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Credit to that user, he did asked how to on this site but no code given and thus no answer. ChatGPT gave him a false answer by stating it is the correct font to use, carry on... 
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Maybe to save some printing cost. Most business decisions are driven by the cost so I don't know why this would be any different.
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As a matter of fact, I've made labels for packagings in the meat industry.
Your #2 is pretty close to the mark.
Mostly, the software that creates labels isn't exactly high-tech, so scaling is not something it does.
The size of labels is restrained by the printers a company has, those printers aren't easily replaced because you'd have to change all labels too, which can easily grow into the hundreds (different labels for different products, countries, customers, etc.).
Labels are usually too small for all the data that producers are now legally obliged to print.
There's a big chance your label is unreadably small because the Arab translation of the text is a bit longer and the label has to accommodate both.
And sometimes it's just that font size 8 is too big, but font size 7 is too small (or there is no 7 and you have to fall back to 6), and if those are your option you go for the size that fits and call it a day!
BarTender is popular label printing and design software and this is what it looks like: BarTender[^]
Chris Maunder wrote: No one involved from label design to product creation to printing to stocking
There's usually not really any design phase.
Some IT guy just makes a label and drags and resizes until it fits.
The people who print the labels and put them on the packaging are not paid nearly enough to care!
Chris Maunder wrote: To save time and money they did zero usability testing
I've never heard of a label being usability tested 
They print the label once to check if all necessary data is on it (read, they can't be sued) and continue with more important business.
Companies don't make those labels for you, they make them so you can see their logo and they don't get fined by their government.
modified 8-Aug-23 3:26am.
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Good old fashioned arse covering 
In a closed society where everybody's guilty, the only crime is getting caught. In a world of thieves, the only final sin is stupidity. - Hunter S Thompson - RIP
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I'm deeply depressed and so totally not surprised.
Thank you so much for the great answer and insight. It's very cool to be able to throw out a question like that and get an insider's view.
cheers
Chris Maunder
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Do what the "weed" people do: a "2-ply" label that peels apart with the pre-printed instructions, etc. inside. Two sides versus part of one face.
"Before entering on an understanding, I have meditated for a long time, and have foreseen what might happen. It is not genius which reveals to me suddenly, secretly, what I have to say or to do in a circumstance unexpected by other people; it is reflection, it is meditation." - Napoleon I
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Gerry Schmitz wrote: the "weed" people
At first I thought you were referring to me because I'm Dutch
For the record, I never smoked weed, but have had plenty of opportunity.
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Well now, funny how they can arrange all the other printing on the packaging to be larger than life to grab your attention, but somehow the stuff they'd rather you didn't pay attention to has to be, for a variety of apparently insurmountable reasons, almost too tiny to read!
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Possibly convenience.
If you have a large font that fills the available area then you need to align the print very well and you will get occasional mismatches - these will be a reject - product and all - and cost money.
It is easier to use a small font and aim for the centre, then a little misalignment does not create a reject.
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Quote: They don't actually want you to read the labels
Hiding all the "stuffed ingredients" in small print like 2g chlorine, 0.1g sianide... In bolder readable letters - "The safest product ever!, consume it now"! 
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Obligatory XKCD
cheers
Chris Maunder
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It's No. 5. Definitely.
Seriously, I think that Sander's explanation is probably close to the mark.
Certain countries mandate a minimal point size for ingredients, the "small print" on contracts, etc. In some of them, a contract that is printed in too-small font can even be invalidated on that basis!
Freedom is the freedom to say that two plus two make four. If that is granted, all else follows.
-- 6079 Smith W.
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Which countries are they?
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In Israel, there is a minimum size allowed for "small print". I'm sure it's not the only country on the globe with this requirement.
Freedom is the freedom to say that two plus two make four. If that is granted, all else follows.
-- 6079 Smith W.
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I have made a habit of scanning all Instructions for Use, User Guide or whatever, at 600 dpi suitable for scaling, as soon as the product enters my house. I haven't started doing it for food labels yet, but the day I see a need for it, I've got the routine.
It won't work that well if the label is wrapped half way around a cylindrical bottle or can, but if it goes half way around, the print can't be that small. Maybe my SLR would work better for bottles/cans; the flatbed scanner wants the image to lay flat on the glass. Transferring photos from the camera to the PC is also a well drilled routine. I've got a macro lens for my camera, so focusing on 2pt print is not a problem (I guess it would be with most smartphone cameras).
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It's point number one. They don't want you to know what's in the product. It's not just for bread and soy sauce.
There's also a lot of tricks they play. Like for instance, the FDA allows the package to say "zero trans fat" if there's less than 0.5 grams per serving. With a small serving size that can still add up despite the package saying zero when it's clearly not. It's not by accident.
How it's made and if it could kill you or not isn't "cool". What's cool is logos and if it was shown on TV with chicks or something.
Jeremy Falcon
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Jeremy Falcon wrote: They don't want you to know what's in the product.
That is an essential point. They use all sorts of strange names, both to make it sound fancy, like declaring the contents of 'aqua' or chemical names filling two lines, and when you look it up, it really is a super-fancy(?) way of identifying some everyday substance.
Or they use chemical names in inventive ways to hide ingredients that the customer might find undesirable, such as not saying 'salt', but specifying chloride and natrium content separately. Except that in Norwegian, 'natrium' is name of sodium, so here, they write it as chloride and sodium, hoping that we will not realize that they are talking about NaCl, salt.
And then there are the ads declaring, say, "Pepsodent toothpaste with irium". When they were pressed about this 'irium', they had to admit that it was their name for water. They had always been careful to never claim to be the only ones with irium, and they had never claimed it to have particular positive effects (that could not be ascribed to water). Yet lots of customers chose the toothpaste that contained irium.
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On a related subject - I also hate it when they print black letters on a dark colored (blue / red / green) background. The font size might actually be big enough to read if they had just printed in white or chose a lighter background.
Contrast people! Contrast!!
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I'm not kind: brain dead designers. Lack of empathy.
"Before entering on an understanding, I have meditated for a long time, and have foreseen what might happen. It is not genius which reveals to me suddenly, secretly, what I have to say or to do in a circumstance unexpected by other people; it is reflection, it is meditation." - Napoleon I
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Doesn't it have to be in French and English as well?
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That's nothing; in the EU it has to be in all the Official Languages, which leads to "quick start" booklets as thick as novels. 
Freedom is the freedom to say that two plus two make four. If that is granted, all else follows.
-- 6079 Smith W.
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Probably all of the above.
It's like TV advertising in the UK where by law the small print (T&C's) have to be included, so they are gabbled in a voice over as quickly as possible, so they are as hard as possible to comprehend. Just shows how deceitful the advertising industry and their customers are.
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They also have an annoying tendency to use colour combinations like black print on a dark red ground. And they seem to make the font inversely proportional to the age of the target reader.
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I would guess number one. Many medical TV ads, after saying how great their product is, often have a disclaimer (how it may in fact harm you) in small low contrast fonts which are on screen for only a few seconds.
I am 80 years old, still writing apps (well sort of), and small font size is always an issue for me.
Bring back punched cards!!
73
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