We use data on purchase quantities and prices of healthy and unhealthy food to show that diets are determined at least partially by the “food environment”. We then estimate a structural model to argue that the effect of the environment is im- portant: Distorted relative prices lead to underconsumption of fruit and vegetables in the amount of around 15%, a third of the gap between the recommended and actual intake. We show that it is possible to remedy these distortions with a policy of taxes and subsidies that makes all consumers better off.