Do USDA Quality Grades Mislead Consumers?

If you've ever seen the words "Choice" or "Prime" advertising a cut of beef, then you've been influenced by the federal beef quality grading system, which is administered by the Agricultural Marketing Service of the USDA.  From "best" to "worst" the grades are Prime, Choice, Select, and Standard.  

In a paper forthcoming the Journal of Animal Science, Eric and Megan Devuyst and I report the results of a study revealing that the USDA beef quality grading system likely sends confusing and misleading signals to final consumers (which is exactly the opposite of the purpose of the grading system).

The key determinant of quality in current grading system is "intramuscular fat" - the amount of fat inside the muscle of the steak.  Steaks with more fat get higher grades, primarily because of the large amount of research showing that consumers prefer the taste of steaks with more intramuscular fat.

But, do consumers know this?  And do they understand the information communicated by the grade names? Based on results of two nationwide surveys (both with over 1,000 people), we believe the answers are clearly: "No".

Most people thought the grade name "Prime" was the leannest, while also expecting it to be juiciest.  When looking just at the pictures (the same ones shown above but without the names), most people thought the picture of the Prime steak would be the cheapest, and they were most likely to associate the picture of the Prime steak with the name "Select."  

Only 14% of respondents correctly ranked the grade names according to leanness, and only 14% correctly matched the pictures with the respective grade names.  That's worse than random guessing (16.67% would be correct just by pure chance given that people had to match three items).   

We conclude the paper with the following:

if the current grading system fails to adequately inform consumers of the relative quality of grades, there remains the likelihood that consumers’ expectations will be unmet. There are three potential methods for addressing this lack of understanding. First, the current quality grading system could be dropped in lieu of private or third-party systems. . . .Second, an educational program could be  developed to promote knowledge of the link between higher marbled beef and taste. . . . The costs of such an effort, however, are likely to be large, and it is unclear what effects they may have particularly when one realizes the existence of many prior educational efforts that have been undertaken in the 70 year existence of the Prime-Choice quality grade nomenclature. . . . Finally, consumers could likely benefit from more descriptive nomenclature. . . . for example, “USDA Prime—Higher Fat, Most Juicy,” “USDA Choice—Juicy,” and “USDA Select—Less Fat, Less Juicy.” 

You can read the whole thing here.

What do consumers think of the FDA's new nutritional labels?

We've known for a few months now that the FDA has been planning to revise and update the nutritional labels appearing on packaged foods.  

There has been a lot of discussion in the news about the merits (and demerits) of the label.  But, what do consumers think?

In the most recent issue of my monthly Food Demand Survey (FooDS), we directly asked consumers what they thought.  Here is a screenshot of the question we asked (note: the order of the labels was randomly varied across surveys).

The images were taken from an FDA website showing an example of the new, proposed label along with an example of the current label.

We have data from 1,016 respondents (data was collected last week); results are weighted to be demographically representative of the US population with a sampling error of +/- 3%.

We found 26% said they preferred the current label, 57% preferred the new, proposed label, and the remaining 18% said they were indifferent.  

What we think about a label may be as important as the label itself

What believe about a food's ingredients may have a biological effect on our bodies above and beyond the actual nutrient content.

That is the conclusion from a study published in the journal Health Psychology, which was recently covered by Alix Spiegel at the NPR Health blog.

The authors conducted an experiment in which they fed the same 380 calorie milk shake to two different groups of subjects.  The first group was lied to, and were told (via a label) that the shake was a "sensible" 140 calories.  The second group was also lied to, but in the opposite manner: they were told (via a label) that the shake was an "indulgent" 620 calories.  

The researchers measured the levels of a hormone, ghrelin, before during and after the label experiment.  Ghrelin levels are particularly interesting to monitor because they regulate metabolism and help signal hunger or satiety.  After eating a big meal, ghrelin levels fall, signalling us to stop eating.  Eat a light meal, and ghrelin levels remain high, signaling us to eat more.

The authors found that people consuming the "indulgent" labeled shake experienced a significant increase in ghrelin just before consumption (in anticipation) and then a significant decline in ghrelin after consumption.  The change, the authors argue, is consistent with that typically observed after eating a big meal.  By contrast, the level of ghrelin was flat before and after eating the "sensible" shake.   All this is in spite of the fact that the two shakes were exactly the same in every way except for the labels!  

The authors were quoted as saying:

Labels are not just labels; they evoke a set of beliefs

and that labels might

actually affect the body's physiological processing of the nutrients that are consumed.

One way to interpret the results is to place them in the category with other "behavioral biases" in the behavioral economics literature: another piece of evidence that people do not behave rationally.  I see it a bit differently.  The results suggest a kind of "extra" rationality.  Mind over matter.  What we think might well trigger how our body responds.  Marketers might influence what we think about foods, but we have some control over the process too.  

