Sales & Marketing

10 Nov 2011

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FGC Conference 2011: The Highlights

Last week, Peter Stubbs addressed over 200 food and grocery industry delegates at the annual New Zealand Food and Grocery Council Conference in Wellington. The conference focused on current and emerging trends in the food and grocery environment.

In this FYI, we summarise the three main areas of Peter's speech:

• legal update - what areas the watchdogs and enforcers are interested in right now;
• this year's emerging trend - food and grocery activism; and
• crystal ball gazing - our predictions of next year's hot legal issues for the food and grocery sector.

LEGAL UPDATE:
AREAS OF WATCHDOG INTEREST

The watchdogs have had a busy year pursuing companies for breaches of consumer protection legislation. They have focused on misleading labels on food and advertisements for rebates/cash back deals.

Misleading labels on food

In Australia, the Australian Competition and Consumer Commission (ACCC) has been paying particular attention to claims about the origin of food and food descriptors like "free to roam" and "fresh".

"Just Organic" Kangaroo Island Honey

The label on a honey product suggested the product contained either all or a significant proportion of honey from Kangaroo Island. The ACCC alleged the claim was misleading because while the honey sold did contain some Kangaroo Island honey, the proportion of Kangaroo Island honey in the product varied wildly - from less than 1% to around 50%.

"Free to roam" chickens

The ACCC is looking closely at advertising that suggests particular farming practices have been used when producing a product (for example, "organic" and "free range").

The ACCC is currently taking action against suppliers of chicken meat, alleging that their "free to roam" claims are misleading or deceptive because "free to roam" implies that the chickens were raised barns with substantial space. The ACCC considers that the population density of the chickens - around 20 per square metre - is not enough space for the chickens to "roam freely".

"Fresh" claims

The use of the term "fresh" continues to attract the attention of the ACCC, as consumers may be willing to pay a premium for "fresh" products (just as they may be for "organic", "free range" or "Fair Trade" products). A juice product called "Berri Australian Fresh" suggested that it only contained recently squeezed juice. The ACCC considered that the product's name was misleading because the juice actually contained a blend of fresh juice and aseptically stored juice.

Lessons

• claims that tout particular locations or attempt to exploit consumers' moral or ethical preferences are likely to be looked at more closely in the future; and
• the costs of being pursued by a regulator can be significant. In our experience, having to defend yourself in an investigation by a regulator can be up to 50 times more expensive than getting it right in the first place.

Rebates and cash backs

Offering a rebate or cash back is a popular way of offering a discount without lowering the ticket price of an item at the point of sale.

A rainwater tank retailer caught the ACCC's attention by advertising its products at the after-rebate price without prominently stating the full price to be paid by customers at the time of purchase. The ACCC's view was that customers would likely think the advertised price was the price they would actually pay, rather than the price once a rebate was finally received.

Lesson

• price is crucial for consumers - the price advertised should be the price consumers can expect to pay at point of sale, irrespective of any future discount they might receive.

AN EMERGING TREND:
FOOD AND GROCERY ACTIVISM

Consumers are increasingly curious about their grocery products. Increased consumer scrutiny and awareness, combined with social media's ability to disseminate information rapidly, has created an ideal environment for food and grocery activism to flourish. A recent Greenpeace campaign illustrates just how easily food and grocery activism can generate negative publicity for your business and your brand.

The Greenpeace campaign took aim at seafood manufacturer Sealord. The campaign claimed that Sealord uses destructive and unsustainable fishing methods. Although Sealord strongly condemned the campaign as misleading, the campaign was well followed in both social and traditional media.

The Greenpeace campaign illustrates how a company's social media presence can be used against it - in this instance Sealord's Facebook page was hijacked by activists to publicise their criticisms. Companies with a social media presence should remain vigilant to ensure that their presence is monitored and, where possible, moderated. Regardless of whether activists' claims are false, coordinated movements can generate a remarkable amount of bad publicity in a short space of time.

CRYSTAL BALL GAZING:
OUR PREDICTIONS

Based on our crystal ball gazing - and our weekly monitoring of legal issues in New Zealand, Australia, and the United Kingdom - we predict the following issues will arise in 2012.

1. A 'greener' Parliament following the election and possible introduction of Green Party initiatives such as country of origin labelling and traffic light labelling.
2. The possible introduction of a new scheme to regulate dietary supplements and other 'low-risk' natural health products. See our FYI on the Natural Health Products Bill.
3. Possible changes to consumer law legislation. See our FYI on the Consumer Law Reform Bill.
4. The idea of a supermarket ombudsman (currently being considered in Australia) may drift across the Tasman.
5. Increased scrutiny of caffeinated food and beverage products as a result of a current review.

HOW WE CAN HELP

If you have concerns about any of the issues raised in this FYI, or would more information about any of the examples raised, we can help. Contact us to discuss the practical effects our predictions may have on your business.

Authors

Peter Stubbs

Partner - Corporate & Commercial

DDI: +64 9 977 5010

Mobile: +64 21 955 230

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Gwendoline Keel

Senior Associate - Corporate & Commercial

DDI: +64 9 977 5201

Mobile: +64 21 242 6639

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Craig Nelson

Senior Associate - Corporate & Commercial

DDI: +64 9 977 5185

Mobile: +64 21 918 309

Email:

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