Mandatory labelling, nutritional taxes and market forces: An empirical evaluation of fat policies in the French fromage blanc and yogurt market

This paper evaluates and compares two popular options of nutritional policy: mandatory front-of-pack labelling and the fat tax. Using household scanner data on fromages blancs and dessert yogurts, the distribution of consumer preferences for fat and for front-of-pack fat labels are separately identi ed by exploiting an exogenous difference in labelling requirements between the two product categories. The demand estimates are then used to calibrate an oligopolistic supply model, and to evaluate the impact of public policies. In the absence of producer price response, making fat labels mandatory would reduce by 38% the fat supplied by this market to regular consuming households. An ad-valorem tax of 10% (5%) on the producer price of full-fat (half-skimmed) products has a similar impact. However, after accounting for producer price response, mandatory labels yield only a 1:5% decrease in fat purchases, as against -9% for the fat tax. This is explained by the producer price response, which neutralises up to 96% of the impact of mandatory labelling on consumer demand. This illustrates how market forces can defeat any intended effect of market-based public health actions.