Research lifts lid on positive effects of food regulation

· 3 min read

Research lifts lid on positive effects of food regulation

S. Sajeesh and Özgür Araz are photographed in a produce section of a grocery store.
S. Sajeesh and Özgür Araz are the authors of a study showing that firms can benefit when they help consumers make healthier choices.

Government regulations equal lower profits — or so says conventional wisdom.

A Nebraska study flips that script, demonstrating that when it comes to fighting obesity, companies can prosper as people choose healthier foods. Those findings hold whether it’s organic tortellini or fast-food fries made without trans fat.

The study suggests food companies would benefit from optimizing healthy options and even lobbying policymakers and collaborating with public health agencies to help combat obesity.
Previous studies have shown that regulations, such as health messaging and taxing unhealthy foods, have widespread public support and are changing consumer choices.

Business professors Özgür Araz and S. Sajeesh, alongside a City University of New York colleague, built an analytical model to understand how those changes affect food companies and their decisions.

“There is this idea that if consumers are going to benefit, then firms are going to lose out,” said Sajeesh, associate professor of marketing. “Our study shows that, under some conditions, firm profits and social welfare can go up simultaneously.

“It’s a powerful idea because it highlights that government regulators can take actions that benefit society at large without pushback from private organizations.”

Their study found companies are responding to consumer demand and improving the healthfulness of their foods. In turn, profits are rising, partly because people are willing to pay more for healthier foods.

Profits are also rising due to decreasing competition among companies. The team found the gap between higher and lower quality foods is increasing. In other words, healthy foods are getting healthier at a greater rate than less healthy foods. Those fries aren’t catching up anytime soon.

Despite the increasing quality gap and corresponding decrease in competition, society could still benefit because even companies making french fries are looking for ways to make them healthier, the researchers said.

“The less healthy option doesn’t have to be unhealthy, and it doesn’t have to poison you,” said Araz, the Ron and Carol Cope Professor of supply chain management and analytics. “Lower socioeconomic classes suffer more with childhood obesity. I think the market shift toward healthier options is beneficial and will reduce health disparities.”

Their research was published in the journal Production and Operations Management.

This story was included in the Office of Research and Economic Development’s annual report. View the full report here.

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