food labeling, regulation, media coverage, trans fat, consumer demand, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety,

Lee, Jonq-Ying

Lin, Chung-Tung Jordan

English

Research Papers in Economics

 
 
 
Influences of Labeling Policy and Media Coverage 
On the Demand for Butter and Margarine 
 
 
 
Chung-Tung Jordan Lin* and Jonq-Ying Lee** 
*Center for Food Safety and Applied Nutrition, U.S. Food and Drug Administration, 
Chung-Tung.Lin@fda.hhs.gov. 
**Department of Food and Resource Economics, University of Florida, 
JonqYing@ufl.edu. 
 
 
 
Selected Paper prepared for presentation at the Agricultural & Applied Economics 
Association 2010 AAEA, CAES, & WAEA Joint Annual Meeting, Denver, July 25-July 27, 
2010. 
 
 
 
 
 
 
 
 
 
 
Copyright 2010 by Chung-Tung Jordan Lin and Jonq-Ying Lee.  All rights reserved.  
Readers may make verbatim copies of this document for non-commercial purposes by any 
means, provided that this copyright notice appears on all such copies. 
 Influences of Labeling Policy and Media Coverage 
On the Demand for Butter and Margarine 
 
 
Abstract 
The major objectives of this study are two-fold: to determine if the mandated 
trans fat information on Nutrition Fact label after 2005 had any impact on the demands 
for butter, margarine, and spread; and if a relationship exists between media coverage of 
trans fat and the demand for butter, margarine, and spread.  The Rotterdam demand 
system was used to analyze the demand relationships among three fat products – butter, 
stick/solid margarine, and soft margarine.  Study results show that the mandatory labeling 
trans fats content in the Nutrition Fact label had no significant impact on the demand for 
stick/solid margarine and soft margarine and the trans fat media coverage over the study 
period had a positive impact on the demand for butter and negative impacts on the 
demand for both stick/solid and soft margarines. 
 
