The ad for Heinz Tomato Ketchup is advertising at its best: a bottle of ketchup in the shape of a tomato. Simple, clean, pretty; message clear as day. Never mind that it’s manipulative and downright misleading.
What message is burned into our brains by that pretty ad? That ketchup, Heinz and tomatoes are roughly the same thing. You take a tomato, ram it into a bottle, glue on a label with that Heinz logo and serve it to the kids. Eat, kids. Eat and be healthy.
Well? The truth is that the distance between Heinz Ketchup and well-being is like the distance between Marlboro cigarettes and riding a horse. Tomato puree comprises less than a quarter of Heinz’s ketchup. The rest is mainly sugar, lots of it; salt, vinegar, onion powder and spices.
How did we come to learn that there is so little tomato concentrate in Heinz Ketchup? Who brought this fact to the public’s attention? Osem, Heinz’s rival in ketchup manufacturing and marketing in Israel, that’s who.
The Israeli food maker applied heavy pressure on the Health Ministry, proved that Heinz Ketchup contained just 21% tomato concentrate, and last summer Heinz was forced to stop selling its tomato-sugar paste in Israel under the name “ketchup” — though it was allowed to call the product “tomato dip” if it so chose.
Osem’s tackle of Heinz happened shortly after Diplomat — the company that markets Heinz products in Israel — launched a 700-gram bottle. Beforehand it had only sold 900-gram bottles. Naturally, the 700-gram bottle cost less; also, size-wise, the Heinz ketchup product now looked more like Osem ketchup. Moreover, the smaller Heinz Ketchup bottle cost about the same as an Osem bottle at the discount outlets.
Last month, though, Osem’s victory was overturned. Finance Minister Moshe Kahlon and Health Minister Yaakov Litzman were humiliated in their efforts to tame the raging housing market and reform geriatric nursing care, respectively, but they won a resounding victory on the battle of the ketchup.
Last month, the two ministers jointly signed a Consumer Protection Law (Marketing and Packaging of Food Products, Amendment 1, 2016) — allowing Heinz to resume selling its sugar-salt-spices-onion powder-with-a-little-tomato-concentrate under the name “ketchup.”
A matter for ministers
How is it that a finance minister (wearing the hat of economy minister) and a health minister (wearing the hat of consumer protection) even find themselves dealing with the definition of ketchup in Israel?
Simple. The Israeli public and politicians have become dramatically more aware of consumer issues and concentration in the last five years — economic concentration, that is, not the concentration of tomato puree. They have come to realize how economic concentration affects their wallets, pensions and the dynamics of politics, too.
The Israeli ketchup market and the battles that raged within it in recent years are typical. For years, Osem had been the market leader in ketchup, maxing at a roughly 67% market share. But Heinz began to gnaw at that share. Osem decided the way to fight the competition wasn’t to cut its price, or improve its ketchup, but to use regulation to block the beast. So it told the public what’s in Heinz Ketchup and persuaded the Health Ministry to change the standard in a way that would bar Heinz from selling it (as ketchup, at least).
Is Osem genuinely concerned about the health of the Israeli eater? Sure, when it’s convenient. Together with its colleagues in the Israeli Big Food cartel, Osem campaigned aggressively against the Health Ministry drive to force them to lower sugar and salt content in their junk foods and soft drinks — though science has long shown that high salt and sugar are bad for you. It’s not a million miles from the cigarette wars of the 1980s and ’90s, following decades of Big Tobacco trashing the science and quashing regulation.
The Osem-Heinz clash over ketchup, the surprise intervention by the finance and health ministers, and the sparring between the food companies and the Health Ministry over sugar and salt, are a wonderful way to understand the dynamics in the markets between the companies, regulators, politicians and the people.
Let’s start with Osem. When it demanded, and received, that the ministry set a special standard for ketchup that would hamstring Heinz, turning it from a marketer of ketchup into a marketer of “spicy condiment,” the argument was economic: consumers needed protection because of information asymmetry. The public can’t read the tiny little letters and realize what ketchup is really made of, so only if we call it “tomato condiment” can they make an informed decision whether to buy the thing.
Many a study around the world has shown that proper disclosure, and labels listing ingredients, do not change eating habits among most people. They continue to eat unhealthy food (certainly as long as healthier alternatives are either more expensive or inaccessible).
