Wednesday, 24 October 2012

Labelling and non-tariff barriers

David Farrar asks why we shouldn't mandate nutritional labelling on alcoholic beverages. People may well forget that alcohol has caloric content; providing information has value.

Here's the case against them.

First, it is fairly easy for large producers of homogeneous products to add nutritional labels to their products. The one-off testing and label re-jigging is a fixed cost that is spread across a very large number of units. But, suppose you're a craft brewer and you get a notion to make a seasonal autumnal ale with pumpkin in it. It'll taste good and sell well as a small batch. But after you make a batch, you're going to have to send a bottle to the lab for testing, wait for the results, and attach the appropriate nutritional label to your new brew. This will add maybe a fortnight or more to your brewing cycle on the first batch of the product and cost you a bit in testing. You can't spread those costs over many units because you're not making many units. And heaven help you if you decide you should double the pumpkin in the next batch.

Second, it's a non-tariff barrier against imported products made in countries that do not have labelling requirements. When New Zealand implemented labelling requirements for standard drinks a few years ago, the shop where I bought my oddball foreign grey market craft beers had to print off little labels for each bottle of the one-offs that they sold, converting the percent alcohol content into a number of standard drinks. This added to the cost of foreign craft beer relative to domestic or mass market product.

You will rightly note that this is also an argument against mandatory nutritional labelling requirements on any small volume products.

If there's any steam behind nutritional labelling requirements, there are things we can do to make it less awful.

The easiest labelling requirement would only require that producers give a general range of calories contained per serving of the product based on the alcohol content alone. A gram of alcohol has seven calories, so a standard drink contains 70 calories. Most products could then simply say something like:
"One serving of this product provides 50-100 calories through its alcohol content."
If you really want to know the protein, carbohydrate, sugar and salt content for the drinks, carve out an exemption for small-batch products and for imported products. 

I really love the oddball small-batch beers that turn up in New Zealand, whether made domestically or imported. Anything that adds fixed costs helps to kill that product range. New Zealand has enough problems with fixed costs without inventing more of them.


  1. Is it just Farrar asking this question? If healthists and the anti-alcohol brigade were pushing for nutritional labelling of alcohol products I'd be very surprised if they gave two hoots about boutique brewers. I suspect they'd see brewers as pretty much akin to drug dealers.

  2. Broadly agree that food labelling is onerous and a real barrier to business development. Having said that, as a micro-producer, I have found that the costs amortise as you develop more lines.

    Calculating nutritional content is passably easy given that Crop & Food make a free database available with most ingredients in it. The arithmetic is straight forward but being totally at one with Excel is a bonus.

    More seriously, I feel that our regulators are just too lazy when they design regulation. It's just so much easier to design regulations that (i) large players will find trivial to comply with and that, then, (ii) will be easier to implement since only a few, easily identifiable, businesses will be able to play by these rules.

    It is not so widely understood that manufacturers who sell their own product have a general labelling exemption. Check out a Baker's Delight (Delite?) franchise some time and notice that products are not individually labelled. They will have a comprehensive product fact book that provides all the information that would be provided on food labels.

    In the case of the small lines of imported foodstuffs extending that model would significantly reduce the cost of compliance. That is, the regulations could require the retailer to make available a nutrition information sheet to anyone who asked rather than require that it the information be fixed to each package.

    Given that regulation often does not deliver the claimed benefits or has unforeseen impacts why not build sunset clauses automatically into new regulation that would require the regulator to prove why a specific regulation should remain in force or see it lapse?

  3. Decent idea around extending that exemption.

    I like the idea of regulatory sunsets, but I doubt they wind up doing much good. Nobody tracks well enough to be able to show that they do more harm than good, and entrenched groups tend to have an interest in arguing for their continuation.