Demand effects of unilateral versus industry-wide sugar reduction scenarios

Voluntary food reformulation agreements may often be ineffective due to a lack of industry compliance. This paper examines demand responses and resulting (dis)incentives for companies to reduce the sugar content of children's cereals in Germany. We estimate the effects of sugar content on consumer choices using a random-coefficient logit model. Subsequently, we simulate how simultaneous and unilateral sugar reductions affect sales, sugar quantities purchased, and consumer welfare. The results identify simultaneous sugar reduction as being most effective in reducing sugar uptake and less harmful to firms' sales compared to unilateral reformulation. Product reformulation is not strongly compromised by substitution behaviour.