Functional Beverages Regulations: The Year in Review

September 19, 2011

Functional Beverages Regulations: The Year in Review

FDA and the FTC exercised some notable enforcement action against beverage companies in the latter half of 2010. Several consent decrees executed between the FTC and beverage or supplement companies evoked fear that the bar for claims substantiation had been significantly and permanently raised. Moreover, joint actions by FDA, the FTC, and the Alcohol and Tobacco Tax and Trade Bureau, in response to public outcry against four manufacturers and marketers of alcoholic beverages containing caffeine, also gave some indication that beverage and liquid supplement companies could face similar action regarding products for which FDA has safety concerns.

Yet, despite the way 2010 came to a close, the first half of 2011 was largely free of major regulatory actions against beverage industry members. The relative quiet came to an abrupt end, however, with the issuance of two FDA warning letters this summer that have likely caused some sleepless nights for marketing department personnel and decision makers at beverage companies.

While there were few instances, if any, of regulatory activity that drew significant media attention during the first half of 2011, it would be incorrect to say that the beverage industry was free from regulatory activity. The beverage industry, like other industries regulated by FDA, has experienced a surge in overall regulatory activity that will only increase moving forward. With the passage and implementation of the Food Safety Modernization Act, all areas of food and beverage safety are being scrutinized. Nowhere is that scrutiny more apparent than through the dramatic increase in FDA inspections. FDA inspections are being implemented at a rapid rate, and the beverage industry has by no means been overlooked in this activity. The overwhelming majority of FDA warning letters issued in 2011 have emanated from inspections.

Notably, for companies manufacturing liquid products, FDA has been active in checking compliance with Current Good Manufacturing Practices and Hazard Analysis and Critical Control Points plans. FDA has also cited numerous “technical” labeling violations, ranging from the failure to list sub-ingredients in the ingredient list to the failure to properly include the name and address of the manufacturer on the label. Warning letters have also been issued to beverage and liquid supplement companies in 2011 for alleged disease claims made expressly or implied through research articles and clinical studies that address disease conditions. However, two FDA warning letters issued this past summer were of particular interest to companies in the beverage and supplement industry.

The first warning letter to generate widespread interest across the beverage industry in 2011 was the warning letter sent to Cytosport, the makers of Muscle Milk, on June 29. While FDA alleged several labeling violations in the warning letter, such as the failure to properly state nutrient content claims, it was the section of the warning letter that addressed the product line name “Muscle Milk” that really caught the attention of the industry. Essentially, FDA alleged that the labels on the products are false or misleading because the labels prominently feature the word milk in the name “Muscle Milk,” even though the product purports to not actually contain milk. While FDA acknowledged that the statement “Contains No Milk” is displayed on the principal display panel below “Muscle Milk,” the agency found this statement to potentially add to consumer confusion because the products do contain milk-derived ingredients. FDA alleged that the “Contains No Milk” statement could give consumers the impression that the products are free of ingredients derived from milk.

Setting aside the decisions that Cytosport must make regarding its branding of a very successful line of products, what significance does the warning letter hold for the beverage industry at large? Earlier this year, FDA sent a warning letter to a bottled-water company regarding a product labeled as “water” that contained flavoring and sugar, both of which are not provided for in the standard of identity for bottled water. For more than a decade, various organizations such as the National Milk Producers Federation and the New York Farm Bureau have been pleading with FDA to enforce the standard of identity against companies using terms like rice milk or soy milk, which don’t actually contain milk. Are such products now in more danger than ever of experiencing similar regulatory scrutiny to that of Muscle Milk? While similar letters have been previously sent by FDA, this letter to a company with a well-known and growing brand is a definite sign to companies using terms in the labeling of products that don’t meet the applicable standard of identity that they are at risk for similar regulatory action.

Ironically, the regulatory action that may provide the biggest scare to the beverage industry was a recent warning letter sent to a non-beverage company. The July 28 warning letter to the makers of Lazy Larry, the products formerly known as “Lazy Cakes,” certainly sent a buzz through the food and beverage industries and garnered much attention across the country. Lazy Cakes, the melatonin-containing brownies, gained much notoriety and were mentioned in articles and news reports around the country. The makers of Lazy Cakes then changed the name of the product to “Lazy Larry” and relabeled the products as dietary supplements, gaining further notoriety and special mention by Senator Dick Durbin in the announcement of his new bill targeting the supplement industry. FDA, in the warning letter, essentially stated that even though the products were labeled as supplements, they really represent conventional foods and that FDA would treat them as such.

The significance of this warning letter to companies in the beverage and liquid supplement industries, despite the fact that it concerns non-liquid products, is that the analysis undertaken by FDA closely resembles the analysis put forth by FDA in a 2009 draft guidance document titled “Factors that Distinguish Liquid Dietary Supplements from Beverages, Considerations Regarding Novel Ingredients, and Labeling for Beverages and Other Conventional Foods.” In that draft guidance, FDA identifies the growing concern it has that beverage products are being marketed as supplements, in spite of the fact that the products resemble conventional food products in terms of packaging, labeling, and use. For example, FDA indicates that the packaging of liquid products in bottles or cans similar to those used for beverages like soda pop, bottled water, fruit juice, and iced tea suggests that the products are intended for use as a conventional food.

FDA states in the draft guidance that the serving size or recommended servings may also suggest that products are more properly characterized as beverages than supplements. FDA provides that liquid products that suggest through their serving size, packaging, or recommended daily intake that they are intended to be consumed in amounts that provide all or a significant part of the entire daily drinking fluid intake of an average person in the United States are indicative of beverages, not supplements. FDA also alleges that the name of a product can represent the product as a conventional food, and that product or brand names that use conventional food terms such as beverage, drink, water, juice, or similar terms represent the product as a conventional food.

FDA stated in the draft guidance that a liquid product’s name, packaging, serving size, and recommended conditions of use, as well as other representations about the product, are all important determinants of whether the product is represented as a conventional food and may not be marketed as a dietary supplement. As of August 1 of this year, FDA had not issued a warning letter to a beverage company that applied the factors set forth in the draft guidance. However, the warning letter to the makers of Lazy Larry identified a number of similar characteristics to establish that the product resembled a conventional food as opposed to a supplement. Factors such as appearance and packaging of the product, the positioning of the product in the store, the name of the website marketing the product, and other factors all weighed in favor of FDA deeming the products to be conventional foods in spite of the labeling, factors very similar to those in the draft guidance.

It is unknown what ultimately led to the warning letter for Lazy Larry. It is no surprise and likely no coincidence that these products which generated an enormous amount of publicity were the subject of a warning letter. Of more interest is whether FDA will issue similar warning letters to companies that market products as supplements that FDA considers to resemble conventional foods or beverages. The very real possibility of such letters warrants another look by beverage and supplement companies at the draft guidance so that they aren’t surprised if FDA follows a similar path for liquid products.