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News Article

What Impact Will New Labeling Have on Companies?

By Andrea Villar | Tue, 07/28/2020 - 13:31

The labeling of hundreds of products that Mexicans consume every day has already begun to change. Starting this week, the new front labeling for industrialized foods and beverages began popping in at supermarket shelves, in cans and plastic wraps with captions indicating excess of sodium, sugars and saturated fat. But what impact will this strategy have on company sales?

"It was the right time to make changes to the standard. The law states that labeling standards should be reviewed every five years. There was certainly a great opportunity to improve the system we have. Industry and consumers could contribute a lot to create a system tailored to Mexicans, capable to inform in due time,” said Oliver Galindo, Tax and Legal Services Partner at Deloitte Mexico in a report.

According to a statement from the Ministry of Economy issued in January this year, the new front warning labeling "will allow the consumer to quickly, clearly and truthfully identify those products with excess critical nutrients: sugars, trans fats, saturated fats, sodium and energy content.”

One of the biggest controversies in the industry about the new labeling is that the authorities unilaterally decided to adopt the "Chilean model" of labeling, distinguished for being especially aggressive to the processed food industry, according to Galindo.

In Chile, the so-called Ley Super 8, in reference to a bar of chocolate recognized in that country that is high in calories, fats and total sugars, came into effect in 2016. Since then, the consumption of sugary drinks has decreased by more than 20 percent. After its results, the Chilean model was taken as a reference in the modification of NOM-051 regarding the labeling of prepackaged food and non-alcoholic beverages.

However, according to data from the OECD, as of October 2019, 74 percent of the adult population in Chile was overweight or obese, making it the OECD country with the highest rate of obesity and overweight, above Mexico (72.5 percent) and the US (71 percent).

“Companies wonder why it had to be the Chilean system, considering that it is a system that has not worked in its country of origin. If we see these results, there is no logic for its implementation in Mexico. In the end, it becomes a government act of faith because there is no scientific data to back it up," Galindo explains.

Is There Really an Impact?

Warning labeling on products in Mexico is nothing new. In 2003, the country adopted the Framework Convention on Tobacco Control (FCTC). The Convention contains a series of recommendations to regulate the tobacco industry and reduce both the demand and the supply of this product. “The consumer lost sensitivity to those warnings. When the consumer first sees them, it may have an impact. Over time and after constant exposure to these warnings, there comes a time when they lose meaning and utility,” said Galindo. 

One of the impacts that the Mexican Council of the Consumer Products Industry (CONMÉXICO) foresees is that diet/light foods and beverages will no longer be produced and marketed by companies. "Light products are treated with the same criteria as their original versions and there are even occasions when they are more punished, so companies say: why do I produce low-calorie products if they punish me?” said at a press conference in February Jaime Zabludovsky, Executive President of CONMÉXICO.

In its 2Q20 report, Bimbo estimated that the impact of the new labeling measures for processed foods in Mexico will be visible until 1Q21. In a conference with analysts, the company's CEO Daniel Servitje said the company is aware of the well-being of its customers and its products and in the future, it will work on the reformulation of some of them. “In Mexico, we hope to have new labels for consumers in October. It is still too early to know if we will be impacted or not by this new requirement,” he pointed out.

Photo by:   Poder del Consumidor
Andrea Villar Andrea Villar Journalist and Industry Analyst