A rose by any other name may still smell as sweet, but does a "Pomegranate Blueberry" juice label from Coca-Cola (NYSE:KO) prominently displaying those fruits constitute false advertising because the product contains, in the words of one attorney, "an eyedropper's worth" of the two?
The Supreme Court is deciding whether a lawsuit by Coke rival Pom Wonderful that calls the label deceptive has merit. Under one federal law that allows private-party lawsuits, the pomegranate juice maker is able to sue Coke for false advertising even though the beverage maker has apparently met the statutory requirements of a separate federal labeling law of the Food and Drug Administration. The Justice Department actually backs Coke in saying Pom doesn't have a case, noting that regulations allow labels to describe the flavor of the juice rather than its predominant ingredients.
Pom doesn't necessarily disagree with that, but it says there need to be limits -- otherwise, instead of that eyedropper's worth of juice, a company could simply add "two microns" worth and call it a day.
Labeling has recently taken on greater prominence as food and drink manufacturers seemingly fudge their ingredients lists to give their products a more wholesome appearance. Consumers are increasingly reading product labels and rejecting those that contain artificial ingredients and sweeteners.
There's been a backlash against companies calling sugar in their yogurt and other products "evaporated cane juice," dairies that want to hide the fact that their milk is artificially sweetened with aspartame, and beverage companies calling their drinks "natural" when they contain some very unnatural, processed, synthetic, and genetically modified ingredients.
Coke itself is very familiar with the problem, as Diet Coke sales have fallen through the floor because the drink contains aspartame. Consumers are abandoning diet soda en masse, opting instead for juices and other naturally flavored drinks, an outcome that may have informed Coke's decision to play up the pomegranate in its Minute Maid juice, even if it really only accounted for 0.3% of the total (there was even less blueberry juice in the beverage, just 0.2%).
While Coca-Cola may have followed the letter of the law with its labeling, it certainly didn't follow its spirit. The FDA correctly gives manufacturers labeling leeway when using juice blends, and the label of Coke's "Pomegranate Blueberry" juice notes it is a blend of five different juices -- though it's mostly apple and grape. Yet there seems little denying it's trying to gain some halo effect from the pomegranate name and wants consumers to believe that's what the juice mainly contains. Calling it apple or grape juice with the barest hint of pomegranate somehow doesn't have the same cachet.
Rather than trying to hoodwink consumers, manufacturers like Coca-Cola ought to realize we're looking for truth in advertising and will reward those who deliver. Giving us real foods and beverages, and not some lab-created or genetically modified substitute, will result in higher sales, while those companies that fail to do so, or obfuscate the real source of ingredients, will see their sales punished in the marketplace.
Truth in labeling
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Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Coca-Cola and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. 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.