The Sneaky Economics of Healthwashing: Why "Healthy" Labels Cost More and Deliver Less

 

The Sneaky Economics of Healthwashing: Why "Healthy" Labels Cost More and Deliver Less

**From avocado-oil chips with no avocado oil to "protein" cereals packed with sugar, food companies are cashing in on the health halo effect. Here's how to spot the tricks—and what regulators are trying to do about it.**

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## The $10 Bag of Chips That Wasn't What It Seemed

Picture this: You're at Whole Foods, looking for a healthier snack. You grab a bag of avocado-oil potato chips. The label promises pure, uncut avocado oil—the good stuff, the heart-healthy fat that's supposed to be better for you. You pay a premium. You feel good about your choice.

Now imagine finding out that 89% of the products tested in a recent UC Davis study that claimed to contain only avocado oil were actually adulterated with cheaper oils. One product appeared to have no avocado oil at all.

Welcome to the world of healthwashing—a sneaky marketing practice that costs consumers billions while delivering little actual nutrition.

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## What Is Healthwashing, Exactly?

Healthwashing (sometimes called "nutriwashing") is when a marketing term makes a food or beverage seem more nutritious or healthy than it actually is . Companies highlight certain ingredients or qualities while downplaying—or completely omitting—the less desirable aspects .

Think "all-natural," "fat-free," "immunity-boosting," "high-protein," "organic," and "non-GMO." These buzzwords create what behavioral economists call the "health halo effect"—a cognitive bias where one healthy-sounding claim or visual cue casts a halo over everything else, making us assume a product is healthier overall than it really is .

The result? We pay premium prices for products that aren't actually all that different from their cheaper counterparts.

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## The Economics Behind the Deception

### Asymmetric Information: When You Don't Know What You're Buying

Economists have a term for this: asymmetric information. It's when one side of a transaction has less information than the other . Think getting ripped off by a mechanic, being convinced to get an unnecessary test by a doctor, or paying $10 for a bag of chips that's actually made with cheaper, less healthy oils.

In the absence of complete information, consumers rely on clues: attractive packaging, buzzwords, pictures of healthy people frolicking under avocado trees. These mental shortcuts are exactly what companies exploit.

### The Pricing Strategy: Charging What You're Willing to Pay

Healthwashing isn't just about persuasion—it's part of a pricing strategy. Some shoppers (typically those with more disposable income) are willing to pay more for foods that seem healthier, even if they aren't. Labels like "organic," "non-GMO," and "100% avocado oil" help companies appeal to those customers and convince them to pay a premium .

### Adverse Selection: When Low-Quality Products Drive Out the Good Ones

Here's the truly sneaky part: when buyers can't reliably tell high-quality products from low-quality ones, the low-quality products can actually drive the good ones out of the market . This is known as "adverse selection"—one of the central insights of Nobel Prize-winning economist George Akerlof's famous paper "The Market for Lemons."

Think of the avocado-oil market: if shoppers can't reliably tell faux avocado-oil products from the real deal, honest producers are forced to compete against cheaper knockoffs that look just as good on the shelf.

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## How Breakfast Cereal Pioneered Healthwashing

To understand healthwashing, it helps to look at its roots. According to food policy legend Marion Nestle—an emerita professor of nutrition, food studies, and public health at NYU—breakfast cereal companies pioneered these tactics .

One of the first big cereal companies, Kellogg's, got its start promoting breakfast cereal as a health food. Over the next century, cereal companies became masters at selling products as healthy—even as many cereals became increasingly sugary. They pushed, and pushed, and pushed, eventually forcing the FDA to allow them to make health claims on cereal boxes .

One of Nestle's favorite recent examples of healthwashing? Cookies & Crème Cheerios Protein. Because what could be healthier than protein-packed cookies and cream for breakfast?

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## Healthwashing Is Everywhere

### In Alcohol Marketing

Alcohol companies have jumped on the healthwashing bandwagon, using terms like "low sugar," "low carb," and "natural" to make their products seem healthier. Cancer Council WA calls this a tactic to "win back" Gen Z Australians who are drinking less . Research shows these claims are powerful—they create a "health halo" that makes people perceive these products as less harmful than they actually are .

### In Tobacco and Vaping

The tobacco industry has repositioned itself as a stakeholder in "harm reduction," promoting e-cigarettes and nicotine alternatives as safer products despite inconclusive evidence . Corporate social responsibility projects—like boreholes, scholarships, and agricultural schemes—help burnish their legitimacy while masking interference in public health policy .

### In Fossil Fuels

Healthwashing extends beyond food. At COP28, health emerged as a focal point, with almost 50 health ministers participating in the first-ever Health Day. But who was behind it? The same entities profiting from fossil fuels. Healthwashing in this context means anything that increases "the acceptability of initiatives or organizations that minimally advance climate action, whilst ultimately undermining rather than protecting health" .

### In the Supplement and Wellness Industry

The supplement industry is largely unregulated—products don't have to obtain FDA approval before going to consumers . This creates a market where influencers can sell "white-label" supplements under their own brand names, with no oversight and no accountability .

