RPC Bites

RPC Bites #32 - breaking news: the EU rejects Amendment 171 on dairy descriptors, mixed alcoholic and alcohol-free beer packs hit Tesco's shelves and the CMA issues draft guidance on green claims

27 May 2021. Published by Ciara Cullen, Partner and Ben Mark, Partner

Welcome to RPC Bites. Our aim in the next 2 minutes is to provide you with a flavour of some key legal, regulatory and commercial developments in the Food & Drink sector over the last fortnight… with the occasional bit of industry gossip thrown in for good measure. Enjoy!!

Plant-based victory as the EU rejects Amendment 171

Last November, RPC's food and drink blog covered a series of votes by the European Parliament on plant-based food labels which can be found here. At the time, MEPs voted against banning the use of meat-related terms for plant-based products but voted in favour of imposing tougher restrictions on the labelling and packaging of plant-based dairy alternatives via Amendment 171 (the Amendment).

Using dairy terms e.g. "yoghurt" for non-dairy products is already prohibited, but the amendment sought to prohibit the use of dairy descriptors that equate plant-based products to their dairy counterparts, e.g. "yoghurt-style" or even "creamy". The Amendment would also prohibit factual allergen information linking plant-based products to dairy products and the use of packaging for plant-based products which may be too similar to the packaging of dairy equivalents. Science-based green claims comparing plant-based and dairy products were also set to be banned.

Now, having come before the EU Council and Commission, the Amendment has been withdrawn following major backlash from the plant-based sector and consumers. Major players in the plant-based arena such as Oatly and ProVeg led a petition against the Amendment, which received approximately 456,000 signatures and was backed by key environmental campaigners, including Greta Thunberg.

It remains to be seen whether the dairy industry will fight back and continue lobbying to protect so-called dairy terms.

The UK's first 4-pack with a no/lo option coming to a Tesco near you

Keeping up with the rising demand for no/lo alcohol whilst still catering to the traditional alcohol market, Tesco has released a mixed 4 can multipack of alcoholic and no/lo beers. In an industry first, each cardboard crate of the new multipack will contain 3 alcoholic beers and 1 alcohol-free option.

Not only will the move capitalise on the lucrative no/lo market, which has seen over 40% growth at Tesco over the last couple of years, but it will also tap into the popular craft beer sector - the demand for unique crafts has increased by 75% at the supermarket over the last two years.

The beers are curated by independent Manchester brewer, Cloudwater, in collaboration with 4 UK brewers, each of which are working to raise awareness and funds for causes affecting their local communities. Supporting what Cloudwater believes to be the only 100% black-owned breweries in the UK, as well as LGBTQ+ causes and vegan and socially responsible choices, the ethical beers are likely to draw a crowd regardless of the no/lo offering.

With health and wellbeing increasingly becoming a priority for shoppers, we will no doubt see more innovative no/lo sales solutions in the future.

CMA issues its draft guidance on green claims

Last November, the CMA announced that it would be investigating whether 'green' claims relating to the environmental sustainability of a product could be misleading consumers in breach of UK consumer protection law. For a more in-depth analysis, see RPC's blog on the CMA investigation here.

With ethical spending at an all-time high last year following the rise of the "conscious consumer", the CMA expressed its concern that businesses would be tempted to capitalise on this demand by making misleading or even false claims about the environmental impact of their products.

On 21 May, the CMA issued its draft guidance on environmental claims on goods and services for consultation. The guidance outlines the following 6 core principles which businesses must follow when making green claims in order to protect consumers. In short, environmental claims must:

  1. be truthful and accurate;
  2. be clear and unambiguous;
  3. not omit or hide important information;
  4. only make fair and meaningful comparisons;
  5. consider the full life cycle of the product; and
  6. be substantiated.

The consultation invites consumers, businesses and other key stakeholders to provide their opinion on the principles by 16 July 2021, with the aim of publishing final guidance for businesses at the end of September.

Nakd bars - confectionary or cake?

Attention: Nakd bars are officially confectionary and not cakes. Morrisons has been battling with HMRC for what it claims was a £1 million overpayment of VAT between 2014 and 2018 for healthy snack brand Nakd's popular fruit and nut bars.

