Counting calories and the effect on food sales

I can remember being in New York ten years ago and regarding their smoke free restaurants and bars with amazement. It could never happen in the UK, I thought. Ten years later and another experiment: compulsory calorie labelling on all food sold in restaurants. Will it happen here? And if so, does the New York experience tell us how firms and consumers might respond?

The idea of menu labels is to help consumers, who tend to underestimate the calories in the food they buy. Critics say it is another step towards a nanny state and firms complain that it is costly to reprint menus. America’s restaurant industry, which (according to The Economist) is expected to have $558 billion in sales this year, has vigorously fought menu-labelling legislation. Some restaurants, already concerned about the slowing economy, worry they could lose customers if they draw attention to the number of calories in their food.

The Economist cites one study showing that customers ordered foods containing an average of 52 fewer calories when the information was prominently displayed in fast-food chains in New York. Another study found that diners ordered lower-calorie meals when the menu was labelled—but only on Mondays and Tuesdays!

Yet the new rules could also enable restaurants to attract customers, and reduce costs, by tweaking their menus. Many companies have already started to introduce new low-calorie items and serve smaller helpings. Starbucks, for example, has changed its “default” milk from whole milk to reduced-fat milk, cutting the calories in its drinks by 14%. (Reduced-fat milk also happens to be cheaper.) Dunkin’ Donuts has a new lower-calorie line called “DD Smart” that is designed to appeal to the health-conscious with such things as egg-white flatbreads and fruit smoothies. And McDonald’s has reduced the size of a helping of French fries, cutting the number of calories—and costs.

Other firms are trying to gain a strategic advantage from the changes. By overhauling menus, cutting portions and thinking carefully about what to offer, firms might be able to turn the rules to their competitive advantage. This is already happening in some US cities without calorie labelling laws. Some restaurants are volunteering calorie information. Will we see the same thing happen in the UK before long?