Health Creates Wealth? The use of Nutrition Claims and Firm Financial Performance

Abstract

Prior research has investigated consumers’ perceptions of nutritional information but does not detail how the use of nutrition claims on product packages maybe associated with a manufacturer's financial performance. Using data from 38 firms, the authors find evidence that a firm's stock market performance and sales relate significantly and positively to both the degree of nutritional emphasis and the specificity of nutrition claims on product packages but relate negatively to the diversity of nutrition claims the company uses across its products. The findings provide important managerial implications to help businesses obtain financial gains through the use of nutrition claims. They also suggest that aligning the labeling policy could be a profitable long-term route for marketers, and it is necessary for policy makers to pay attention to firm performance. The insights regarding the economic benefits of using nutrition claims from a marketing–finance perspective provide further implications for policy makers to encourage firms to offer nutritious products and make nutrition information more accessible for consumers.

The Impact of Nutrition Label Regulation on Firm Marketing Action and Performance in China

“…Following Cao and Yan (2016), all data were acquired from the annual reports of listed Chinese firms that belong to associations for manufacturers of food and other consumer goods. 1 We measured advertising, donations, and R&D as the respective expenditures divided by annual sales.…”

“…1Using data from 38 U.S.-listed firms, Cao and Yan (2016) study the relationship between a firm's sales and nutritional claim strategies in nutrition labeling. Accordingly, both the sample of food firms (including all listed food firms) and the control group of other consumer product firms (including consumer goods sector index) are from the three boards on China's stock markets (Shanghai, Shenzhen, and Hong Kong): main boards (for large firms), small and medium-sized boards (for small and medium-sized firms), and growth enterprise boards (for new and small firms).…”

“…Signaling theory (Spence 1973) and the information acquisition-risk reduction framework (Murray 1991) comprise the main theoretical foundation. Product labels can cue consumers about product qualities (Atkinson and Rosenthal 2014; Cao and Yan 2016). Because enactment of the FNLA might have caused a change of information asymmetry in the market, a firm's marketing actions that signal product quality and firm performance may have also changed in response to the law (Moorman, Du, and Mela 2005).…”

“…Because regulation may achieve unexpected effects (Moorman, Du, and Mela 2005; Moorman, Ferraro, and Huber 2012), marketers and legislative bodies need to know the broad influence of nutrition labeling on firms and the market (Calfee and Pappalardo 1991). Linking standardized nutrition label information disclosure to a firm's marketing strategies and performance can provide deeper insights for policy makers and firms, as such disclosure may affect business practices and resource relocation (Cao and Yan 2016; Moorman, Ferraro, and Huber 2012).…”

Substitute foods are more likely than their traditional food counterparts to display front-of-package references

“…All nutrition messaging provided to the consumer on the FOP, however, in addition to other information about product quality (e.g., "organic" and "natural" characteristics), is displayed at the manufacturer's volition. There is now considerable evidence to suggest that the presence of these FOP references can influence consumer's purchasing behavior (Volkova and Mhurchu 2015;Cao and Yan 2016).…”