food & beverage marketing: significant issues in 2014 and beyond live webcast

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Speaker Firms and Organization: Miller Thomson Catherine Bate Partner Thank you for logging into today’s event. Please note we are in standby mode. All Microphones will be muted until the event starts. We will be back with speaker instructions @ 09:55am. Any Questions? Please email: [email protected] Group Registration Policy Please note ALL participants must be registered or they will not be able to access the event. If you have more than one person from your company attending, you must fill out the group registration form. We reserve the right to disconnect any unauthorized users from this event and to deny violators admission to future events. To obtain a group registration please send a note to [email protected] or call 646.202.9344 . Presented By: September 16, 2014 1 Partner Firms: Moses & Singer, LLP James Alterbaum Partner Freeborn & Peters LLP David L. Ter Molen Partner

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In a two hour live webcast, a panel of thought leaders and practitioners assembled by The Knowledge Group will discuss the significant issues and latest insights on Food & Beverage Marketing for 2014 and beyond. Speakers will discuss: Insights on the regulation of food and beverage marketing in Canada and the United States Hot topics, including: GMO/ genetically engineered claims; Revisions to nutrition labelling; Sugar and sodium; Supplements; and more Strategies for implementing effective and compliant online and social media campaigns in a regulated environment Negotiating and preparing for a major strategic event (financing, liquidity or acquisition) Protecting your brand, trade secrets and key assets in anticipation of a major event To view the webcast go to this link: http://youtu.be/pyDwkRXjt1I To learn more about the webcast please visit our website: http://theknowledgegroup.org

TRANSCRIPT

Page 1: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Speaker Firms and Organization:

Miller ThomsonCatherine Bate

Partner

Thank you for logging into today’s event. Please note we are in standby mode. All Microphones will be muted until the event starts. We will be back with speaker instructions @ 09:55am. Any Questions? Please email: [email protected]

Group Registration Policy

Please note ALL participants must be registered or they will not be able to access the event. If you have more than one person from your company attending, you must fill out the group registration form. We reserve the right to disconnect any unauthorized users from this event and to deny violators admission to future events.

To obtain a group registration please send a note to [email protected] or call 646.202.9344.

Presented By:

September 16, 2014

1

Partner Firms: Moses & Singer, LLPJames Alterbaum

Partner

Freeborn & Peters LLPDavid L. Ter Molen

Partner

Page 2: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

September 16, 2014

2

Follow us on Twitter, that’s @Know_Group to receive updates for this event as well as other news and pertinent info.

If you experience any technical difficulties during today’s WebEx session, please contact our Technical Support @ 866-779-3239. You may ask a question at anytime throughout the presentation today via the chat window on the lower right hand side of your

screen. Questions will be aggregated and addressed during the Q&A segment. Please note, this call is being recorded for playback purposes. If anyone was unable to log in to the online webcast and needs to download a copy of the PowerPoint presentation for today’s event, please send an email to:

[email protected]. If you’re already logged in to the online webcast, we will post a link to download the files shortly. If you are listening on a laptop, you may need to use headphones as some laptops speakers are not sufficiently amplified enough to hear the presentations. If

you do not have headphones and cannot hear the webcast send an email to [email protected] and we will send you the dial in phone number.

About an hour or so after the event, you'll be sent a survey via email asking you for your feedback on your experience with this event today - it's designed to take

less than two minutes to complete, and it helps us to understand how to wisely invest your time in future events. Your feedback is greatly appreciated. If you are

applying for continuing education credit, completions of the surveys are mandatory as per your state boards and bars. 6 secret words (3 for each credit hour) will

be given throughout the presentation. We will ask you to fill these words into the survey as proof of your attendance. Please stay tuned for the secret word.

Speakers, I will be giving out the secret words at randomly selected times. I may have to break into your presentation briefly to read the secret word. Pardon the

interruption.

To know more about the Knowledge Group Unlimited Subscription Programs, please send us an email at [email protected] with “Unlimited” in the

subject.

To know more about the Knowledge Group Outsourcing Services, please send us an email at [email protected] with “Outsourcing Services” in the

subject.

Page 3: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Partner Firms:

September 16, 2014

3

Freeborn & Peters LLP is a full-service law firm headquartered in Chicago, with international capabilities. Freeborn is always looking ahead and seeking to find better ways to serve its clients. It takes a proactive approach to ensure its clients are more informed, prepared and able to achieve greater success – not just now, but also in the future. While Freeborn serves clients across a broad range of sectors, it has also pioneered an interdisciplinary approach that serves the specific needs of targeted industries, including food, private equity and venture capital, transportation, insurance and reinsurance.

Freeborn is a firm that genuinely lives up to its core values of integrity, caring, effectiveness, teamwork and commitment, and embodies them through high standards of client service and responsive action. Its lawyers build close and lasting relationships with clients and are driven to help them achieve their legal and business objectives.For more information, please visit www.freeborn.com.

Miller Thomson LLP is one of Canada’s leading business law and litigation firms. With close to 500 professionals based in eleven offices across Canada, Miller Thomson can claim to cover Canada better than any other Canadian law firm.  The firm offers a complete range of business law, regulatory and advocacy services, providing advice in both English and French, and servicing clients from around the globe.  In addition to its other strengths,   Miller Thomson's Agribusiness and Food Group is a multidisciplinary team from across Canada, offering an in-depth understanding of legal issues challenging those in the agriculture, food production and marketing.

Moses & Singer provides legal services to prominent companies, individuals and families in the New York City area. Among our broad array of clients are leaders in banking and finance, manufacturing and wholesaling, consumer products, entertainment, media, real estate, healthcare, advertising and technology. We represent entrepreneurial clients as well as established businesses in financing and corporate transactions.  The firm has unique strength in the areas of intellectual property and commercial litigation, and in connection with corporate reorganizations and bankruptcies.  The firm also serves successful individuals on matters concerning asset protection, business succession and tax planning. 

Page 4: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Brief Speaker Bios:David L. Ter Molen

David Ter Molen is a Partner in the Litigation Practice Group and member of the Food Industry Team. David litigates and counsels clients primarily in the areas of intellectual property, advertising and unfair competition. He has achieved favorable results for plaintiffs and defendants in trademark and unfair competition, false advertising and patent infringement matters. David has represented clients in a wide array of technical areas and has substantial trial and appellate experience.

David helps food and beverage companies protect and exploit their branding, marketing and other intellectual property assets, including compliance with FDA & USDA regulations. He is also the author of the Food Identity Blog (foodidentityblog.com).

September 16, 2014

Catherine Bate

Catherine Bate has focused her practice in marketing and advertising law for over 10 years, and has developed expertise that has earned her a reputation as a recognized leader in the practice.  She provides business-focused advice concerning promotional and advertising activities in all media, including: promotional contests, games and sweepstakes, privacy matters (including CASL/anti-spam compliance), compliance with consumer protection legislation, marketing and advertising-related agreements, and packaging and labelling requirements.  Catherine also assists clients in regulated fields (including, in particular, ads for food, cosmetics and alcoholic beverages) with advertising preclearance and regulatory matters.  Her expertise also includes consumer product safety and, when necessary, recalls.

James Alterbaum

James Alterbaum, a senior partner in the Corporate/M&A practice, Chairman of its Accounting Law practice and lead partner of the Firm's Long Island, NY practice,  has over 30 years experience in corporate, securities, commercial and employment law. With a background in accounting and finance, