Food & Beverage Crystal Ball: Trends we’re following



October 16, 2018

Food, Beverage & Agribusiness Newsletter

Author(s): Lori B. Green, Jenny L. Holmes, Lauren M. Michals, Alison B. Torbitt

Nixon Peabody has one of the leading Food, Beverage and Agribusiness (FBA) practices in the nation. In this edition of the quarterly Crystal Ball Newsletter, our FBA lawyers present short summaries of some recent trends we have seen across the industry.

Nixon Peabody has one of the leading Food, Beverage and Agribusiness (FBA) practices in the nation. In this edition of the quarterly Crystal Ball Newsletter, our FBA lawyers present short summaries of some recent trends we have seen across the industry. The application of new and exciting technology raises some unique legal issues, especially as their implementation increases in popularity. Similarly, new and expected legislation raises a number of potential issues regarding consumer exposure warnings for food and beverage companies. We will continue to watch closely as these issues unfold in the months ahead.

Soaring to new heights: Cannabis products to fly high

As of October 17, 2018, cannabis is legal for recreational and medicinal use throughout Canada, legal for recreational and medicinal use in nine U.S. states as well as Washington, D.C., legal for medicinal only use in twenty-two U.S. states and on November’s ballot for legal recreational use in Michigan and North Dakota. However, cannabis remains illegal at the federal level in the U.S. As more states legalize cannabis and food and beverage companies enter the cannabis market in Canada, food and beverage products infused with THC or CBD are likely to be the largest disrupter to the industry in years. We expect cannabis consumables will transform the alcohol industry, just as the end to prohibition did 85 years ago, and impact the industry’s entire supply chain. We also expect demand for cannabis products will grow exponentially as legalization occurs and consumer preferences shift as the cannabis market matures. The market potential for cannabis products is enormous and, as such, this year has seen a surge in M&A and investment activity in the cannabis industry, which we predict will continue at an even greater pace next year. Lori Green

Cloudy outlook: Privacy concerns with coffee drone

Fitness trackers have unfettered access to hosts’ lives. They record heartbeats, sleeping patterns and physical exertion. And now, they are on the verge of being used to deliver coffee. IBM has obtained a patent for a coffee drone that will not only deliver coffee, but can predict one’s desire or need for another cup. Drones could be used in offices, restaurants or public settings to deliver coffee to the person who ordered using facial- or voice-recognition software, Bluetooth or another electronic ID tag. This has raised concerns about individual privacy, especially since it uses an individual’s personal information to predict when one needs caffeine by using the fitness tracker to assess the user’s sleep patterns, wake-up time and heart rate. If granted access to an individual’s medical history, the device also purports to be able to determine what, if any, medications might interact poorly with caffeine and warn or not serve the user. Where exactly is the line between where and when it is okay to invade privacy? What if it improves health by creating efficiencies? The answers to these question remain murkier than ever. Jenny Holmes

The wild west: California Proposition 65 continues

California Proposition 65 private enforcers are increasingly focusing their efforts on the food industry. For instance, there have been recent claims concerning acrylamide in food products ranging from breads to snack foods to nut products, as well as lead, cadmium and arsenic in other foods and nutritional supplements. As new regulations, effective on August 30, 2018, place greater responsibility on manufacturers and internet and catalog retailers—notwithstanding their geographic location—to provide warnings, it is likely enforcers will increasingly target these entities. Therefore, food retailers must evaluate their programs to ensure compliance with these new warning requirements. In addition, retailers need to be aware of the new short window to resolve alleged violations. In relation to these increased claims, the U.S. FDA and the California agency that oversees Proposition 65 heightened their evaluation of cancer and reproductive harm warnings, including those involving staple foods like cereals, rice and coffee. This development opens the possibility for successful preemption and First Amendment defenses. As a result, we anticipate increased regulatory and legal actions addressing the scope and application of Proposition 65 to foods, including pending regulations on how to assess the exposure level from consuming foods and what foods may not require warnings. Lauren Michals

Growing momentum: How blockchain is influencing the food and beverage industry

Blockchain is a list of records or “blocks” linked using cryptography to create a ledger of verifiable activity. Its usage is gaining momentum in the food and beverage space to track everything from raw product suppliers to end-of-life statistics. Recently, Walmart announced it will mandate its “fresh leafy greens” food suppliers to use blockchain. By 2019, they will be required to upload information like field locations, harvest times and E. coli or salmonella detections. Pilots have also begun—through a partnership between Walmart and IBM—for fruit and pork. Additionally, Unilever, Nestle and Tyson Foods are investing in blockchain-based initiatives. Similarly, blockchain is helping establish a “waste-to-profit” marketplace. Each year, ten million tons of plastic enter oceans and one trillion dollars is lost when recyclable/reusable waste enters landfills. Startups like Australia-based Sustainability Cloud are attempting to match waste-to-local profitable solutions and products. This process enables companies to track, document and verify whether waste gets recycled/reused, and to identify ways to encourage recycling by revitalizing the recycling and remanufacturing industry. Companies like Coca-Cola have already partnered with Sustainability Cloud. As the uses for blockchain in the food and beverage industry evolve, we will monitor its impact. Alison Torbitt

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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