Food & Beverage Crystal Ball: Trends we’re following

January 04, 2021

Food, Beverage & Agribusiness Newsletter

Author(s): Laura B. Bacon, Michael J. Cooney, Lori B. Green, Lauren M. Michals, John Ruskusky, Marissa B. Wiley, Paul Lazdowski

In the 2021 first-quarter edition of Nixon Peabody’s Crystal Ball newsletter, our Food, Beverage, & Agribusiness (FBA) team shares insights into various industry trends, including personalized nutrition, COVID-19–related relief funds and donations, at the impacts of the Illinois Biometric Privacy Act, an interesting rise in California’s Proposition 65 claims, and cannabis-related legalization. We will continue to watch closely as these issues, and others, unfold in the months ahead and as we transition into 2021.

What should food and beverage companies consider when offering greater nutrition personalization to their customers?

As individuals gain interest in optimizing their health, companies are looking to personalized nutrition as a means of distinguishing their product offerings. Many consumers are tempted — and entertained — by the prospect of obtaining the “perfect” nutritional products for their individualized needs. However, personalization raises data privacy concerns, since it requires the collection of sensitive data by nature. The more health-specific the questions, the greater the privacy concerns become for collecting and storing customer data. In addition, companies must ensure that the marketing of their personalized products does not over-promise and under-deliver. If the personalized product appears to promote being “healthier” or “more beneficial” for a customer than a non-personalized counterpart, the company should be prepared to share the information supporting that claim. Otherwise, there is a risk of regulatory scrutiny or consumer false advertising claims. Companies that seek to increase their options for personalized nutrition should consult their privacy and regulatory counsel to ensure they have implemented a program that protects both themselves and their consumers. Kristin Jamberdino

COVID-19–related relief from the food and beverage industry

Throughout the COVID-19 pandemic, the food and beverage industry has been particularly adept at identifying points of community need and then deploying resources to meet those needs. Many industry members with strong brand recognition — and the public recognition and support that comes with it — have found this convening power to be a vital force for convincing others to volunteer time and/or make charitable gifts. In-kind donations constitute an important resource for social good. While the charitable income tax treatment of in-kind gifts is not as favorable as some other forms of charitable donations, there are still strong incentives for deploying valuable inventory to the public. In addition, the industry has vast supply chain expertise, with a laudable ability to channel products and resources where they are most needed. As a result, American food banks and pantries — and the growing numbers they serve — have benefitted greatly from these resources.

Nevertheless, some industry sectors suffer under an existential threat (e.g., restaurants), while others — such as grocery stores — have performed strongly. Remember to consult an attorney if you are considering a donation or establishing a charitable support organization. Michael Cooney

How is the Illinois Biometric Privacy Act (BIPA) continuing to affect the food & beverage industry?

Failure to comply with BIPA may lead to statutory damages for collecting an individual’s biometric information (e.g., fingerprint, retina, or facial scans). Relevant to the food and beverage industry, a fingerprint time clock or fingerprint access to a cash register constitutes the collection of individual biometric information. In addition, employers, retailers, and restaurant owners that have installed thermal scanning or other COVID-19–related safety precautions must investigate whether the technology they are using collects biometric information as it is defined under the law. Many companies have implemented the written consents required by BIPA, but food and beverage businesses should remember that these consents should be drafted to cover vendors that may have access to any collected biometric information. Section 15(d) of BIPA allows for a claim against a private entity that discloses or otherwise disseminates a person's biometric information without consent. Thus, there has been an increase in lawsuits filed against companies on the basis that written consent covers the company but not the timekeeping vendor, who may have access to the biometric information, whether directly or through the cloud.

Moreover, BIPA claims continue to be filed against non-employers — from vending machines that allow customers to “log in” to purchase an item to the timekeeping vendors directly. For entities that do not have an employer-employee relationship with the user, there should be implementation of written e-consent policies that require electronic consent by customers and employees. John Ruskusky, Laura Bacon

Will companies see relief from California Proposition 65 claims in the future?

Claims brought under California’s Proposition 65, which requires companies to place a warning regarding cancer and reproductive harm on products if the products could cause exposure to any one of over 900 chemicals, will not disappear anytime soon. However, some limited relief for acrylamide-related claims for cooked or heat processed foods may be on the horizon.

In 2020, we saw an increase in Proposition 65 claims related to food — particularly for acrylamide and lead — in a variety of products, including cookies, baked goods, almonds, processed seafood, and canned fruits. For example, in 2020, private enforcers issued more than 400 Proposition 65 Notices of Violation for acrylamide in food products. There is a pending regulation that, if finalized, will set acceptable acrylamide levels for a number of foods, such as bread, cookies, potato- and sweet potato-based products, waffles, and almonds. This regulation will provide guidance to the industry and potentially lessen the number of Proposition 65 private enforcement actions. Even without formal adoption of this regulation, the proposed acceptable acrylamide levels provide some guidance to the food industry for those products. Information about the pending regulation can be found here. Lauren Michals

How will an increase in legalized cannabis impact the food & beverage industry?

In 2021, we anticipate regulated cannabis legalization, including for hemp cannabidiol (CBD), to accelerate. Support has spiked the past few years, as most recently evidenced on election night 2020: Arizona, New Jersey, Mississippi, Montana, and South Dakota voted to legalize, regulate, and tax cannabis. These votes raise the number of states with legalized medical marijuana to 36, and the number of states, including the District of Columbia, with legalized cannabis for adult recreational use to 15. In addition, in late 2020, the U.S. House of Representatives approved a bill to federally decriminalize marijuana. The Marijuana Opportunity Reinvestment and Expungement (MORE) Act would allow states to devise cannabis policies without federal interference and establish a cannabis sales tax to fund a suite of restorative justice programs. While there are hurdles to navigate before cannabis is legalized federally, momentum is building. Food and beverage companies must remain patient. Although public and congressional pressure will push the Food and Drug Administration (FDA) to clarify pathways to market and, if the data support it, sign off on CBD-containing products, it is unclear whether the FDA’s cannabidiol enforcement policy will be reviewed and approved by the Office of Management and Budget, which has had it since July 2020. Lori Green, Paul Lazdowski

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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