By David Pring-Mill

The following text has been excerpted from Sections 4.2—4.2.4 of the Policy2050 report “Opportunities and Risks in the Functional Beverage Market, 2021,” in order to serve as a product sample and fulfill Policy2050’s mission “to keep the most socially-relevant insights outside of any paywall.”

Sometimes, a functional beverage does not deliver the health benefits, or stimulation, it promises. There’s a significant risk of active ingredient deterioration or inconsistent quality.

Beverage companies may need to make bigger investments in order to find the optimal formulations and packaging solutions that can preserve active ingredients, delivering the promised health benefit to the consumer at the time of their consumption.

If functional claims are deemed misrepresentative, or the product harms consumers, the beverage company could get sued. These lawsuits happen frequently and settling them, as quickly, quietly, and inexpensively as possible, has become an almost routine business practice.

Many food and beverage companies have come to think of these settlements as “nuisance fees.”

In addition, the FDA, FTC, and watchdog groups are standing guard. For example, in 2019, the National Advertising Division referred the FTC to claims being made by The a2 Milk Company that its products were easier to digest, based on a technical distinction. The FTC chose to forgo a formal investigation, in part because the company modified the content on its website. The agency also noted: “Any implication that label revision would be burdensome is simply untrue.”

The right stuff, in the right amounts

Savvy consumers should ask themselves:

• Does this product contain the right ingredients or nutrients for me?
• Does it contain those ingredients or nutrients in the right amounts?
• Do the benefits outweigh the risks?

Let’s look a little closer at Question #2:

A recent academic study of energy and isotonic drinks in the Polish market sought to differentiate itself from previous studies, which have mainly looked at the ways that beverage ingredients modulate the body’s metabolism or perform as food additives.

Styburski et al. (2020) noted that the levels of nickel in energy and isotonic drinks varied from sample to sample, and that other studies had also shown high and varying nickel content in functional beverages.

“As a consequence, long-term consumption of energy and isotonic drinks may produce nickel-induced toxic effects and constitute a potential threat to human health,” they wrote.

The mean aluminum content in energy drinks was 0.481 mg/L. In sports drinks, it was 0.354 mg/L. As most consumers know, energy drinks typically come in cans whereas sports drinks are bottled. The higher levels of aluminum in some energy drinks could be due, in part, to the internal effect of that metallic packaging.

“The Al level in the studied functional beverages exceeded the maximum permissible limits for that mineral in water, according to WHO and European guidelines, which amounts to 0.2 mg/L. Al exerts a negative influence on human cognitive processes. Its accumulation in the brain may lead to the impairment of memory, speech, motor coordination, tremors and paralysis. Deposition of aluminium in the body has also been implicated in the development of Alzheimer’s disease. Its symptoms are related to increased Al accumulation in the hippocampus, which is responsible for learning and memory processes.”

— Styburski et al. (2020)

These beverages are, of course, not water. The researchers noted that many of these functional beverages were developed primarily for athletes who needed to replenish what they lost through exertion. However, the market size and far-reaching marketing means that people who are not over-exerted athletes will also drink these beverages, possibly often and in large quantities.

The variability of content is a problem. High volume consumption, which a beverage company is unlikely to actively discourage, could compound that problem.

Consumer Reports conducted lab tests of 15 protein drinks and found that “all of the products tested had at least one sample containing arsenic, cadmium, lead or mercury.” They found that levels of detected contaminants were especially high in Muscle Milk products.

Determinations of acceptable heavy metal levels vary, depending on the organization issuing the standards. CytoSport, the maker of Muscle Milk, responded that its products were analyzed by NSF International and passed, according to those standards. Consumer Reports responded, in turn, that their testing indicated considerable variations in levels of heavy metals from sample to sample of the same product, which suggests that better quality controls are needed in this product category.

The Consumer Reports findings are consistent with a range of academic research that observed a variation in metallic content from sample to sample, including the Polish market study mentioned above.

Some of this beverage variation doesn’t pose a danger but it does potentially cast doubt over the functional claims or even the category.

In Sport & Exercise Medicine Switzerland, Mettler et al. (2006) found that the osmolality of sports and recovery drinks available on the Swiss market varied over a relatively wide range (157-690 mmol/kg). They noted that flavor preferences play a role but determined some of the measurements were not optimal. The researchers observed: “The osmolality of some commercial sports drinks, which are designed to be consumed during exercise, tended to be in the hypertonic range, although such drinks should rather be slightly hypotonic.”