The process to partially and fully hydrogenate to harden liquid fats was developed 
about a hundred years ago.  Animal fats that people used for cooking tended to spoil and 
the hydrogenation of liquid fats allowed the development of shelf-stable vegetable-based 
fats with neutral flavor.  Hydrogenated fats was made popular during the war time when 
animal fats were rationed and when scientists found that saturated fatty acid intake 
elevate low-density lipoprotein (LDL) cholesterol levels which increased the risk for 
coronary heart disease.  However, products made with partially hydrogenated oils are 
lower in saturated fats but they contain trans-isomer fatty acid (trans fat).  During the 
1990s, research results indicated that increased intake of trans fat raises LDL cholesterol 
levels and possibly reduces high-density cholesterol (HDL) cholesterol levels; therefore, 
increases the total cholesterol to HDL-cholesterol ratio.  To address this public health 
concern, the U.S. Food and Drug Administration (FDA) proposed mandatory labeling of 
trans fat contents in 1999 and issued a final rule on nutrition labeling of trans fatty acids 
(trans fat) on July 11, 2003.  This final rule requires manufacturers to list trans fat 
content on the Nutrition Facts label of foods and some dietary supplements on a separate 
line immediately under the declaration for saturated fat.  The new labeling rule became 
effective on January 1, 2006.  
Between September 2003 and June 2008, media coverage (TV/radio, newspapers, 
and magazines) pertaining to trans fat has increased from about three times per week in 
2003 and 2004 to ten times per week in 2005, 19 times per week in 2006, and over 20 
times per week in 2007 and 2008 (Lexis-Nexis Academic).  In earlier years, media 
reported the potential health problems with the consumption of trans fat, followed by 
reports on food labeling requirement; fast food chains, cruise liners, Walt Disney 
Company, Girl Scout of America eliminating or reducing trans fats from their menus or 
products; municipalities, counties, and states campaign or passed bans on trans fats; and 
  1the “trans fat free” claim started to appear on food labels (Unnevehr and Jagmanaite 
2008).  
Moorman and Matulich (1993) indicated that consumers were more influenced by 
information from media sources rather than information from casual sources, such as 
friends and family members.  According to an American Dietetic Association’s (ADA, 
2002) consumer research study, media is a major contributor to nutrition and health 
knowledge.  In this study, the ADA found that 72 percent of consumers named television 
as a chief source of nutrition information.  Popular magazines and newspapers were also 
ranked as chief sources of nutrition information by 58 percent and 33 percent of 
respondents, respectively. 
The objectives of this study are two-fold: to determine if the mandated trans fat 
information on Nutrition Fact label after 2005 had any impact on the demands for butter, 
margarine, and spread, and if a relationship exists between media coverage of trans fat 
and the demand for butter, margarine, and spread. 
Method and Data 
Following Barten (1964), the Rotterdam model which can be written as 
(1) widlnqi = μiDQ + Σj πijdlnpj + ΣjΣk βikdak + γidi,  
    i = 1, 2, . . ., n. 
where pi and qi being the price and quantity of good i, respectively; a is a vector of 
factors other than quantity, such as the news pertaining to trans fat; dlnxi =  log(xit – xit - 
52), xi = pi, qi; daj = dajt – dajt - 52 (the time subscribe was omitted for brevity); wi = piqi/m 
is the budget share for good i; μi = pi(∂qi/∂m) is the marginal propensity to consume; DQ 
= Σi widlnqi is the Divisia volume index; πij = (pipj/m)sij is the Slutsky coefficient, with sij 
= (∂qi/∂pj + qj∂qi/∂m) or the element in the ith row and jth column of the substitution 
matrix; βik = wi(∂lnqi/∂ak) is a media coverage coefficient indicating the impact of the kth 
type of medium coverage relating to trans fat during period t; di is a dummy variable that 
has a value of 1 for time periods after 2005; otherwise it has a value of 0; di is a time 
trend variable for the weeks after labeling rule became effective and γi is the coefficient 
of di which measures the impact of the mandatory trans fat labeling on the demand for 
product i.  The general restrictions on demand are 
(2) adding  up:  Σi μi = 1 and Σi πij = 0; Σi βik = 0; ∑i γi = 0; 
homogeneity: Σj πij = 0; and  
symmetry: πij = πji. 
Trans fat media coverage variables are the number of reports pertaining to trans 
fats by TV/radio and newspapers/magazines (printed media), respectively.  There are two 
types of media coverage: the ones pertain to general trans fats discussion and the ones 
with butter/margarines mentioned.  These media coverage variables were treated as 
psychological stocks and specified as  
(3) am,k,t = ∑j=1 to t-1 (1 – λm)
j fm,k,j + fm,k,t;  
  2where superscript k denotes the content of media coverage (general trans fat or 
butter/margarine specific), m denotes the type of media (TV/radio or printed media), fm,k,j 
is the number of reports during week j for either TV/radio or printed media (k) and λk is 
an erosion or depreciation parameter for medium k which has a value between zero and 
one.  Because the frequencies of TV/radio and printed media are highly correlated, the 
number of TV/radio and printed media coverage were combined into those for general 
trans fat and those for butter/margarine specific, 
(4) ak,t = ∑m (∑j=1 to t-1 (1 – λm)
j fm,k,j + fm,k,t); 
a grid search method was used to estimate λm, i.e., using the values between 0 and 1 with 
steps of 0.05 for TV/radio and printed media; the values of λm that provided the best fit 
were chosen (Maddala 1992).  The demand elasticity of media coverage is 
(5)  ∂lnqi/∂lnak = βik ak/wi. 
Three types of fats were used in the study: butter (Butter), stick/solid margarine 
(Hard M), and soft margarine (Soft M; includes soft, soft stick, pattie, and liquid).  The 
raw data, weekly national sales data, were reported at the universal product code (UPC) 
level and include unit and dollar sales; the UPC level data were aggregated into the three 
types of fats described above.  In this study, quantity demanded was measured in pounds, 
prices were obtained by dividing dollar sales by pound sales. 
Table 1 shows the sample statistics.  As shown in Table 1, butter accounted for 
53% of the dollar sales and 31% of the quantity sales, followed by stick/solid margarine 
(37% dollar sales and 49% of quantity sales) and soft margarine (11% dollar sales and 
20% of quantity sales).  The average price for butter, stick/solid margarine, and soft 
margarine are $2.94, $1.30, and $0.91 per pound, respectively. 
Note that seasonality could be eliminated using 52
nd differences in the Rotterdam 
model.  Pound sales and the dollar shares were used as the dependent variables qi and wi, 
respectively; the average prices were used as explanatory variables pj.  Average budget 
share values underlying the differencing were used in constructing the model variables – 
wit was replaced by (wit + wit-52)/2.  Iterative seemingly unrelated regression method was 
used to estimate parameters μ and π.  Results are presented in Table 2. 
Results 
Table 2 shows the iterative seemingly unrelated regression estimates of equation 
(1) with homogeneity and symmetry (2) imposed.  The data for model (1) add up by 
construction and the equation for spread was deleted (Barten 1969).  The estimates are 
invariant to the equation deleted, and the parameters of the deleted equation can be 
recovered by using the adding up demand restrictions in equation (2) or by simply re-
running the model deleting a different equation. 
Results show that the trans fat labeling beginning 2006 (coefficient γi) had an 
insignificant impact on the demand for these products.  The lack of impact may be 
explained by the actions of food industry before 2006; i.e., some of food manufacturers 
had already added trans-fat information on the Nutrition Facts label, reformulated 
margarine products, or both prior to the effective date of the rule.  The lack of 
relationship between the policy and demand may also suggest any market impact 
  3produced by the policy was overwhelmed by an ongoing and stronger trend in the 
demand of these products.  Unfortunately, we had data only for the 2003-08 period, 
which could be too short to capture any long-term changes in demand between these 
products.   
TV/radio has a λ=0.75 and newspaper/magazines has a λ=0.85; indicating media 
coverage impacts decayed relatively quickly.  General media coverage had a negative 
impact on the demand for butter but its impact on margarine (hard and soft) was 
insignificant.  Specific trans-fat-butter-margarine coverage had a positive impact on the 
demand for butter but a negative impact on hard and soft margarine.   
The marginal propensities to consume (MPC, μi) for all three products are 
positive and statistically different from zero.  All own-price Slutsky coefficients are 
negative and statistically different from zero.  All cross-price Slutsky coefficients are 
positive, indicating that butter, stick/solid margarine, and soft margarine are (net) 
substitutes (Green 1978, based on substitution effect only or compensated for real income 
changes). 
The coefficient estimates for general trans-fat coverage indicate that trans fat 
coverage had a negative impact on the demand for butter and positive impacts on the 
demand for stick/solid and soft margarines; however the latter are not statistically 
different from zero.  The butter/margarine specific media coverage had a positive impact 
on the demand for butter and a negative impact on the demand for stick/solid margarines 
and soft margarines.  In addition, the coefficient estimates for butter/margarine specific 
coverage are larger for stick/solid margarines than the one for soft margarines; an 
indication of that butter/margarine specific media coverage had a larger negative impact 
on the demand for stick/solid margarines than for soft margarines.  The coefficient 
estimates for the time trend variable for trans fats’ mandatory labeling are all statistically 
not different from zero, an indication of the new labeling requirement had no impact on 
the demand for the three fat products during the study period. 
 