Now, if I can just fool myself into believing that small lunch salad is actually one of the Carl's Jr. "Indulgent Salads", I'll feel fuller and lose more weight! 

The study's sample size was small (N=46), probably because to measure ghrelin they had to insert an intravenous catheter to draw blood at repeated intervals.  So one proceed with caution until more work of this sort is done.  Still, very interesting nonetheless.

Coming to a Grocery Store Near You: A New Nutrition Facts Panel

According to this story from the AP:

After 20 years, the nutrition facts label on the back of food packages is getting a makeover.

and

The FDA has sent guidelines for the new labels to the White House, but Taylor would not estimate when they might be released. The FDA has been working on the issue for a decade, he said.

and

The revised label is expected to make the calorie listing more prominent, and Regina Hildwine of the Grocery Manufacturers Association said that could be useful to consumers. Her group represents the nation's largest food companies.

Hildwine said the FDA also has suggested that it may be appropriate to remove the "calories from fat" declaration on the label.

It's not yet clear what other changes the FDA could decide on. 

Personally, I think it is a good idea to bring research to bear on the design of the nutrition facts panel.  I've been critical of certain aspects of the implications people draw from the research in behavioral economics.  But, here is an area where the research is useful and has direct relevance.  

The government is going to provide nutrition information anyway (and has been doing it for 20 years), and as such, shouldn't it at least be presented in a way that is most understood by the consumer?  It is impossible to believe that the current little black box with dozens of horizontal lines is the most effective format.  

How do we know which type of information is "most effective"?  Effective, of course, could have many meanings.  One definition could relate to the extent to which the information is accurately understood by the consumer (I'd prefer that over whether the label causes some change in behavior desired by particular nutritionist).  Another way is to see what types of information arise in markets (i.e., what information consumers demand and how companies provide it).  For example, I've notice cereal boxes with color coded labels on the front of the package in the upper left-hand corner.  Similar private initiatives abound.

I'm  sure interest groups on all sides - from food companies to health activists - will want a say.  I just hope solid consumer research is brought to bear on the issue as well.

Transfat Ban

No doubt most of you have heard by now of the FDA's plans to ban transfats .  I've had a few reporters ask about my thoughts on the issue, so I thought it would be useful to pass them along here.

First, from my reading of the research (and I will admit to being no expert on the issue), it does seem that consumption of "synthetic" transfats have deleterious health effects.  Interestingly, however, a few studies show that "natural" transfats from animal sources may not be as unhealthy, despite having similar chemical compositions as the "synthetic" transfats.  

The question before us isn't whether certain transfats are unhealthy - they are - but rather: what is the government's role in regulating transfats?  The move in recent years to educate the public on the scientific evidence, and even to require labeling of transfats on nutritional facts panels, is reasonable in my opinion given the established safety risks.  And indeed, almost every story I've read on the issue shows that these efforts alone caused a significant voluntary drop in use and consumption of transfats.  The trouble comes when some third party - the FDA in this case - moves from informing public about risks to making the decision for us.  The government has moved from the role of impartial referee conveying the rules of the game to a player in the game picking sides.

Many of the news stories point to the number of "lives saved" if a ban on transfats were implemented.  But, this is misleading when discussed without context.  We could save many more lives each year if the government banned driving.  Many lives could also be saved if we banned alcohol and went back to prohibition.  Skydiving is risky - why not ban that too?  The reasons is that many risk activities convey benefits to the public that must also be considered.  

What are the benefits from the use of tranfats in food?  Taste.  Mouthfeel.  Cost.  Improved shelf life.  What would be the costs of removing transfats?  Higher food prices.  Manufacturers may have to add more sugar or salt or more saturated fat to compensate for the loss of transfats.  The point is that any discussion of the benefits of a ban on transfats must be considered in the context of the costs of the ban.

Even if a ban passed a narrow cost-beneft test, I think we'd also want to ask whether the infringement on freedom of choice can be justified on logical grounds.  Stated differently, where is the market failure? Normally, economists identify market failures if there are price-altering market powers, externalities, public goods, or information asymmetries.  Only the later of these, in my opinion, has any credibility, but with the existence of labels, even that is no justification.  That leaves only one primary motive for the ban: the dim view that the public is unable to properly weight the risks themselves and are in need of paternalistic intervention.  Of course, government officials won't come right out and tell us that their motivation is our perceived ineptitude  because we'd rightly rebel against such a condescending attitude.       

One last point: it seems pretty clear that the provision of information via labels, and resulting consumer demands, induced innovation by food companies to come up with ways to do without transfats.  But, is it possible that a ban could hinder innovation?  As I've already mentioned, all transfats are not created equal.  Is it possible for scientists to develop new fats that convey some of the same beneficial properties as existing "synthetic" transfats without the health risks?  I don't know.  And we may never know if we institute a blanket ban.