionally desire assistance, and not least personal attention, rather than play “hide and seek” with products around the store.

In his book “Inside the Mind of the Shopper”, Herb Sorensen identifies four sources of profits for supermarkets that come on top of margin from sales of the food and grocery products per se. As argued by Sorensen: “If shoppers are ignored, it is because they contribute the least to retailers’ bottom lines.  This may be surprising, because on the surface the entire business model of a retailer seems to be to sell products to shoppers” (p. 114, [1]).  Those four sources of profits in descending order of importance are:

  • Trade and promotional allowances from the brand suppliers — Much of the game is played between the manufacturers and retailers where the former pay rebates of various kinds to the latter for “warehousing” their merchandise in the stores and occasionally incentivize the retailers to make promotions for their brands (e.g., end-of-aisle display, discounts). Consequently, it appears that retailers gain money by buying from their brand suppliers rather than selling to shoppers.
  • Float on cash — Meaning that the store makes additional money on its sales revenue from income on bank deposit (i.e., accruing interest).
  • Real estate — Stores occupy buildings and these are assets in their own virtue. Major retail chains need to carefully choose promising locations with respect to the communities they intend to serve and less expensive property for building the store in aim to lower costs. When a chain purchases the property rather than rents a space, it may gain as an owner from its investment in the real estate itself when it decides to exit the location.
  • Margin on sales — Actually Sorensen refers to extra income from additional businesses operating in the premises of the store like a lucrative deli store, pharmacy, photo services, restaurant etc., where the store’s owner gains additional margin or collects its share from contract licensees.

I believe that these additional activities of retailers and their associated income provide some interesting clues in explaining why Israelis have become so upset in recent weeks with retailers as well as the manufacturers of many consumer products, mainly food and grocery. The protesters have difficulty in putting the blame on one party or another, but in fact both parties may be responsible. Anger has been directed from the beginning more squarely at manufacturers, but retailers also contribute to raising prices of consumer products.

Notably, the Israeli protesters are upset about the prices charged at retail chains, not the self-service approach of those stores and how it affects their shopping behaviour. However, when retailers distance themselves from the consumers, don’t understand them sufficiently and don’t care how they shop, especially because they have other side-interests, the retailers may lose sensitivity to their customers with respect to both pricing and the shopping experience.

The first source, promotional allowances from the brand suppliers, chiefly suggests that retailers and manufacturers share responsibility in losing sight of the consumers. These allowances are strongly engrained in the business relations between retailers and their brand suppliers. For the latter it has become a necessary tool to influence the presence of the brand in the store. However, retailers and manufacturers may become so focused on those dealings, they fail to see their effects on the end consumers. The responsibility falls more hardly in this case on the retail chains because the manufacturers are using this method to push their way through to the shoppers for the benefit of the retailers. However, relations between the two parties are more complex than that, each trying to exert influence on the other (e.g., strong brand suppliers who demand that their own staff organize their products on store shelves), and therefore are both responsible for any effects of their battles behind the backs of the consumers.

Making money by gaining interest on cash or return on real estate is by itself a legitimate and fair way for increasing income for the retailers. The problems start when retailers become more occupied with financial and real estate investments than caring for the needs of their shoppers-customers. These profit-generating activities have a negative effect for consumers to the extent that they divert food retail chains from their core business or raison-d’être.

Greater reliance on extra sources of profits can particularly help explain the lower sensitivity of retail chains to the needs and concerns of the consumers. It is a matter of shifting their target of focus. Hence more research of shopper behaviour in-store may allow retailers to learn how to make the experience of shoppers in their stores more enjoyable, and their shopping trip more effective (i.e., how they fill their basket / cart) while producing higher value to the retailers. Research related to pricing issues should reveal the degree of shoppers’  willingness-to-pay for different product types and the maximum price they wish or can afford to pay at any given period of time. Further, better interaction with shoppers in different modes should provide effective signals of any right or wrong doing of retailers in time.

Nevertheless, having additional sources of profit cannot sufficiently explain why prices in food chains in Israel have risen so high over the past five years. That is, if retailers have those additional sources of profit, why should they need to offer products at high margins, making them more expensive than similar products sold in other countries like the US, UK and in the European continent? It may happen because retailers in Israel do not  receive income from such extra sources as much as abroad, they do not perform sufficient research (or the appropriate kind of research) to provide the relevant information, or they may have become complacent and over-confident due to lack of complaint from consumers as they pursue greater profits. They have raised prices excessively even for necessary products such as basic dairy products. The inner-dealings of retailers and manufacturers are the most likely suspects in blinding both parties to consumers.

There are some serious questions to address in resolving the consumer crisis:

  • How is the chain of value of over-priced consumer products built up? (e.g., if a litre of milk is sold by dairy farmers to the producers at about 2.50 NIS [~€0.50], how is value added up to reach a price as high as 8.00 NIS [~€1.60] for a 250g(!) of cottage cheese at the retail chain?)
  • Why should the price of food and grocery products be much higher than in other developed countries  (e.g., Tesco in the UK offered its own brand 300g cup of cottage cheese in June for £0.75 [2] compared with 8.00 NIS or £1.45 for a 250g cup of cottage by Tnuva, a national brand in Israel.)
  • What does it suggest to us when retailers are able to lower prices in a short time to a more reasonable price level when put under pressure? (e.g., after a few days of effective campaign in Israeli media, the price of cottage cheese dropped to 7.00 NIS / ~€1.40)
  • A government report recommended to allow import of selected dairy products to Israel and press dairy farmers to lower their price of milk to producers. Is it right and just to squeeze farmers in an industry that is already suffering greater difficulties to sustain itself, when there is a much wider space for maneuvering by manufacturers and retailers?
  • One may also question, if retailers save on keeping a minimum level of service in supermarkets, shouldn’t that allow them to offer products at lower prices? (Possibly retailers in Israel have not employed sufficiently additional discretionary services in their premises to increase profits.)

The cost of building a distance between retailers and consumers is a loss in customer trust, resentment, and increase in tackling of staff with grumbling shoppers. Chain retailers in Israel, mainly food and grocery chains, have crossed a line in distancing themselves from consumers thus evoking a public roar and protest. While national brand suppliers have also allowed it, it should have been the prime responsibility of the retailers who are facing the consumers to identify troubles in time, using research and customer feedback, and to act upon, including warning and advising business partners that are also concerned. But retailers may not be able to act effectively without the co-operation of their business partners, specifically brand suppliers, and the support of the government where necessary.

Ron Ventura, Ph.D. (Marketing)

[1] “Inside the Mind of the Shopper: The Science of Retailing,” Herb Sorensen (Ph.D.), 2009, NJ: Pearson Education (Prentice-Hill).

[2] Retrieved from www.mysupermarket.co.uk in June 2011

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