Can bundling incentivise better food habits?

After a long, exhausting morning at work, you realize that you desperately need a boost of caffeine and an affordable and filling snack to go with it. The local convenience store, your go-to for quick snacks and coffee, is only steps away. There, you have two options. For an extra dollar, you can either bundle a pastry or a box of pre-cut fruit with your coffee. Which option would you choose?

Saibal Ray, Professor of Operations Management at McGill University and the Vice-Dean of Faculty at the Desautels Faculty of Management, might already know your answer. In a recent field study, he and his co-authors (PhD student Nymisha Bandi and Scale-AI Prof. Maxime Cohen) at McGill University examined the effect of bundling and price promotions on consumers’ eating habits. They found that, if it costs the same to buy a pastry versus a box of fruit, you’re more likely to buy the fruits.

“It is possible through price promotions to incentivize customers to eat healthy,” said Ray. “But just saying ‘healthy food is good for you’ will not work. You need some kind of incentive.”

As part of their study, a convenience store modified its coffee bundles. Initially, the store only offered pastries with coffee. Then, for a time, the store replaced pastries with healthy snacks. Later, the store introduced both healthy snacks and pastries as separate bundles, giving consumers the option to choose between the two.

Ray and his co-authors tracked consumers’ purchases across these three areas. They found that, once the store removed the cost barrier to healthier food bundles, healthy snack sales increased by over 1,000 percent while unhealthy snack sales decreased by almost 40 percent. Then, once the offer ended and healthy snacks went back to their previous prices, customers stopped buying them.

A bundle of profits

Based on these findings, Ray thinks bundling could offer a pathway towards balancing the needs of consumers and retailers (food sellers).

Healthy food is expensive, making it inaccessible to lower-income families and individuals who want to eat well. Plus, as inflation rises, consumers continue to focus on costs rather than the nutritional value of their diets. This often leaves them opting for ultra-processed options which are unhealthy but cheaper, since food companies can produce them at lower costs.

Healthy food is expensive for sellers, too. To make a profit, they need to ensure that perishable goods are sold on time and at a price that’s worth it.

Creative food bundling, however, can help offset losses incurred from selling discounted fruits and vegetables. In the case of the convenience store from Ray’s study, coffee is a high-margin product which generates significant profits for the store. By offering consumers more add-on options, retailers are incentivising consumers who want to eat healthy to buy more coffee. The profit from the increased coffee sales can thus offset the cost of offering healthy snacks as affordable add-ons.

“This is actually more profitable for the retailer,” said Ray. “If you give this choice, it makes you more money and at least some people are going to buy the healthier option.”

Based on the research paper Incentivizing Healthy Food Choices Using Add-On Bundling: A Field Experiment by Nymisha Bandi (PhD candidate at the Desautels Faculty of Management), Maxime C. Cohen (SCALE-AI Research Chair at the Desautels Faculty of Management), and Saibal Ray (James McGill Professor, Operations Management; Vice-Dean, Faculty at the Desautels Faculty of Management).