Food & Beverage Crystal Ball: Trends we’re following



October 25, 2021

Food, Beverage & Agribusiness Newsletter

Author(s): Anthony V. Bova II, Rachel L. Conn, Jennifer A. Jovcevski, Ian T. O'Banion, Ben Reiter, Tyler Savage, Tracey B. Scarpello, Marissa B. Wiley

What’s the Impact?

In the 2021 fourth-quarter edition of Nixon Peabody’s Crystal Ball newsletter, our Food, Beverage, & Agribusiness (FBA) team shares insights into various industry trends, including:

  • US TTB labeling guidance
  • TikTok influencers collaborating with food and beverage companies
  • Surging natural gas prices in Europe
  • Advancing gender and racial equity in the retail, CPG, and grocery industries
  • FDA guidance aims to reduce sodium consumption
  • Nixon Peabody LLP and WSP USA Virtual Series (including OSHA, sustainability disclosures, and indoor food growing)

We will continue to watch closely as these issues, and others, unfold in the months ahead and as we transition into 2022.

Get it right the first time: US TTB labeling guidance

In May 2021, the US Alcohol and Tobacco Tax and Trade Bureau (“TTB”) issued guidance and helpful tips for alcoholic beverage companies seeking quicker product label approvals. Because applications for certificates of label approval, or COLAs, are often rejected or returned to applicants due to easily avoidable issues, the TTB provided a series of tips to help applicants thwart any issues before they arise. Why are COLAs necessary? As background, a COLA authorizes the holder to bottle and remove (or import) an alcoholic beverage product that bears the label shown on the COLA. The regulatory goal for requiring COLAs is to provide comfort to the consumer that an alcoholic beverage product being consumed is properly described directly on the product’s container.

What are some common COLA missteps?

  • Net Contents Statement. A common misstep on COLA applications is that the net contents are incorrectly stated
  • Lack of Supporting Documentation. Another common issue is that applicants fail to submit the necessary supporting documentation
  • Specialty Inclusions. Applicants should also be aware of the need to include certain specialty disclosures on their COLAs, including with respect to organic claims and allergens

In light of these potential pitfalls and specialty considerations, COLA applicants should consider seeking legal counsel before starting the application process to ensure they submit comprehensive, correct, and complete documentation the first time. Anthony Bova II

Emerging trend: Food and beverage industry joins forces with TikTok influencers to build brands

In today’s increasingly virtual world, visibility on a variety of social media platforms is a marketing must-have. How companies leverage social media continues to evolve, but one powerful trend is stepping into the limelight (or, should we say, the ring light): leveraging the brand-building power of influencers.

Brands are realizing, and capitalizing on, the value that influencers bring, which could enhance their business, but there are many legal considerations to keep in mind. For example, it is important to memorialize the relationship between the influencer and the brand in a written agreement, which often includes an equity-as-compensation component. The characteristics of that equity compensation are highly customized and sensitive, which requires a specialized knowledge of corporate structures and brand dynamics.

As influencers continue to succeed at raising the profile of food, beverage, and agricultural products, they are becoming an integral part of brand marketing strategy. Leveraging influencers, brands are reaching all potential audiences, with the added bonus of feedback on the needs of their consumer via the direct line that influencers have with their viewers. The most successful brands will be those with a long-term digital strategy with the capability to react quickly to momentary trends. Marissa Wiley

Surging natural gas prices are causing food and beverage shortages in Europe — Is the US next?

