Public Policy Issues in the Marketing of Seals of Approval for Food

Philanthropic organizations face an array of competitive threats that affect their ability to serve their chosen missions and to survive: a proliferation of new competitors, an almost 300 percent increase since the 1960s (Harvey and McCrohan 1988); changes in donor strategies, such as cause-related marketing (Varadarajan and Menon 1988); and a softening of donor support, particularly among the young (Harvey and McCrohan 1990). These forces have led charities to seek alternative sources of funds. One effort, as exemplified by the American Heart Association (AHA), has been the sale of the organization's reputation--its seal of approval.(1) Use of a seal of approval as a fundraising mechanism is an interesting development in the widespread practice of the granting of seals by nonprofit organizations, as is the subsequent competitive use by the for-profit recipient. Seals of approval received significant attention from policymakers with introduction of the American Heart Association's HeartGuide Seal which would have certified foods as "healthful." This was particularly true of the Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA). Although the seal has been discontinued, questions surrounding the issue of seals of approval remain unresolved. Given the need for philanthropic organizations to seek new sources of funds, the continued interest in health on the part of consumers, and consumers' emerging attention to environmental concerns (e.g., the Green Cross Seal of Approval program), seals of approval could be a significant part of the competitive landscape of the 1990s. Additionally, the lingering tensions among government agencies, in particular the FDA and the Office of Management and Budget (OMB), may offer profit opportunities for reputable, as well as questionable, issuers of seals. Given these factors, the use of seals of approval as fundraising devices raises significant public policy issues. This paper discusses five public policy issues surrounding use of seals of approval as fundraising and competitive devices: (1) increased consumer interest in good health and the commercial and regulatory response; (2) impact of seals of approval and search costs; (3) seals of approval as a competitive tool; (4) pricing of seals of approval; and (5) effect of seal programs on consumers. Finally, some concluding comments are presented on the public policy response to the use of seals of approval for food. COMMERCIAL AND REGULATORY RESPONSE TO THE HEALTH-ORIENTED CONSUMER Over the past 25 years, American consumers, in particular the middle and upper classes, have become much more conscious about the relationship between fitness and diet and health. There is widespread acceptance of the idea that regular exercise and proper nutrition are essential to good health. Interest in diet and health is hardly new. Early in the 1800s there had been concern that the strong and virtuous American had grown fat because of increased affluence (Green 1986; Schwartz 1986). Approximately 100 years later the fitness movement focused on preparation for America's new role as a world leader (Brown and Clignet 1988). However, today's fitness movement differs in that it is not related to the past, progress, or affluence. Rather, fitness is seen as an antidote to the ills of modern living (Glassner 1989). As such, marketing health, or certifying healthfulness, holds potential for good, profit, or abuse. In addition, media attention directed to the links between diet and health in general, and the almost constant publicity regarding problems created by excessive cholesterol and the need for more fiber in the diet in particular, have made consumers more conscious about the foods they eat. Commercial Response An excellent barometer of prevailing moods and current trends in diet is the advertising messages offered by cereal manufacturers. After research indicated that oat bran might reduce cholesterol levels, cereal makers stocked shelves with new products made with oats. …