From aesthetics to functionality, packaging can play a critical role in a product's success or failure. Add the increasing demand for eco-friendliness, and food and beverage manufacturers may find themselves spending as much time and energy on what's outside a product as what's in it. U.S. demand for converted flexible packaging is expected to reach $20.7 billion in 2019, representing an increased transition from rigid to flexible packaging. Single-serve, resealable and sustainable packaging options are also making strides.

Table of Contents

• Viewpoint
  by Judie Bizzozero
• Packaging 2.0
  by Judie Bizzozero
• HPP Options Boost Juice Category
  by Melissa Kvidahl
• Case Study: Dreaming Cow
  by Joanna Cosgrove
• Case Study: Tio Gazpacho
  by Danielle Rose

Takeaways for Your Business

• Between 2010 and 2014, flexible packaging use grew 56% in consumer packaged goods (CPG) launches.
• Popular for organic, artisanal and craft products, glass jars convey prestige and a more homey feel.
• High-pressure processing (HPP) in plastic bottles reinvigorated the fresh beverage category.

San Francisco’s effort to crack down on soda consumption suffered a defeat this week after a panel of federal appeals court judges found unconstitutional an ordinance requiring a warning on certain types of advertising for sugar-sweetened beverages.

In holding a district court judge abused his discretion, the Ninth Circuit ruled the American Beverage Association and two other associations were likely to prevail on their claim that the ordinance chilled commercial speech, offending the First Amendment.

Adopted in 2015, the ordinance would require the following disclosure on advertisements for certain sugar-sweetened beverages posted on billboards, structures or vehicles: “WARNING. Drinking beverages with added sugar(s) contributes to obesity, diabetes and tooth decay. This is a message from the City and County of San Francisco."

Writing for the court, Circuit Judge Sandra S. Ikuta noted the government failed to meet its burden of showing the warning was entirely factual, uncontroversial and not unduly onerous. She cited FDA’s statements contrary to the warning that added sugars are “generally recognized as safe" and “can be part of a healthy dietary pattern when not consumed in excess amounts."

Commenting on the misleading nature of the warning, the judge wrote, “By focusing on a single product, the warning conveys the message that sugar-sweetened beverages are less healthy than other sources of added sugars and calories and are more likely to contribute to obesity, diabetes, and tooth decay than other foods. This message is deceptive in light of the current state of research on this issue."

The appeals court also found the required disclosure was unduly burdensome.

The requirement for a black box warning covering 20 percent of an advertisement “overwhelms other visual elements," wrote Ikuta, who pointed out major companies manufacturing sugar-sweetened beverages filed declarations, asserting they would remove ads from covered media if the ordinance takes effect.

“Because the ordinance is not purely factual and uncontroversial and is unduly burdensome, it offends the associations’ First Amendment rights by chilling protected speech," Ikuta wrote. She was joined in the opinion by J. Michael Seabright, Chief U.S. District Judge in the District of Hawaii, who was one of three judges designated to hear the appeal.

In a concurring opinion, Circuit Judge Dorothy W. Nelson said she agreed with the judgment because “the ordinance, in its current form, likely violates the First Amendment by mandating a warning requirement so large that it will probably chill protected commercial speech."

However, she described as “tenuous" her colleagues’ conclusion that the language in the warning is controversial and misleading.

2015 Lawsuit

In July 2015, the American Beverage Association, California Retailers Association and California State Outdoor Advertising Association filed a lawsuit in federal district court, challenging the ordinance one year before it was scheduled to take effect.

In a declaration filed with the court, PepsiCo discussed the potential impact of the required disclosure on its advertising.

“Because of its size, format, and content – including its all-capitals ‘WARNING’ – PepsiCo is concerned that the required warning would substantially overwhelm PepsiCo's intended messages on advertisements impacted by the ordinance," the company noted.

Responding to the city’s message in the same advertisement, PepsiCo said, would not be feasible.

“Trying to do so would turn an advertisement into a scientific debate," the company asserted. “Given the requirements imposed by the city, there would also be too little room left for the original message."

Edward M. Chen, a U.S. District Judge in the Northern District of California, denied the associations' motion for a preliminary injunction, but he nonetheless granted a request to prevent the ordinance from taking effect pending an appeal.

Chen found the ordinance was likely accurate and factual, rejecting the associations’ arguments that the ordinance suggests it’s dangerous to drink beverages with added sugar regardless of a person’s diet or lifestyle and that consuming such drinks uniquely contributes to obesity and diabetes.

The required warning “only says that SSBs [sugar-sweetened beverages] ‘contribute’ to obesity and diabetes, not that they will necessarily result in diabetes or obesity in any particular case; nor does the disclosure state that SSBs are the sole or even dominant cause," Chen wrote in his 2016 order, denying the associations’ request for a preliminary injunction.  

But in holding the lower court abused its discretion, the Ninth Circuit’s Ikuta noted the associations were likely to prevail on their constitutional claim and met the other requirements for a preliminary injunction—including a demonstration that they were likely to suffer irreparable harm without the requested relief.

