Impact analysis of the Health Star Rating system for small businesses
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The CIE was engaged by the Victorian Department of Environment and Primary Industries to assess the impact of a proposed Health Star Rating (HSR) system on small businesses in Victoria. The HSR system is a voluntary, industry-led scheme that enables a direct comparison between individual foods based on their nutritional profile. The adoption of the HSR system by businesses brings a range of potential benefits, opportunities, costs and risks. These impacts are of particular concern for small businesses, which in Victoria form the majority of operators in the food manufacturing industry. The CIE consulted with a range of such businesses to better understand these concerns.
The CIE found that the potential costs of the HSR system are substantial enough to limit voluntary uptake. Small businesses face particularly high costs due to their limited in-house capacity
to calculate product ratings and make the necessary changes to labelling. The benefits and opportunities that small businesses associate with the HSR system are largely contingent on products receiving high star ratings: in such cases, the HSR system may serve as an official validation of existing product branding, and may open up new markets amongst consumers who would not usually be guided by nutritional content. Businesses are concerned about the potential risk to their brand value of low star ratings. The report concluded that Governments should act quickly to dispel misinformation and clarify the next steps in the HSR adoption process, and provide more assistance to small businesses to facilitate uptake.
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