World's Strictest Food-Label Law Has One Company Fighting Back

(Bloomberg) -- One of the biggest food companies in Chile is lashing out at a law that has made shopping for snacks tricky, whether it’s a chocolate bar or bag of chips.

For the past two years, everything from salad dressing to cookies in the South American nation has been plastered with stark warnings of high calories, sugar, fat or salt content, part of an effort to fight obesity rates that rival the U.S. The law also forbids food producers from using characters that may appeal to children -- the mustachioed Pringles man or Tony the Tiger are no-gos, either censored with a dark circle or gone altogether.

Carozzi SA, a family-controlled company that sells everything from pasta to juices and sweets, isn’t happy the government has demanded labels with signs to discourage buyers. Chile is the company’s biggest market, accounting for more than 60 percent of sales. In its 2017 financial report, Carozzi said revenue was flat in Chile, down from growth of 12 percent the year before, partially because of the law. In a separate emailed response to questions, Carozzi said that after taking out some unrelated one-time effects, growth would have been close to 8 percent -- the pace achieved this year through September.

Family Patriarch

Chairman Gonzalo Bofill, the current patriarch of the family that has led the company since 1975, recently told the local newspaper El Mercurio that the warnings were “an utter failure.” Carozzi also bought ads suggesting changes and better education for consumers. At the heart of the criticism is that the labels only cover a third of food sold (something bought informally on the street is exempt) and that the way the government determines if a product needs labeling -- based on a fixed portion of 100 grams, not the actual size of the portions sold -- is unfair.

“We don’t want to get rid of the labels or tell kids that sugary foods now are good,” Santiago Valdes, head of Carozzi’s Chile operations, said in an interview with Pauta Bloomberg radio on Nov. 29. “We now have a regulation that gives a false sense of security, and when time goes by people are going to notice that we’re in the same place and will blame the food industry again.”

The black octagonal warnings put the South American nation ahead of a global trend as consumers demand more information about what’s in their food. The law deemed the strictest in the world was a necessity, too: a 2016 study from the World Health Organization showed Chile has the highest obesity in the region, behind only the U.S. among OECD countries.

Wider Waistlines

Valdes says obesity rates have actually increased in the past two years, citing a statement from the Food and Agriculture Organization that said the number of obese people 15 years or older in Chile grew 9.3 percent between 2016 and 2017. The government, meanwhile, says it will take years for the law to impact obesity rates, and points to surveys that show demand for sugary drinks and cereals have fallen some 25 percent.

Similarly, the OECD said in a paper published last year that there’s evidence to suggest that “traffic-light” systems -- a less-harsh version of the Chilean approach like the one implemented in the U.K. -- could increase the number of people selecting a healthier option by about 18 percent, and lead to a 4 percent decrease in calorie intake.

Other countries are closely watching the label system. A report released in March said that 15 countries are studying the system, including Uruguay, Canada, Australia and Israel. Last month, Brazil passed a bill to reduce sugar content of products including cake mixes and sandwich cookies.

©2018 Bloomberg L.P.