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Both Government and Private Company Food Labels Have Tradeoffs

Posted by Maria Bowman, Catherine Greene, and Fred Kuchler, Economic Research Service in Food and Nutrition
Dec 27, 2017
A shopper examines a package of meat in a grocery store for freshness
A new report by USDA’s Economic Research Service (ERS), Beyond Nutrition and Organic Labels—30 Years of Experience With Intervening in Food Labels, evaluates the impact of Federal organic and nutrition labels and several other food labels that emerged in recent decades.

For more than a century, American families have used government-regulated food labels, such as “USDA prime beef,” to help them decide what food products to buy. Today, consumers also look to food labels for information about how their food was grown and how healthy it is. 

Some food labels, such as grades of beef, eggs and apples, are based on longtime Federal requirements that apply to all companies. In 1990, Congress also directed USDA and FDA to set standards for organic and nutrition food labels. But private-sector companies can put other information on food labels, such as whether a product is “raised without antibiotics,” or made without genetically modified ingredients (“non-GMO”), without government verification.

A new report by USDA’s Economic Research Service (ERS), Beyond Nutrition and Organic Labels—30 Years of Experience With Intervening in Food Labels, evaluates the impact of Federal organic and nutrition labels and several other food labels that emerged in recent decades.

National standards for the Nutrition Facts label were intended to provide consumers with information to make healthy food choices. Since then, it has emerged that shoppers may be overwhelmed by the amount of information provided and in response, some companies have added simpler health claims on the front of food packages.

Before USDA developed standards for organic food, the word “organic” meant different things for different products, and in different U.S. States. National standards have helped level the playing field for producers and have widened consumer access to organic food. Since Federal organic standards were implemented in 2002, U.S. retail sales of organic food have risen five-fold.

While Federal label standards can be comprehensive, this doesn’t ensure that consumers understand them. The USDA Organic seal, for example, means that the farmer used practices that maintain or improve soil conditions, did not use GMOs, antibiotics, hormones, or synthetic pesticides -- and met many other requirements. However, many consumers confuse the USDA Organic seal with other less comprehensive food labels, especially labels that make a single claim such as “natural,” non-GMO,” and “raised without antibiotics.”

Without government involvement, the same label can be based on different standards — and private labels are often not verified. For example, early “raised without antibiotics” labels had different meanings, confusing consumers and creating conflict between companies. Though the labels now mean the same thing, firms don’t need their labels to be verified by USDA or other groups in order to use them. 

Private-sector labels making single claims, such as “raised without antibiotics,” also provide opportunities for producers, and more choice for consumers. For example, producers can adopt a single practice at a lower cost than meeting all the requirements to use the USDA Organic seal, and in turn, offer a lower retail price for that product. Grocery store price premiums for USDA Organic chicken breasts, for example, were double the premiums for “raised without antibiotics” chicken breasts in 2016. Smaller price premiums for single-trait products expand the market of potential customers while still giving companies an economic incentive to adjust their production processes.

Category/Topic: Food and Nutrition

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