POM Seeks to Prevent Coke From Juicing Sales

Source: Minute Maid.

It's sad, really, that the best defense Coca-Cola (NYSE: KO  ) could come up with against charges it was snookering the public with deceptive advertising was that federal law doesn't let competitors file lawsuits against it, since that argument seems to validate the allegations. Perhaps worse for the soda maker is that not even the Supreme Court would buy into the argument. Although the high court didn't weigh in on the merits of the lawsuit, only that the case can proceed in lower courts, it represents a setback for Coke, at least in the court of public opinion.

Pomegranate juice maker POM Wonderful alleges the beverage company's Pomegranate Blueberry juice deceives the public into believing the drink is actually made mainly from those fruits when in reality it's almost all apple juice -- 99.4%, in fact -- with just a smidgen of blueberry and pomegranate added to allow Coke to claim otherwise. 

Coke hasn't answered the charge of whether it's being deceptive, but instead maintains POM is prohibited from bringing a case against it because the federal Food, Drug & Cosmetics Act gives the FDA jurisdiction over labeling, and the regulatory allows beverage names to use the names of the juices providing the flavor, even if those juices don't provide the bulk of the contents.

POM countered that under the Lanham Act, private-party lawsuits are permissible to protect against unfair competition by misrepresentation of products. The juice maker says its own more expensive pomegranate blueberry juice is 85% pomegranate and 15% blueberry, and that the cheaper knockoff is hurting sales.

While the lower courts sided with Coke, the Supreme Court backed POM's case, saying that Congress had ample opportunity to speak on the competing regulations and, having chosen not to, is purposely allowing them to coexist, permitting competitors to bring civil lawsuits to protect their commercial interests, while also protecting public health and safety with FDA regulation. During arguments, Justice Kennedy suggested Coke had "a very difficult case to make" if it was arguing its label was fair to consumers.

Source: POM Wonderful.

That may be, but Coke probably has less to worry about in the courtroom than in the court of public opinion. Over the years, POM has sued other juice makers with similar claims, including PepsiCo, Ocean Spray, and Welch's, but has lost each time. But consumers are becoming more savvy about the foods they're eating and the beverages they're drinking.

Diet soda sales in particular have been rapidly declining because of concerns over the artificial sweeteners they use. According to Beverage Digest, Diet Coke volumes fell 6.8% last year while sales were down 6.9% as it's sold nearly 20% fewer cases of Diet Coke since 2007. Not even regular Coke has escaped the implosion, falling by around 10% over the same period.

Now as it becomes more widely publicized that its so-called pomegranate blueberry juice is virtually neither, containing just 0.3% of the former and 0.2% of the latter, consumers may feel indignant that they've been tricked.

Of course, POM Wonderful knows something about deceptive advertising, too, as the FDA and the FTC are pursuing it for health claims it's made about the benefits of pomegranates, saying they're not supported by science.

Regardless of how the court case turns out, Coca-Cola's attempt to juice sales by playing fast and loose with its labeling could cause consumers to sour its sales.

Warren Buffett's biggest fear is about to come true
Warren Buffett just called this emerging technology a "real threat" to his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. It won't be long before everyone on Wall Street wises up, that's why The Motley Fool is releasing this timely investor alert. Click here to learn more about what's keeping Buffett up at night and the one public company we're calling the "brains behind" the technology.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3000322, ~/Articles/ArticleHandler.aspx, 9/4/2015 6:34:16 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


Today's Market

updated 9 hours ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 -16.48 -0.35%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 4:00 PM
KO $39.16 Up +0.26 +0.67%
Coca-Cola CAPS Rating: ****