Slightly over a decade later, nutrition researchers in Poland found that sports drinks had the same osmotic pressures as bodily fluids at 275–295 mOsm/kg water. Is this a sign of progress? Variation from market to market? Or variation from product to product (both in terms of brands, and individual units)?

Different criticisms and agendas

Functional beverages should always be safe and, ideally, well-formulated for the nutritional and health-related needs of whomever is consuming them. In certain instances, regulators may need to step in for the sake of public health.

Making money and making valid health claims needn’t be thought of as mutually exclusive. Any perceived shortfalls or vulnerabilities in a product’s health/wellness claims could be looked upon by competitors as commercial opportunities to outshine them.

Such was the case with Karma Water, which redesigned its packaging specifically in order to avoid active ingredient deterioration and deliver nutrients more effectively than predecessors like Vitamin Water.

Vitamin Water was a high-profile 2009-2016 case of functional claims being challenged, and the case dredged up all the controversies associated with the reasonable consumer standard.

It’s important to look at the full range of effects on consumers that could stem from a misrepresented product.

In 2019, when the FDA issued warning letters to 15 companies for selling CBD products in ways that violated the Federal Food, Drug, and Cosmetic Act (FD&C Act), the agency mentioned that some consumers may “put off getting important medical care” if they believe in unsubstantiated claims.

The costs associated with getting a diagnosis and pharmaceutical treatment can be extremely high in the United States, where 66.5% of all bankruptcies are still tied to medical issues despite attempts at healthcare reform. The temptation to easily resolve a potentially troubling medical concern with a readily available consumer product is obvious. But it might not be resolving the concern at all, just temporarily alleviating the fear and exacerbating the underlying health issue.

(More information about cannabis-infused beverages can be found in the Policy2050 report “Consumer Trends, Diversification & Strategies in the Global Beverage Industry, 2021.”)

Intentional marketing deceptions can be very damaging to consumers. However, in other instances, critics and litigants may be driven by their own agendas.

As one Finnish insurance company, If P&C Insurance, warns its prospective clients: “Foreign companies doing business in the U.S. should be mindful that seemingly frivolous claims that challenge the most basic principles of common sense may withstand initial judicial scrutiny and immediate dismissal.”

Examples

Here are five examples of beverage product claims and the resulting complications:

(1) Red Bull not giving people wings.

Red Bull agreed to pay up to $13 million to settle a class-action lawsuit and up to $4.75 million in legal costs. Why? The litigants felt that Red Bull misleadingly positioned their energy drink as a premium functional beverage. Red Bull reportedly settled in order to avoid the unpredictability and high costs of litigating in the United States.

The complaint stated: “The defendant’s prodigious advertising marketing and promotional spending has been used to mislead customers into believing that Red Bull is a superior product worthy of a premium price and has the ability to ‘give you wings’ and provide energy and vitality.”

Their complaint was that the energy drink doesn’t contain more caffeine than other available caffeinated beverages but is priced and marketed as though it does. Ironically, energy drink companies have been making similar arguments in response to polar opposite criticisms, from members of the public who feel that energy drinks are overly stimulative and may carry unique side effects.

The energy drink industry is in something of a bind. If it asserts that guarana and other ingredients have a synergistic caffeine-like effect on top of the caffeine already added to the product, then this claim may attract consumers who are actively seeking that extra stimulation and the promised “wings.” But in the process, the industry might lend credibility to arguments that the product is dangerous, responsible for arrhythmias, and worthy of additional regulations.

One study found that the vast majority of health incidents were due to overconsumption of energy drinks or co-ingestion with other substances. It concluded by stating that the products are safe so long as they’re consumed moderately and separately, then added, “There is an overwhelming lack of evidence to substantiate claims that components of EDs, contribute to the enhancement of physical or cognitive performance.”

These types of conclusions could be seen by the industry as helpful or harmful, depending on the nature of the controversy.

(2) Ginger ale doesn’t have much ginger.

Canada Dry Mott’s Inc. settled a class action lawsuit in court for $200,000. Why? Canadian plaintiffs alleged that Canada Dry ginger ale falsely claimed to be “natural” and “made from real ginger.” The plaintiffs argued that this labeling was misleading to health-conscious consumers.

