Consequences of dual certification regulation: the case of Japanese functional food market

Purpose This study aims to investigate how dual health claim regulations affect the market performance of functional food products. Focusing on the Japanese beverage market, we examine how the coexistence of the strictly regulated Foods for Specified Health Uses (FOSHU) and the more accessible Foods with Function Claims (FFC) labelling systems influences sales volumes, prices and the number of certified products. Design/methodology/approach Using a nine-year (2013–2022) transaction dataset of various functional beverage products, we develop a simultaneous equation model to capture the interaction between products with different labels. The model is estimated using the feasible generalised least squares method. Findings The introduction of the FFC system resulted in a decline in sales volume, price and the number of FOSHU products. These changes are attributable to increased market entry of FFC products, which act as substitutes despite differing scientific rigour. The results indicate that consumers are unable to identify quality differences between FOSHU and FFC products, suggesting limited awareness of the regulatory differences between them. This study demonstrates how introducing a simplified labelling system can drive high-quality products out of the market. Originality/value This study is among the first to empirically examine competition between food products certified under distinct health claim systems. It provides novel insights into the unintended consequences of regulatory coexistence, especially how looser certification may erode the value of stricter systems, with implications for consumer protection and market sustainability.