Front-of-pack nutrition labels prompt surprise swing in sales

The roll out of front-of-pack labelling schemes at leading supermarkets could have "dire consequences" for certain product categories, according to a report by the investment bank Citigroup.

Analysts at Citigroup said they had obtained "startling data" from Tesco illustrating changes in purchasing patterns following the introduction of front-of-pack labels highlighting fat, calories, sugar and salt per portion.

Sales of ready meals and sandwiches with higher than average levels of fat and salt had plummeted by up to 41%, while sales of comparable products with a better nutritional profile had soared by more than 100% in many cases, said the report.

"The magnitude of the sales impacts is such that we are left with the inescapable conclusion that the increased prevalence of front-of-pack signposts may lead to marked changes in consumer buying habits," it concluded.

Tesco said: "We labelled more than 2,000 chilled products and immediately saw definite changes in purchasing behaviour."

Sainsbury, which introduced its Wheel of Health front-of-pack labels more than a year ago, said shoppers were still buying from their favourite categories but selecting between products on the basis of the new information - frozen ready meals with no red segments [high concentration] on the Wheel of Health, for example, were growing at 7% while those with red segments were down by 35% year-on-year.

While manufacturers had reduced fat, sugar and salt in many products, the scope for significantly improving the nutritional profile of savoury pastry was limited and costly, said the Citigroup report, which is bad news for struggling Northern Foods, for which pastry products represent 22% of all sales.

"A Pork Farms medium pie contains 83g of fat - that's 119% of the guideline daily amount for women and 83% for men. In short, we believe pastry products face a very challenging future," it said.

The report singled out Northern as being "cornered by a mix of retailer, competitor and inflationary pressures" and said it risked losing business with Marks & Spencer (M&S), which accounts for 30% of its sales.

Northern had already lost some M&S business to RHM.

One analyst said: "One hears there has been a fall-off in the relationship with M&S at the senior level. It does seem bizarre that they have not been able to make more profit out of the relationship, given the mutual dependency there has been."

Northern declined to comment before its annual results on May 31.