The company produced documents showing its use of ginger derivatives. The plaintiffs then shifted their argument. They alleged that the company utilizes a boiling process that destroys any functional benefits that could be derived from the “negligible” amounts of ginger.

The company “expressly denies liability and is not required to change its product labelling or advertising for products marketed in Canada.”

This type of controversy is becoming a recurrence.

Earlier in 2020, Subway, the sandwich chain, unsuccessfully attempted to sue the CBC, a Canadian public broadcaster, for $210 million in damages, over reporting that focused on the amount of chicken contained in Subway’s chicken sandwich patties. Subway also sued Trent University, which did laboratory work for the investigative segment.

In the report, competitors including A&W, McDonald’s, Tim Hortons, and Wendy’s were all found to have higher percentages of chicken DNA in their chicken products.

(3) Is Snapple healthier than soda?

There’s an elaborate art to managing perceptions (see this report’s PR Challenges exploration in the Risks section).

Snapple acquired a contract with the NYC public school system, in part, because city officials didn’t want to encourage soda consumption, which they viewed as unhealthy. However, nutrition advocates and critics of this arrangement contested the notion that Snapple is a healthier product, referring to it as “vitamin-fortified sugar water.”

(4) The different processes of kombucha.

In Emma Brenner, et al. v. KeVita, Inc., the plaintiff stated that the centuries-old kombucha drink was “roaring into upper-middle class consciousness at upwards of $5 per bottle” but KeVita kombucha products had exploited this commercial opportunity through false advertising.

The modern consumer is becoming more attentive to beverage processes and larger narratives.

Labels and marketing materials are telling the stories of products’ supply chains. Brands are highlighting processes as well as ingredients.

Consumers are researching DIY techniques. They’re creating social media content around their beverages. They’re buying innovative, at-home beverage machines.

Process is integral to functional beverage categories and their consumer appeal. But questions concerning which process is best, and what different terms signify, remain very much unsettled.

The class action suit against KeVita argued that “it is the fermentation process that truly defines the beverage and the byproduct of this process that drives consumer demand.”

The suit then alleges that KeVita undermined its own marketing claims when it shifted away from its original raw and unpasteurized formulation. The suit suggests that there’s an important difference between health benefits derived from fermentation and controlled probiotic strains introduced into the product after pasteurization. This is said to make the product in question “not a true kombucha beverage.”

The suit also alleged that KeVita purchases shelf space in the refrigerated section of stores and instructs consumers to keep its products refrigerated, even though it transports these products in non-refrigerated trucks.

According to the suit, this is meant to further perpetuate the idea that production methods haven’t changed and the product remains unpasteurized.

Attorneys told FoodNavigator-USA, a food and beverage industry trade publication, that they considered this argument to be meandering and confused but said that it touched upon the varying definitions that exist within the category. There is said to be a divide between “the old school type brands using traditional methods like you’d make it on your back porch at home” and companies that exert additional controls over production (sometimes at a larger scale).

Both sides have now agreed to a proposed settlement. KeVita agreed to modify its product labels.

(5) Is Muscle Milk really milk? What about soy milk?

This final point is included to illustrate that some of this litigation could be provoked by directly competing interests.

Ownership over CytoSport, the maker of Muscle Milk, recently switched from Hormel Foods Corporation to PepsiCo, a long-standing distribution partner. Back in 2009, CytoSport was still independent, financed by a private equity firm that focused on building and revitalizing consumer brands.

CytoSport’s flagship product, Muscle Milk, drew the attention of competitor Nestlé USA who made milk-based products and objected that this new product wasn’t really dairy milk.

Nestlé USA filed a complaint with the National Advertising Division of the Council of Better Business Bureaus over CytoSport’s marketing and also petitioned the United States Patent and Trademark Office to revoke Muscle Milk’s trademark. CytoSport declined to participate with the NAD’s independent self-regulatory review process and the matter was referred to the FTC.

The New York Times reported that Nestlé was “hardly picking on someone its own size,” and yet simultaneously, CytoSport had a record of claiming trademark infringement, sometimes against companies much smaller than itself. One of those small companies suggested to the Times that Nestlé prevailing over CytoSport would be poetic justice.