Demand elasticity estimates based on the demand parameter estimates (μi and πij) 
and calculated at the sample means are shown in the bottom half of Table 2.  The 
estimated income elasticities (εim = μi/wi) show the impacts of a one percent increase in 
the total expenditure of fats on the sales of the individual fats.  Results show that if the 
total expenditure on fats is increased by one percent, the sales of butter, stick/solid 
margarine, and soft margarine would increase by 1.39%, 0.43%, and 1.04%, respectively. 
  
The uncompensated own-price elasticity estimates (εii = πii/wi – wiεim) show the 
demands for butter (εii = -1.30) and stick/solid margarine (εii = -1.67) is price elastic; and 
the demand for soft margarine (εii = -0.75) is price inelastic.  The uncompensated cross-
price elasticity estimates (εij = πij/wi – wjεim) are small relative to their own-price 
elasticities.  A positive cross-price elasticity estimate shows that the products are (gross) 
substitutes and a negative cross-price elasticity estimate shows that the products are 
(gross) complements.  The cross-price elasticity estimates presented in Table 2 show that 
butter is a substitute for stick/solid margarine and soft margarine; however, stick/solid 
margarine is a complement to butter. 
  
  4Elasticity estimates for media coverage variables are estimated using equation (9).  
In general, these elasticity estimates are small.  Results show a one percent increase in 
general trans fat media coverage would decrease the demand for butter by .0016% and a 
one percent increase in butte/margarine specific media coverage would increase the 
demand for butter by 0.0049% and decrease the demand for stick/solid margarine and 
soft margarine by 0.0062% and 0.0030%, respectively. 
Concluding Remarks 
 
  The Rotterdam demand system was used to analyze the demand relationships 
among three fat products – butter, stick/solid margarine, and soft margarine.  The 
emphasis of this study was placed on if and how the market of butter, stick/solid 
margarine, and soft margarine, might have changed before and after the effective date of 
the final rule of labeling trans fats.  Study results show that the general trans fat media 
coverage over the study period had a negative impact on the demand for butter and 
butter/margarine specific media coverage had a positive impact on the demand for butter 
and negative impacts on the demand for stick/solid and soft margarines.  Additionally, 
study results also show that labeling trans fats in the Nutrition Fact label had no 
significant impact on the demand for butter, stick/solid margarine, and soft margarine. 
 
The FDA issued the final rule on trans fat on July 11, 2003 and the final rule 
became effective on January 1, 2006.  Between July 2003 and January 2006, there were 
publicity and news reports pertained to the trans fat issues.  In addition, many 
manufacturers already listed trans fat content on their Nutrition Facts label before 
January 2006.  Therefore, consumers had almost three years to hear, to find trans fat 
information on food labels, and to act upon it.  As a result of consumers’ familiarity with 
trans fats issues, this study found that there was no significant impact of the new labeling 
requirement on the demand for the three fats products. 
 
