All-natural claims become risky business

by Jeff Gelski
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KANSAS CITY — Katherin “Barr” Hogen of Barr-None Consulting in Boulder, Colo., has advice for her clients that may want to make all-natural claims on the front of their products.

Don’t.

Choose an alternative way to promote your product instead. Ms. Hogen said she works for start-up companies who cannot afford to be sued, which lately has become a more frequent occurrence for all-natural claims.

Ms. Hogen, formerly with Odwalla, works mostly with bar manufacturers in the natural and organic industry, but mainstream companies also are starting to shy away from all-natural claims on the front of products. For example, PepsiCo, Inc., Purchase, N.Y., in July removed the phrase “all natural” from the labels of its Naked juices after a lawsuit was filed in the U.S. District Court of California. PepsiCo agreed to pay $9 million to settle.

The report “The new lawsuit ecosystem; Trends, targets and players” released in October by the Washington-based U.S. Chamber Institute for Legal Reform included information on all-natural claims. The report said a recent study found the number of consumer fraud class actions brought in federal court against food and beverage companies rose to more than 102 in 2012 from 19 in 2008.

The report called California the “epicenter” of lawsuits.

“We identified nearly 150 food class actions filed since 2011, with more than half filed in California courts,” the report said.

Plaintiff lawyers target the “deep pocket” of the food industry and search for plaintiff-friendly consumer protection laws, according to the report. Food-related actions may allege that a product was advertised as all-natural when it contained synthetic or artificial ingredients such as preservatives or high-fructose corn syrup or when it contained bioengineered ingredients such as corn or soy, according to the report.

No standard of identity exists for natural. The Food and Drug Administration has said, “From a food science perspective, it is difficult to define a food product that is ‘natural’ because the food has probably been processed and is no longer the product of the earth. That said, F.D.A. has not developed a definition for use of the term natural or its derivatives. However, the agency has not objected to the use of the term if the food does not contain added color, artificial flavors or synthetic substances.”

Like Ms. Hogen, Anthony “Tony” Pavel, a partner for Washington-based Morgan Lewis who provides regulatory counseling to clients on food and food ingredient products, sees potential problems when making all-natural claims. The risk of litigation associated with natural claims has become more of a financial liability, he said.

Instead of all-natural claims, food and beverage companies may turn to claims that are more definable and more readily substantiated, he said. The claims may refer to what types of ingredients are used or how a product is processed.

Companies may use “tick” boxes on the front of packaging more often, Mr. Pavel said. They may put check marks inside boxes to tick off what attributes a product has, such as high in fiber, low in sugar or minimally processed.

Ms. Hogen said companies may end up with too much “noise” on the package or too many claims.

“I try to convince (client companies) to focus on your big story,” she said. “What is the most compelling story that you can tell for your product?”

She discourages companies from choosing all-natural as a compelling story.

“It’s not really going to push the needle for sales on them anyway,” she said. “Why get yourself caught up in the quagmire?”

The percentage of new food product launches with all-natural claims has stayed steady in recent years. In 2012, the percentage in the United States was 13%, the same percentage as in 2008, according to Mintel Group Ltd. The percentage of new drink launches with all-natural claims in 2012 was 8%, down from 13% in 2008. Through Dec. 10 of this year, the percentages were 15% of food products and 8% of drink products.

“They are never going to completely disappear,” Mr. Pavel said of all-natural claims. “I think you’re going to see less use of them, though, unless we see a clear policy from the F.D.A. or a legislative fix.”
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