Informative or confusing: judging the effectiveness of current country of origin labelling requirements

The Institute interviewed two industry experts, with differing policy viewpoints, to gain their opinions on this issue.

Richard Mulcahy
Chief Executive Officer
Gary Dawson
Chief Executive Officer
Australian Food & Grocery Council (AFGC)

There are currently two types of country of origin labelling sanctioned by the Australian Competition and Consumer Commission (ACCC) in Australia. These are:

•    ‘Product of’ and ‘Grown in’

‘Product of’ and ‘Grown in’ means that each significant ingredient or part of the product originated in the country claimed and almost all of the production processes occurred in that country. ‘Product of’ is often used for processed food and ‘Grown in’ is mostly used for fresh food.

•    ‘Made in’

‘Made in’ means that the product was made (not just packed) in the country claimed and at least 50% of the cost to produce the product was incurred in that country. These products could contain ingredients from other countries. A product with a ‘Made in Australia’ label won’t necessarily contain Australian ingredients.

Do you think these provide adequate information to enable consumers to make informed choices about the origins of the foods they are purchasing?

Richard Mulcahy, AUSVEG

The current system is ambiguous and has the potential to mislead consumers. AUSVEG has particular concerns about the term ‘Made from local and imported ingredients’, which provides no real information to consumers about the origins of various ingredients, and can be used to obscure the true proportion of imported produce in a product. We would like to see this term banned for use on labels.

We also have concerns about the term ‘Made in’, which identifies where processing costs were incurred, but can create the impression ingredients were grown in a particular country. In a 2014 Choice survey, only 12% of respondents were able to correctly identify the meaning of ‘Made in Australia’. This clearly shows that use of the claim is ineffective and is outright counterproductive in attempts to inform consumers. AUSVEG strongly supports the blanket removal of the term ‘Made in’, and would instead like to see the term ‘Manufactured in’ used to represent where the product has been processed.

AUSVEG would also like to see a simple visual form of positive differentiation on the front of food packaging to establish what percentage of a food product is sourced from Australian ingredients. The country of origin statement should be moved to the front of the pack and increased in size, with the countries of origin of the ‘characterising’ ingredients detailed.

Gary Dawson, AFGC

There is no doubt that there are ways of improving the clarity of information to consumers about the origin of the food they are eating. In this respect the overarching requirement in consumer law that companies ‘don’t mislead’ is just as important as the specific origin requirements. Consumers already access a wide range of information beyond the regulated origin labelling requirements outlined above – via avenues including company websites, social media reviews and endorsements, front-of-pack logos like ‘Australian Made Australian Grown’, point-of-sale displays, smartphone apps, QR codes and so on. Generally, where provenance is a selling point for a product, companies are quick to provide additional information over and above what is legally required. The recent SPC campaigns covering labelling, social media and mass media focusing on the source of their ingredients is an example.

The current regulations attempt to cover two important but quite separate aspects of food origin – where the ingredients are grown (Product of / Grown in) and where the processing or manufacturing took place (Made in). Both are important. Place of manufacture communicates jobs, economic value add and safe processing; origin of ingredients communicates farm provenance and producer value.

Confusion often arises because consumer perception of what ‘origin’ means shifts according to the product – for fresh food ‘origin’ is about where it is grown, whereas for highly processed foods ‘origin’ is about where it is manufactured. This is borne out in research by Choice and in consumer research undertaken by Catalyst in 2014 which found Australian consumers regard place of manufacture to be just as important as origin of ingredients.

Do you think a labelling system that requires manufacturers or retailers to identify the country of origin of the main ingredients in food products would be more informative for consumers?

Richard Mulcahy, AUSVEG

We are strongly of the view that by providing consumers with more information about the country of origin of the food they are buying, they will be better informed. Importantly, taking this step would provide consumers with information that research has long indicated they desire, and would allow them to exercise their well-documented preference for purchasing Australian produce. Including the country of origin of characterising ingredients on a product’s label will benefit consumers by providing them with both useful information and genuine choice.

As food manufacturers are already required to identify characterising ingredients (by including the percentages of these ingredients as a proportion of the overall food product), and regularly change labels to promote events and campaigns, we do not believe introducing additional country of origin labelling requirements would result in significant increases in compliance costs.

Gary Dawson, AFGC

Information about the source of major ingredients would, by definition, provide more information to consumers, but the extent that consumers value or respond to such information would vary according to the particular food item. For example, there is little or no evidence that consumers of Australian made chocolate want to know the origin of the cocoa beans even though they are all imported. The closer the product is to ‘fresh’ or less processed, the more consumers are likely to value information about the source of key ingredients.

By way of context, an AFGC review in 2014 of five major food and grocery manufacturer customer call centre logs over a one year period found that out of nearly a quarter of a million customer initiated contacts only 0.39%, or less than half of one percent, were about origin. Claims that customers are generally confused and demanding more origin information must be tested against these facts.

Do you believe the majority of consumers will preferentially buy food products that are grown in Australia, and what should Australian farmers and food manufacturers do to enhance the perceived value of Australian products?

Richard Mulcahy, AUSVEG

There has always been strong demand for locally-grown vegetable and potato produce, with consumer research regularly showing the vast majority of Australians prefer to buy Australian-grown wherever possible.

In a 2014 Choice survey, 85% of respondents said it was crucial or very important for them to be able to identify if the food they buy has been grown in Australia. This clearly displays the importance of a clear, well-structured country of origin labelling system, and the value it could provide to Australian growers and food manufacturers.

The recent hepatitis scare linked to imported berries has further reinforced in the minds of the Australian public the superior growing practices and higher standards employed by Australian growers, and galvanised demand for local product.

As evidenced by the groundswell of public support for an improved country of origin labelling system, consumers want to know where the food they are buying comes from so they can make an informed purchasing decision.

The stellar reputation of Australian produce presents genuine opportunities for growers, manufacturers and retailers, which could only be enhanced by a clearer, more transparent country of origin labelling system.

Better labelling requirements would encourage food manufacturers and retailers to source Australian product, as advising consumers of this fact would provide them with a premium selling point.

Clearer labelling laws will ensure that we continue to have free trade but that it is also ‘fair trade’, providing local producers with a platform to compete on their merits against international products, without having to overcome ambiguous or confusing labelling such as ‘Made in Australia from local and imported ingredients’.

Gary Dawson, AFGC

Consumer surveys consistently find that the key drivers of purchase decisions are price, quality, brand and habit, with country of origin an important but secondary consideration. This was borne out by the Catalyst research in 2014 which found that between one in nine and one in six consumers cite country of origin or ‘Australian’ in the top three drivers of their purchase decisions.

It is actual consumer purchase behaviour (as opposed to stated intentions) that will have a lasting impact on manufacturer and retailer sourcing arrangements. Where Australian provenance is a driver of sales, food producers, processors and retailers tend to call it out strongly in their labelling and promotion. Understanding consumer preference and willingness to pay a premium for Australian sourced product, and responding to it through the provision of information across multiple channels, is the key insight that Australian food producers and processors need to respond to in order to enhance the perceived value of Australian sourced products. This will have a greater impact than changes to origin labelling regulation. 

Images: hello-julie, Joe Lodge 

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