Readers will probably remember the renowned Jaffa Cake fiasco back in the nineties, when Jaffa Cakes were ruled to be cakes rather than biscuits and therefore did not attract VAT. In a similar fashion, Morrisons contended that the Nakd bars were cakes as opposed to confectionary and so should be zero-rated for VAT purposes. In February of this year, following HMRC's refusal to repay the VAT on the bars after it classified them as confectionary, Morrisons appealed to the tax tribunal.

Over a three-day hearing (and various tasting sessions), the judge analysed the bars to establish their true category. Despite offering carrot cake, blueberry muffin and banana bread flavours, the judge found that Nakd bars are in fact confectionary. Of note, was the fact that the bars have a high sugar content, are sweet to taste and are eaten with fingers. The overarching sentiment was that food classification did not need to be unnecessarily complicated; if it doesn't look like cake, contains different ingredients to cake and would be out of place on a plate, it's likely that the food product is not cake.

For a similar food-based VAT debacle, check out issue 18 of RPC Bites here, where we reported on the Irish Supreme Court's decision that the sugar content of Subway's 'bread' is so high that it falls outside the legal definition of 'bread', for the purposes of the Irish VAT rules.

Digital Deposit Return Scheme coming to a retailer near you

As covered in more detail in our Retail Therapy Blog here, a deposit return scheme (DRS) allows empty drinks containers to be returned to a collection point via so-called reverse vending machines. Such schemes have already been deployed across Europe, Australia, Canada and the USA with the world leader in this space, Norway, claiming to have recycled of 97% of plastic drinks bottles sold through its scheme. The traditional DRS charges a deposit for the packaging, which is repaid to the customer when they return their packaging to an allocated reverse vending machine, the aim being to reduce the carbon footprint associated with the 14 billion plastic drinks bottles, 9 billion drinks cans and 5 billion glass bottles used in the UK each year.

However, the UK launch of the DRS has suffered delays following the Covid-19 pandemic and it is now set to be rolled out in late 2024 in England and Wales and July 2022 in Scotland. A consultation on the England and Wales schemes is currently underway and available to view here.

In a bid to combat the delay and cost of the original reverse vending machine plan, a host of big names, including Diageo and the British Retail Consortium intend to trial a Digital DRS. Put simply, by placing unique barcodes on packaging, the Digital DRS would allow customers to scan the code at a kerbside collection or "smart bin" to indicate that their packaging has been recycled. The hope is that this method will incorporate current kerbside recycling infrastructure to reduce both the cost and the carbon footprint associated with installing new reverse vending machines, the cost of which has been estimated to be over £1 billion. It should also alleviate long queues and build upon home recycling habits.

For more information, the Digital DRS Industry Working Group's written evidence can be found here.

Distin-gü-ished dessert brand acquired by Exponent

In a sweet addition to its current portfolio of food and drink businesses, Exponent (private equity firm and former owner of Quorn) has recently acquired popular dessert brand, Gü.

Pete Utting, Managing Director at Gü is hopeful for the opportunities that the new partnership will provide stating that: "the team has a deep understanding of the food and drink sector and a strong track record in adding value to well-known brands". With Simon Davidson, Senior Partner at Exponent, recognising the brand's potential for growth, both in the UK and internationally, adding that it has "the opportunity to create a truly global, premium indulgence brand".

Already occupying around 20% of the yoghurt/dessert market share in the UK and recording the largest growth in that category last year, we look forward to seeing what is next for Gü as it sets its sights global.

58 years of export health certification...

An increase in red tape was almost inevitable in the aftermath of Brexit for many exporters, but a recent study by a food exporters trade body has found that food exporters have spent a collective 58 years filling out export health certificates in 2021 following new post-Brexit requirements.

As reported on frequently in RPC Bites, the certificates are needed to ship live animals, animal products and composite food products amongst other products from Great Britain to the EU. The 58 years encompasses a whopping 89,000 certificates; a 110-fold increase from the 806 certificates issued last year. There have been calls for the UK to establish electronic certification methods to enable faster processing or alternative ways to handle exportation requirements efficiently based on product-specific requirements.

One can anticipate that the total time spent on certification in 2021 will easily surpass the age of retirement; however, many of the certifiers themselves won't be able to run into the freedom of retirement just yet with full-time checks due to commence in October.