Okay. But is “tomato condiment” any more accurate? Maybe it’s less so — but it’s certainly a boon for Osem in its catsup conflict. Osem also took care for the new standard to be enforced by sending all the supermarket chains a letter, in which it warned that Heinz isn’t ketchup and should be removed from the shelves.
That same Osem, which demanded last year that consumers be protected from tomato condiment, is part of the food manufacturing association that persuaded the Health Ministry to let them spread decreases of salt in their foods over 10 years. So when Osem finds it convenient, it wants regulation; when inconvenient, it will seek ways to defang it.
Healthy or healthier food
What is the manufacturers’ claim? That food, with the sugar and salt, does not harm. What causes harm is consuming large quantities of it. Itzik Tamir of Coca-Cola Israel and head of the association even insists that “there is no such thing as unhealthy food. There is healthy food and there is healthier food.”
Ah. Anyway, why not let the market decide? Why interfere?
Simple. Osem insisted that the competition be forced to label its product “tomato condiment” instead of “ketchup” because it knows that consumers are unlikely to read the ingredients list. Because Osem knows what Daniel Kahneman, Amos Tversky and other behavioral economists have also discovered — that the consumer is not rational.
In many cases of information gap between manufacturers and users, or of addictive products, and where there are no cheap healthy alternatives, regulatory intervention can change consumer behavior for the better.
Food companies also know what Big Tobacco knew: that sugar and salt are addictive, and the more they put into their products, the more products people will snarf.
But back to ketchup! Heinz didn’t change the composition of its condiment, but the finance and health ministers retreated and decided to let it label that stuff “ketchup” anyway. Why? Because of the concentration. Not the concentration of tomato mush, but the antitrust law.
This meddling in the concentration of tomatoes and ketchup market shares has a common denominator: in both cases, meddling was warranted because of market failure. In the first case, the market failure was information asymmetry (or misleading consumers). In the second, the market failure was due to the sheer clout that a single player with a 67% market share can wield. With a market share that huge, the chance of competition over quality and price is remote.
Lest we forget ye, salmonella
Actually, it isn’t rare for consumer protection to clash with market protectionism. This is a lovely point to bring salmonella into the discussion. Recent weeks have brought a flood of reports about microbial contamination of food. Some think it’s a turning point for consumer law in Israel, and that the regulator will vanquish the nasty food companies that are negligently poisoning us.
There is no question that exposing the lies and feints by Unilever — one of the four biggest food manufacturers in Israel — is a good thing. It could change norms and the balance of power between the regulator, consumer and gigantic companies. But we’d be wise to season our sweet victory with a grain of salt.
Why? Because in contrast to intuition, big business adores regulation. Bring it on! More and more regulation, heavy, expensive, complicated — because as we saw in the case of Osem and Heinz, regulation is mainly a tool in the hands of the monopoly to stymie competition.
The committee of experts at the Standards Institute of Israel that recommended stopping Heinz from calling its thing “ketchup” included Sigal Dolev, the chief technologist at Osem’s culinary division.
Does it sound wrong to you that representatives of local manufacturers and monopolies sit on the standards panel? It probably does, but it’s just one of many examples. The SII is a key tool for big companies and importers to thwart competition and keep prices high.
The social-justice protest that began in 2011 over the cost of living in Israel led to fresh demands to break the monopolies. Until then, the monopolies preserved their status by simply buying the watchdogs, openly or otherwise. Now they have to be wilier — and things like the salmonella scare can become a very clever tool.
Some weeks after the headlines about vomiting die down, the manufacturers will start campaigns to block competition by small companies using slogans like “For the sake of your health.” The stricter the regulation, the more standards and tests there are, the happier the big food manufacturers will be.
Regulators should promote regulation that protects the consumer but does not stifle the market while it’s at it. They should promote regulation that leverages the power of the market, but intervenes when the market fails. And the politicians should protect the regulators when they fall foul of some manipulative campaign by the companies. And the media should expose the regulators and politicians when they confuse the public, fail to distinguish between good regulation and bad, and do deals behind the public’s back.
As for the ketchup, just like other junk food and soft drinks chock-full of salt and sugar, just use it frugally, whatever it’s called and whoever’s selling it — a local monopoly or a U.S. one.
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