Front of Packaging Nutritional Labels Will Prompt Changes for CPG Companies

MORE THAN 40% of U.S. adults are living with obesity. To reduce the problem, the Food and Drug Administration is looking to make it easier for consumers to access and understand food and beverage nutrition information while shopping. To that end, in mid-January, the FDA unveiled its long-awaited proposed rule on Front of Packaging Nutritional Labels (FOPNL).

FOPNL is already in use in many countries worldwide. The various approaches include as warning systems, which alert consumers to high levels of certain nutrients; spectrum systems, which provide a singular score for a food’s nutritional value; and repeated systems that display nutrient values and RDI percentages on the front and back of labels. 

Ultimately, the FDA chose a combination of a repeated and warning system, with indication on front of packaging as to whether products are high, medium or low in their use of salt, added sugar and saturated fat and their serving content percentage.

South Korea became the first country to introduce front-of-pack nutrition labels in 2009 to provide consumers with simpler and more immediate nutrition information. Many countries followed and positive impacts have been demonstrated. Chile, for example, an early adopter of front of packaging labeling, saw significant reduction in consumption of calories, sugars, sodium and saturated fat by consumers based on a sample population studied in the twelve months prior and following the implementation of FOPNL and other related regulations. Despite these positive results, obesity still increased in Chile in the same period.

Compared to warning labels in Latin America, this proposed rule by the FDA is overall more neutral given that there isn’t just one warning label, but a sliding scale including low, medium and high ratings for products. 

Interestingly, the FDA only looked at salt, added sugars and saturated fats, excluding calories, overall fats, etc. This creates very specific opportunities for players to reformulate.

Undoubtedly, making this transition to FOPNL in the U.S. will result in marketplace changes. Certain product categories are likely to be impacted more than others, with some products coming out as winners and others as losers. 

Packaged food and beverage manufacturers will have to decide whether to reformulate their products and if so, whether to do so on a global or regional level. Additionally, these players might explore streamlining their product offerings (SKUs) and introducing nutritionally optimized products.

Food ingredient companies can assist in reformulations by offering solutions for reducing added sugar and salt content, for example. Retailers have opportunities to optimize their shelf-space to prioritize products with better nutritional profiles.

While this transition will certainly present challenges, it does create some distinct opportunities for companies across the value chain.

 While CPG players will need to look at their product portfolios to determine when they will trigger high or medium levels of saturated fats, added sugar and sodium, they can also look for opportunities to reformulate products to reduce these ingredients:

• Saturated fat replacement could involve changes in oils or complete formulation changes for example, including starches and texturants for mouthfeel
• Reduction in added sugars can involve changing to alternative sweeteners, both synthetic (for example, sucralose) or natural (for example, stevia, monkfruit, etc.)
• Sodium reduction can involve changing to potassium salts, using different spice blends or gradually reducing sodium from products to limit taste difference sensitivity

FOPNL also presents an opportunity to introduce products that have low added sugars, salts and saturated fats into categories where the existing products have medium or high levels to create a strategic advantage.

More than just nurition facts

While reformulation and product introductions play an important role, players do need to consider that nutrition facts aren’t the only thing that consumers pay attention to. Consumers expect great taste, sensory experience, clean labels, etc. With ingredients at this time coming under greater scrutiny – as seen in the ban of Red Dye No. 3 - consideration needs to be made when reformulating around which ingredients can add value on the nutrition side, but may deter consumers who are concerned with clean labels.

For some categories, the FOPNL doesn’t need to necessarily drive change, such as in mainstream sugar confectionary. Consumers already understand that these candies are filled with added sugars and are buying them as an indulgence. So, in these categories, players can look to lean into their indulgence position, reconsidering package sizes and consumer experience, without trying to fully change their products.

While a final ruling is yet to occur, the combination of the FOPNL proposed rule, additive bans, a new Administration, the “make America healthy again” movement and a recent change to what qualifies as “healthy” in the US, it is clear that health and nutrition is in focus for the FDA. 

Therefore, the time is now for CPG manufacturers to assess and plan for this changing regulatory environment. 

Michelle Briffett is Principal, Roland Berger, one of the world's leading strategy consultancies with a wide-ranging service portfolio for all relevant industries and business functions. For more information, please visit www.rolandberger.com.