Even if a food or beverage maker properly lists all the ingredients its product contains, it can still be accused of misleading consumers. That's what Coca-Cola (NYSE:KO) found out a few years ago after a court rejected its attempt to have a lawsuit against its Vitaminwater brand dismissed over its labeling.
The Center for Science in the Public Interest said because the label contained phrases like "vitamins + water = all you need," consumers could be fooled into thinking that's all the beverage contained, despite the label properly listing all the ingredients, with which federal judge John Gleeson concurred.
The fact that the actual sugar content of Vitaminwater was accurately stated in a Food and Drug Administration-mandated label on the product does not eliminate the possibility that reasonable consumers may be misled.
So this isn't a case like that of WhiteWave Foods (NYSE:WWAV), which tried to snooker consumers by calling the sugar in its milk the creatively contrived name "evaporated cane juice." Rather, this is a company saying sugar's sugar and telling consumers how much the drink contains -- as the FDA requires it to do -- but it is still facing financial loss regardless.
Reading is fundamental
We all remember our moms admonishing us to take our vitamins to make sure we grew up healthy and strong, and though the real value of vitamins remains somewhat in dispute in a world of fortified foods, some people have been apparently rendered incapable of discerning marketing slogans from ingredients.
The case is moving forward and Coke believes it will ultimately prevail, particularly after another judge ruled the CSPI can only seek declaratory and injunctive relief for the labeling issues and not damages. Injunctive relief prevents Coke from making certain claims for the product, such as because its Power-C flavor, for example, is infused with zinc and Vitamin C, it wouldn't be able to claim Vitaminwater helps "power your immune system" as it currently does. Needless to say, the CPSI also thinks it will win when Coke has to testify under oath about its ingredients.
Like a waistline spreading from eating too many sweets, the labeling lawsuit trend keeps growing. Dr Pepper Snapple Group (NYSE:DPS) is being sued because the plaintiff thought the antioxidants in its 7-Up berry-flavored drinks actually came from juice instead of the added vitamin E because the label showed pictures of fruit. Energy drink maker Red Bull is being sued because it charges a premium for its caffeinated beverage that "gives you wings" even though it allegedly provides the same jolt as a lower-priced cup of coffee.
Of course, beverage makers don't do themselves any favors when they join the litigation frenzy. Monster Beverage (NASDAQ:MNST) previously sued rival Redline for failing to keep consumers "amped to the max" for seven hours as they claimed.
On a sugar high
Coca-Cola bought Vitaminwater from Glaceau in 2007 for $4.2 billion, and as it generates some $300 million annually in revenues according to Forbes, it's no wonder the drink maker considers it to be among its most important brands, right up there with Coke, Sprite, and Minute Maid.
Clothing retailer Syms used to use the tagline "An educated consumer is our best customer," but they apparently don't exist anymore. There's no sugarcoating the fact this lawsuit should be tossed because Coke honestly told consumers Vitaminwater contains enough sugar to rot your teeth and make you fat. Just because someone chose not to read the label doesn't mean he should still be able to hit the lottery by taking Coca-Cola to court.
Fool contributor Rich Duprey owns shares of WhiteWave Foods. The Motley Fool recommends Coca-Cola and Monster Beverage and owns shares of Monster Beverage and WhiteWave Foods. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.