The sales data do not have information on trans fat contents in the products 
studied.  If and when the trans fat content information becomes available, the products 
can be redefined according to the trans fat content level in the product and the results 
from redefined fats products may provide better insight about consumers’ reactions to 
trans fat labeling requirements. 
  5References 
American Dietetic Association. 2002.  Nutrition and You: Trends 2002. Chicago, Illinois: 
American Dietetic Association. 
Barten, A. P. (1964).  “Family Composition, Prices and Expenditure Patterns,” in P. E. 
Hart, G. Mills, and J. K. Whitaker (eds.), Econometric Analysis for National 
Economic Planning, London: Butterworth. 
Brown, M. G. and J. Lee (1993).  “Alternative Specifications of Advertising in the 
Rotterdam Model,” European Review of Agricultural Economics, 20: 419-36. 
Duffy, M. H. (1987).  “Advertising and the Inter-Product Distribution of Demand,” 
European Economic Review, 31: 1051-70. 
Duffy, M. H. (1989).  “Measuring the Contribution of Advertising to Growth in Demand: 
An Econometric Accounting Framework,” Internal Journal of Advertising, 8: 95-
110. 
Green, H. A. J. (1978).  Consumer Theory, New York: Academic Press. 
International Food Information Council Foundation. 2008. 2008 Food & Health Survey: 
Consumer Attitudes toward Food and Health A Trended Survey.  IFIC Foundation. 
Maddala, G. S. (1992).  Introduction to Econometrics, 2
nd edition, New York: 
Macmillian. 
Theil, H. (1980).  System-wide Explorations in International Economics, Input-Output 
Analysis, and Marketing Research, New York: North-Holland. 
  6  7
 
Table 1.  Sample statistics - Weeks ending 09/20/2003 thru 06/14/2008 
  Butter  Stick/Solid Margarine  Soft Margarine 
  
Price ($/lb)     
   Mean  2.94  1.30  0.91 
   Std  0.31  0.11  0.06 
      
Quantity (lbs)     
   Mean  8,648,508  13,049,100  5,569,862 
   Std  3,269,563  1,409,061  1,903,293 
      
$ share (%)     
   Mean  52.56%  36.86%  10.58% 
   Std  3.94%  4.27%  1.31% 
      
Quantity Share (%)     
   Mean  31.11%  48.84%  20.05% 
   Std  4.59%  5.34%  2.49% 
      
Media (times/week)  TV/Radio*  Printed Materials   
General    
   Mean  5.48  7.89   
   Std  14.54  12.42   
Butter/Margarine    
   Mean  1.68  0.48   
   Std  4.00  0.89   
 
  
Table 2.  Demand parameter estimates 
πij  Media Coverage   
Butter  Hard M.  Soft M. 
μi  General  Butter/Marg 
Labeling 
Dummy 
             
Butter  -0.2988*  0.1760*  0.1228*  0.7311*  -0.0051**  0.0926*  -0.0025 
  (0.0214)  (0.0201)  (0.0070)  (0.0076)  (0.0036)  (0.0214)  (0.0025) 
Hard M.    -0.2188*  0.0428*  0.1591*  0.0045  -0.0812*  -0.0024 
   (0.0214)  (0.0088)  (0.0074)  (0.0035)  (0.0211)  (0.0020) 
Soft M.     -0.1656*  0.1099*  0.0006  -0.0113*  0.0049 
     (0.0090)  (0.0021)  (0.0009)  (0.0054)  (0.0044) 
Demand Elasticity   
Price (Uncompensated)  Income  Media Coverage 
 
Butter  -1.2995*  -0.1779*  0.0864*  1.3910*  -0.0016**  0.0049*   
  (0.0369)  (0.0415)  (0.0138)  (0.0145)  (0.0011)  (0.0011)   
Hard M.  0.2507*  -0.7527*  0.0704*  0.4316*  0.0020  -0.0062*   
  (0.0496)  (0.0623)  (0.0240)  (0.0201)  (0.0016)  (0.0016)   
Soft M.  0.6145*  0.0218  -1.6744*  1.0382*  0.0010  -0.0030*   
  (0.0603)  (0.0864)  (0.0853)  (0.0196)  (0.0014)  (0.0014)   
  R Matrix
a         
  Butter  Hard M.         
Butter  0.9047*  0.1508**         
  (0.0850)  (0.1127)         
Hard M.  0.0179  0.7202*         
  (0.0823)  (0.1091)         
The numbers in parentheses are standard errors of the estimates. 
aResults are corrected for first-order autocorrelation using the full R matrix (Berndt and Savin 1975). 
*Statistically different at α = 0.05 level. 
**Statistically different at α = 0.10 level. 
 
  8

Influences of Labeling Policy and Media Coverage On the Demand for Butter and Margarine

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