American Beverage Association, San Francisco City Attorney Respond

The Ninth Circuit’s ruling “affirms our position that the San Francisco warning mandate not only violates the constitutional right to free speech but it is also deceptive and misleading to consumers," the American Beverage Association said in an emailed statement.

Added the Washington-based association: “America's beverage companies believe there are better ways to help people reduce their sugar consumption. That's why we're taking steps to reduce sugar in our beverages, offer more choices with less sugar and put calorie information up front so people can make informed decisions about their drinks."

John Coté, communications director for the Office of San Francisco City Attorney Dennis J. Herrera, said his office was “disappointed" in the Ninth Circuit’s ruling.

“We’re analyzing the decision and evaluating all of our options," he said in an emailed statement. “San Francisco remains committed to being a leader when it comes to protecting the health of our residents, especially our children."  

Editorial credit for Amazon photo: Jonathan Weiss / Shutterstock.com

For food companies, if they haven’t created consumer “brand love" already, they might want to think about getting some. Why? Because loved brands will prosper in this new era, whatever it may become. For now, let’s call it the “click and wait" era.

First, the implications for food brands. Amazon doesn’t “do" small; its business model is predicated on moving critical masses of merchandise. Niche, specialty brands will feel two pressures. Foremost, their margins are going to be reduced significantly. Amazon leaders didn't even meet their new employees, and yet everyone was clear that on Day 1 prices were coming down. If the small specialty guys can’t react, they will be replaced by Big Brands A, B, C, etc.

During the food renaissance, many big brands have tuned in to consumers’ new expectations, and have cleaned up their product labels accordingly. In turn, they just may reconnect with some lost consumers and rekindle latent brand love. Big brands also have reinvented themselves via acquisitions and innovations. With Amazon (and all things online) critical mass matters. If you can’t supply the nation, you may not get the attention of retail partners trying to feed the online beast.

Specialty brands aren’t going to die, just like big brands were never going away. But it is time for them to grow up and make the investments to align with the right partner to feed an emerging and changing market. The challenge? Food remains a sensory sell, and an online post without sensory cues can only motivate purchase so much. Consumers still will want to shop for the items they hold nearest and dearest to their hearts. No one believes the bulk of groceries will be bought online, but even a conservative small share is big business. And again, Amazon does not do small.

Why does brand love matter? Because those with it will win, and those without it will be squeezed. Losing brands will be forced to focus on transactions and become low-cost producers. They will sell a lot of “pantry" items at low margins. Winning brands won’t completely defy oncoming margin pressures, but the benefits of being a click away from your target consumer will help outweigh any sacrificed margins.

Our research has shown that consumers will go out of their way, pay extra and even hoard their loved food brands. What happens when it’s easier for consumers to get those loved brands? Business will be good. Loved brands will become more accessible to targeted consumers and will have a greater opportunity to speak to those consumers. How can a marketer not love that?

Finally, food marketers should think about the notion of “click and wait." Although this may temper some of the hysteria surrounding the revolution in our midst, the established food acquisition model in our culture lives on: consumer sees food, consumer buys food, consumer eats food. This food journey can take seconds, minutes, maybe hours, but rarely days. Are consumers going to let the convenience of clicking (and waiting) for their food replace their expectations of instant gratification? The answer is yes and no. Some categories and brands will fit a click-and-wait model better than others. Obvious items such as pantry items, supplies, small wares and shelf stable foods will grow at a much faster rate than refrigerated or frozen foods. Figuring how stronger online players fit into an overall distribution mix will be the trickier task for marketers.

One thing is clear: as retailers and trading partners get stronger, brands that have not formed an unbreakable bond with their target will get weaker. Creating Brand Love is the best bet as the climate changes.

** Foodmix’s Ben Finch and Bill Sherman will be speaking about building Brand Love during the “Developing and Delivering Clean Label Messaging" workshop on Friday, Sept. 29 at SupplySide West in Las Vegas.

While kids seek foods that appeal to their taste buds, parents are increasingly interested in better-for-you products they feel good about feeding their families. Many brands are responding through cleaner ingredient decks free from artificial additives or preservatives and featuring natural flavors and colors. Understanding trends and factors that influence kids’ food purchases can provide industry players with strategies to better position their companies and brands within the clean label food and beverage market.

Download this infographic to learn about trends and go-to-market opportunities for clean label food and beverages in the children’s sector.

For more information, visit Food Insider Journal’s “Cleaning Up The Kids’ Aisle.”

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While kids seek foods that appeal to their taste buds, parents are increasingly interested in better-for-you products they feel good about feeding their families. Many brands are responding through cleaner ingredient decks free from artificial additives or preservatives and featuring natural flavors and colors. Understanding trends and factors that influence kids’ food purchases can provide industry players with strategies to better position their companies and brands within the clean label food and beverage market.

Download this infographic to learn about trends and go-to-market opportunities for clean label food and beverages in the children’s sector.