In a separate instance, a federal court accepted the argument that a CytoSport competitor had mimicked the “trade dress” of Muscle Milk; in other words, the visual characteristics of the packaging were similar enough that a consumer seeking out the Muscle Milk product might mistakenly grab the competing product off a shelf.

Ultimately, the FTC decided not to take any enforcement action against CytoSport because the company agreed to modify its product labels, prominently stating on the front panel that the Muscle Milk product “Contains No Milk.” Then the matter escalated further through the FDA’s involvement until CytoSport satisfied those regulatory concerns.

This case study brings up an essential question: What is milk?

When CytoSport had to defend its “milk” claims, they presented the argument that Muscle Milk was designed to replicate some of the effects of human breast milk.

The legal war over what is really considered to be milk has involved numerous fronts over the years, most unnoticed by the average consumer.

The non-profit trade group Dairy Farmers of Canada also opposed the use of the word “milk” in Muscle Milk’s trademark. CytoSport was able to dismiss these objections through strong affidavit evidence, demonstrating the common uses and perceptions of what “milk” is, derived from sources such as dictionaries, Google results, marketplaces, and active trademarks.

In 2018, the FDA issued a request for information (RFI) under former Commissioner Scott Gottlieb, driven by concerns that alternative dairy products have not been standardized under names like “milk” and “cheese,” and that consumers may expect the same nutritional attributes of dairy products in dairy alternatives.

The dairy industry, which has been significantly losing sales to dairy alternatives, has suggested via one of its trade associations that “mammals produce milk, plants don’t.” Gottlieb himself remarked that product labels and marketing used by dairy alternatives have deviated from the established FDA standard of identity for milk, which specifies “lacteal secretion,” and that deviation is very clear because “an almond doesn’t lactate.”

As part of the review process, Justin Pearson, an attorney for the non-profit libertarian law firm Institute for Justice, quipped, “If a consumer is confused about the source of a product labeled ‘almond milk,’ then he has bigger problems than being confused about which milk to buy.”

In the same league:

What does “lightly sweetened” mean? The maker of Steaz iced teas was sued over this claim; so were Kellogg’s and General Mills.

What does “natural” mean?

A class action lawsuit was filed against Hint Inc. because its beverage products were marketed as being “all-natural,” despite being found to contain propylene glycol. That synthetic substance is a very common solvent that is typically not declared as an ingredient if it exists in low quantities.

One legal analysis by Winston & Strawn partner Amanda Groves, shared with the trade publication FoodNavigator-USA, suggested that PG could be fairly characterized as a natural flavor based on FDA regulations. However, she said, “I suspect the plaintiffs will argue that regulation does not cover the ‘all natural’ label.”

These disputes over definitions have no end in sight, particularly when competitive interests may be overtly, or indirectly, fueling the disputes.

Strengthening functional beverage claims

Beverages can strengthen their functional beverage claims and work to minimize this type of litigation by:

• Researching any relevant consumer segments to see what their expectations or interpretations might be.
• Creating online resources that provide additional information about any functional beverage claims and processes. The product label might be framed as the “first step” in a consumer’s health-oriented research journey. Whether they choose to take an additional step is up to them.
• Fighting their way into the refrigerated section. Maintaining a cold chain can be extremely costly and complicated but, in some instances, refrigeration could help to maintain active ingredients. This strengthens functional benefits and any associated claims.
• Conducting regular tests of their products to ensure that key functional ingredients aren’t degrading over time. According to industry consultant BevSource, shelf life studies commonly utilize one of two methods:
  
  In the direct method, beverages are stored under conditions similar to those that the product will face on the market, and the contents are periodically tested to see if, or how, they change, in real-time.
  
  The accelerated method is faster but with a margin of error. This method modifies conditions such as pressure and temperature to accelerate spoilage reactions in a beverage. It enables beverage brands to predict how environmental conditions and different formulations might impact the end product’s properties.
• If a beverage company devises a method for retaining and delivering more functional benefits to consumers than competing brands, it needs to then educate the consumer about those methods in order to fully capitalize on that innovation. Otherwise, a consumer evaluating both products on a shelf might assume that they’re of equal benefit and then make their selection based on a factor such as packaging or price.

The full report “Opportunities and Risks in the Functional Beverage Market, 2021” is now available for purchase on Policy2050.com.