Christian wellness influencers, for example, use Bible verses and faith language to build trust, then sell supplements that are often unregulated and rarely tested . Some companies are even using AI-generated personas—Amish women, "Christian" influencers—to sell products, cutting out the middleman entirely .

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## What Regulators Are Doing

### The FDA's Proposed Front-of-Pack Labels

Under a proposed FDA rule, most packaged foods would have to carry a small box on the front labeling their levels of saturated fat, sodium, and added sugar as "Low," "Med," or "High" . The idea is to translate the numbers buried in the Nutrition Facts panel into something shoppers can understand at a quick glance.

But Nestle points to several Latin American countries that have gone further, requiring prominent warning symbols on products high in sugar, sodium, or saturated fat. Research shows these labels significantly reduce sales of unhealthy products—and the food industry hates them .

### India's Front-of-Pack Labelling Push

In India, the Food Safety and Standards Authority of India (FSSAI) has been pushing for Front-of-the-Pack Nutrition Labelling (FOPL) for years . An expert committee first proposed it in 2014. After a Supreme Court intervention, FSSAI is now working on a final recommendation .

FOPL requires manufacturers to list nutritional information on the front of packaging instead of the back, where shoppers often ignore it . Some countries use a traffic light system (green, yellow, red), others use star ratings or warning labels.

Some Indian startups have voluntarily adopted FOPL to market themselves as honest brands. One company, ReNewtra, uses a traffic light system right on the front of its packaging—green for the healthiest ingredients, red for the unhealthiest .

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## How to Avoid Getting Hoodwinked

So how do you avoid falling for healthwashing?

### 1. Read the Back of the Package

Nestle recommends focusing on the ingredient list, not the marketing claims on the front . "The ingredient list is easier," she says. "It just lists everything in order of weight. That one's easy and tells you a lot."

### 2. Watch Out for Buzzwords

Terms like "natural," "wholesome," "organic," and "non-GMO" don't necessarily make a product healthier . There's no legal definition of "natural," and "organic" refers to how ingredients are grown, not their nutritional value.

### 3. Ignore the Front of the Package

Nestle says that nutritionists "don't pay much attention to the front of the package." Instead, flip it over and read the Nutrition Facts panel and ingredient list .

### 4. Remember: The Healthiest Foods Don't Need Labels

"The healthiest foods don't have nutrition facts panels," Nestle says . Think apples, oranges, farro, almonds, kale, and broccoli. Michael Pollan's advice: "Eat food. Not too much. Mostly plants."

Maybe it's worth adding three more words: Ignore the marketing.

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## Frequently Asked Questions

### Q: What is healthwashing?

Healthwashing is a marketing strategy where companies make products appear healthier than they actually are by highlighting certain ingredients or qualities while downplaying others . It includes buzzwords like "natural," "fat-free," and "immunity-boosting" that create a "health halo" effect .

### Q: Why is healthwashing so profitable?

It's based on asymmetric information—consumers don't know what's really in the products they're buying . This allows companies to charge premium prices for products that seem healthier, even when they aren't. Labels like "organic" and "non-GMO" help companies convince customers to pay more.

### Q: Is healthwashing illegal?

Not necessarily. While outright lying on ingredient lists violates federal labeling rules, using buzzwords and clever packaging to create a health halo is generally legal . The FDA has no formal definition of "natural," which leaves room for marketers to interpret the term as they see fit .

### Q: What is the health halo effect?

A cognitive bias where one healthy-sounding claim or visual cue casts a halo over everything else, making us assume a product is healthier overall than it really is . For example, "high-protein" cookies might still be packed with sugar and unhealthy fats.

### Q: What is Front-of-Pack Nutrition Labelling (FOPL)?

FOPL is the practice of requiring manufacturers to list nutritional information on the front of packaging instead of the back . Some countries use traffic light systems (green, yellow, red), star ratings, or warning labels. Research shows these labels influence purchasing decisions and reduce sales of unhealthy products .

### Q: Does the FDA require warning labels on unhealthy foods?

Not yet. The FDA has proposed a rule requiring most packaged foods to carry a small box on the front labeling levels of saturated fat, sodium, and added sugar as "Low," "Med," or "High" . Some Latin American countries have gone further, requiring prominent warning symbols.

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## Conclusion: The Health Halos Are Coming Down

Healthwashing is a billion-dollar deception that exploits our desire to eat better and our limited time to decode nutrition labels. But the tide is turning. Regulators are pushing for front-of-pack labels. Consumers are becoming more skeptical. And some companies are voluntarily embracing transparency.

As Nestle puts it: "The healthiest foods don't have nutrition facts panels." Until the grocery store is filled with only whole foods, the best defense is a simple one: read the ingredients, ignore the marketing, and remember that if it sounds too good to be true, it probably is.

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## Disclaimer

**IMPORTANT:** This article is for informational and educational purposes only and does not constitute medical, nutritional, or legal advice. Always consult with a qualified healthcare provider or registered dietitian for guidance on your specific dietary needs. Food labeling regulations vary by country and are subject to change.