Wendel Rosen’s Food and Beverage Practice Group provides a full range of services to producers, manufacturers, distributors, suppliers, growers, retailers and investors, as well as to the broader consumer packaged goods industry. Heading into 2018, we believe that food and beverage companies should keep the following considerations in mind:

1. Regulatory Oversight. It is still not clear what the Food and Drug Administration’s (FDA) focus will be with regard to its regulatory enforcement strategy under the Trump administration. While the FDA rolled back certain regulations to allow for greater time for industry compliance (ex. new Nutrition Facts Panel and restaurant nutritional disclosure regulations), the FDA will likely pay more attention to enforcing the Food Safety Modernization Act regulations. Therefore, a focus on your company’s compliance with food safety regulations is a must.
2. Changing Consumer Preferences. Staying on top of shifting consumer preferences is essential for relevant food and beverage companies. Healthy snacking options and increasing convenience in both food packaging and delivery are gaining significant traction in 2018. The lack of time for meal preparation continues to drive an increase in convenient foods, but consumer awareness also demands that such foods be nutritious and delicious alternatives to the home-cooked meal. While every trend may not apply to your business, prudent food and beverage companies should prioritize analyzing available market data to ensure they  understand the driving preferences behind consumer purchasing decisions.
3. Recalls. Recalls are time consuming and costly events. Since 2011, Class I and Class II recalls have steadily increased. Food and beverage companies should continually review their food safety programs to effectively educate and train employees, conduct internal audits, and improve their food safety/quality systems. In doing so, they will greatly reduce the risk of a voluntary market withdrawal or a mandated recall.
4. Social Media. The genie is out of the bottle, and food and beverage companies must have a strategy to retain control of their brand image in our increasingly digital world. Food and beverage companies should proactively develop strategies to effectively communicate about their products and manage user engagement to maintain a positive consumer expression about their brands.
5. Mergers and Acquisitions. Mergers and acquisitions will continue to serve as a growth strategy for companies looking to bring new, on trend products to the marketplace. Acquisitions of smaller companies who are leading market food and beverage trends can be done at a lower cost than spending the time and resources in experimenting with new products.
6. E-commerce. With Amazon’s acquisition of Whole Foods, e-commerce will continue to grow in 2018 as busy consumers will likely show increasing interest in quicker and/or home delivery.  Consumers will continue to integrate ordering from their mobile devices into their monthly routine of in-store shopping.  Food and beverage companies should look to find ways to expand their direct-to-consumer sales and/or third-party e-commerce platforms to increase their sales and market position.
7. Technology. Technological change will accelerate in our food systems from the way food is grown to the way it is purchased and delivered. At this year’s Fancy Food Show we saw how the supermarket of the future may look, as well as how technology can provide consumers with greater transparency and more complete information that they can use to inform their purchasing decisions. Food and beverage companies need to understand what such transparency could mean for their brands and how they can meaningfully communicate with consumers.
8. Disruption. From plant-based foods challenging “traditional” food concepts in the meat and dairy categories to hydroponic farmers challenging what foods can be certified organic, disruption continues to intensify. It is no longer enough to consider “how” something is done, but also “why” it is done. Entrepreneurs are emerging who are looking to explore the beneficial intersection of food science and technology to advance the sustainability and health of our global food supply. Food and beverage companies clinging to the status quo, beware.
9. Plant-based foods. The consumer diet is shifting to accommodate more plant-based foods. According to the market research firm Mintel, the preference for natural, simple and flexible diets will continue to drive an array of vegetarian, vegan and other plant-based food products.
10. Have fun!  While food safety and food quality are serious concerns of any responsible food and beverage company, don’t take yourself too seriously. The food and beverage industry still affords you meaningful consumer engagement opportunities, access to innovative technologies, and the venue to introduce exciting products that will be on supermarket shelves and in consumer pantries. Throw in the industry trade shows, networking opportunities, and professional growth opportunities and you quickly realize that the industry is FUN. (So, get out there and start enjoying it – we’re right here when you need us.)

Is it odd for a lawyer to write a blogpost about how to avoid lawyers?  Not at all. We hate to see claims of misrepresentation made against our clients by plaintiff’s class action attorneys. Typically, their claims have little merit and mean only wasted time, money and energy.

The goal of the class action attorneys is to extract the largest ransom with the least work. Anyone with a computer can generate rafts of “cut and paste” demand letters and complaints. They usually try to exploit vagueness in the law, often using professional plaintiffs who show up in scores of copycat lawsuits.