The rising cost of natural gas has led to warnings that European consumers should brace for shortages in pork, poultry, and carbonated beverages. The potential shortage stems from a lack of carbon dioxide that is used for processing meat and carbonating beverages and is often obtained as a by-product of fertilizer production. There appear to be numerous factors contributing to the high natural gas prices, including: increased demand as economies recover from the pandemic, Hurricane Ida causing production facilities to go offline, extreme cold and heat events that have depleted seasonal reserves, low wind and hydro production, and (at least in Europe) limited supply from Russia. While the US has also seen rising natural gas prices, they have yet to reach the heights that Europe is experiencing and North American gas producers appear prepared to ramp up production if prices remain high. However, natural gas storage reserves in the US are significantly lower than normal for this time of year, global competition for supply is increasing, and the cold winter months when gas demand peaks have yet to arrive. Even if natural gas prices don’t directly disrupt food and beverage production in the US, consumers would be wise to prepare for potential disruptions to global food and beverage supply chains if the cost of natural gas remains high globally. Ben Reiter

Advancing gender and racial equity in the retail, CPG, and grocery industries

According to a July 2021 study by Deloitte, 35% is the average percentage of Fortune 500 board members in the consumer staples (food) industry who identify as women or minorities.  47% is the average percentage of board members in the nonfood consumer staples industry who identify as women or members of underrepresented groups. Many CPG (consumer packaged goods) retailers and grocers are striving to balance gender and racial equity, not only to ensure they are comprised of a more diverse workforce but also to invest and support women and minority-owned CPG businesses in the chain of supply and as a network.

As we continue to explore marketplace shifts in a post-pandemic world, I predict we will continue to see an increasing range of company blueprints, proposals, and tactics to invest in, employ, and empower women and minorities in the CPG retail and grocery industry. Major food retailers have the greatest spheres of influence in this space and can set an example to advance equity in the marketplace by adding more companies owned by women and other historically marginalized people to their supplier network, marketing to consumers with more inclusive messages, and locating their operations to help address food deserts in underserved areas. Women or minority business owners who are interested in investing in another minority-owned business, contracting with minority-owned suppliers and distributors, merging or acquiring another minority-owned business, or starting up a business, should consult with legal counsel well versed in DE&I (Diversity, Equity & Inclusion), like Nixon Peabody LLP, in order to maximize their success and help turn the tables toward inclusivity. Jennifer Jovcevski

FDA guidance aims to reduce sodium consumption

Research indicates that 70% of the average American’s total sodium intake comes from sodium added during food manufacturing and commercial food preparation. As a result, the Food and Drug Administration (FDA) issued new guidance calling for food manufacturers, chain restaurants, and food service operators to voluntarily reduce the amount of sodium in the processed, packaged, and prepared foods they produce. The targets in the guidance seek to decrease average sodium intake from approximately 3,400 milligrams to 3,000 milligrams per day, which is about a 12% reduction over the next 2.5 years. The FDA stated that these guidelines are the first step in a multi-year campaign to gradually lower the nation’s sodium intake to closely align with current dietary guidelines—suggesting individuals consume no more than 2,300 milligrams (or 1 teaspoon) of sodium per day. The FDA urged the food industry to meet short-term goals as soon as possible. Further, the agency said it would continue a dialogue with industry members as it monitors the sodium content of the food supply to evaluate progress, noting that similar “voluntary and gradual approaches” have been successful in Canada and the U.K. We will continue to monitor the impact of this guidance on the FBA industry. Tracey Scarpello

Nixon Peabody LLP and WSP USA Virtual Series

Nixon Peabody LLP and WSP USA are teaming up to address important Food and Beverage industry trends, and share useful insights on how best to navigate the issues affecting businesses.

  • OSHA in a post-COVID world

    In the first program of the Nixon Peabody and WSP USA four-part food and beverage webinar series, we discussed the topics that employers should consider as businesses reopen and the COVID-19 situation evolves. It is critical that companies stay informed about new occupational safety and health regulations, guidance, trends, and enforcement. Rachel Conn

  • Sustainability disclosure and reporting trends

    In the second program of the Nixon Peabody and WSP USA four-part webinar series, we discuss various topics related to sustainability disclosure and reporting trends that food and beverage companies should consider. While sustainability disclosure is currently voluntary, now more than ever companies are increasingly recognizing its importance. Tyler Savage

  • Leasing to indoor food growing & cannabis companies

    In the third program of the Nixon Peabody and WSP USA four-part webinar series, we discuss the legal and environmental frameworks that impact indoor farming companies and the landlords leasing to them. Ian O'Banion

 

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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