Enough diatribe! Your New Year’s resolution should be to stay away from class action attorneys in 2018. Here are some guidelines that will help you do that. We’ll have more posts on the subject as the year progresses.

Prop. 65: California Prop. 65 requires that you make disclosures on your labels if your product contains more than specified limits of identified chemicals. If you are selling in California, look at the list of chemicals on the Prop. 65 list. Now find a qualified lab that can test samples of your product runs for Prop. 65 chemicals and get the testing done. I can assure you that if your product category (chocolate – for example) is known for having trace elements of Prop. 65 chemicals, there are plaintiff’s lawyers who are testing your product. You should know the results of those tests before they do. If your product does have amounts of these chemicals that require Prop. 65 notices, it may be cheaper to put notices on your packages than it is to reformulate. It will certainly be cheaper than settling a class action claim for failure to include a Prop. 65 notice.

“Natural”: “Natural” is an accepted term to describe the marketplace. The largest industry event is “Natural Products Expo West.” The main retail publication is the “Natural Foods Merchandiser.” Food stores, whether independent or parts of a chain,  are referred to as “Natural Food Stores.” However, just because “natural” is used by the industry and the public to describe minimally processed foods does not mean it should have a home on your label. There’s no legal definition of “natural.” In 2015, in response to industry requests, the FDA asked for comment about whether “natural” should be defined and, if so, how. After receiving many comments, the FDA did nothing then. Last year, FDA Commissioner Dr. Scott Gottlieb said that the FDA is now looking at how to define “healthy” and “natural” more uniformly. “Natural” claims are one of the largest source of class action suits. Until “natural” has a clear legal definition and you are sure that your product meets it, don’t put the word on your label. It’s as simple as that.

“Healthy”: Is your product healthy? Of course it is. Would you be selling a food product that is unhealthy?  Of course not. Would you be advertising “Now, Even More Unhealthy In Convenient Family Pak?” Of course not. Unlike “natural,” the FDA does have a definition for “healthy.” However, the definition must be used carefully. It is out of date, contrary to current nutritional science and is under review. The FDA is reconsidering the definition and, last year, agreed that KIND bar could continue using “healthy” on its labels even though KIND bars exceeded the amount of fat allowed in the FDA definition. Our best advice is not to use the word “healthy” until there is a new definition. However, it you feel compelled to use it, find out if your product satisfies the requirements.

That’s it for now. I hope this New Year’s resolution comes true for you. See you at the Specialty Food Show or EXPO West.

And the California Supreme Court said “Let there be more litigation” and there was more litigation.

This week, the California Supreme Court held that private citizens (i.e. class action plaintiffs’ attorneys) can bring state court actions against produce companies that falsely label their products “organic.”

The Plaintiff in this case alleged that she paid a premium for Defendant Herb Thyme’s “Fresh Organic,” believing they were in fact 100 percent organic. She was vexed to discover that Herb Thyme allegedly blends its organic produce with non-organic produce, selling it under the “Fresh Organic” label.  She filed a putative class action for violation of California’s Consumer Legal Remedies Act, unfair competition law and false advertising.

Defendant Herb Thyme argued that the federal  Organic Foods Production Act of 1990 (OFPA) vests the USDA with “exclusive authority to regulate the labeling and marketing of organic products and both expressly and implicitly preempts state truth-in-advertising requirements.”  The trial court agreed with Herb Thyme’s arguments and dismissed the case.  The intermediate Court of Appeal agreed that OFPA implicitly preempted state law claims, but disagreed that it did so explicitly.

But the California Supreme Court reversed, finding that OFPA neither expressly nor implicitly preempts state court actions.  The Court noted that while OPFA preempts states from creating alternative: (A) definitions for the term “Organic,” and (B) certification processes that growers must meet to qualify as “Organic,”   OPFA does not preempt state court actions like the one against Herb Thyme.  The Court noted that OPFA permitted states to enact more stringent standards regarding organic production and that other courts, including the Eighth Circuit, had also found that OPFA did not preempt state court actions.

So, we can add state litigation regarding the term “organic” to the virtual smorgasbord (check out the U.S. Chamber report “The New Lawsuit Ecosystem,” p.88) of food labeling litigation buzz words like “natural,” “hand-crafted,” “healthy,” “all-natural,” “whole-grain,” “lite,” “pure,” and “100%.”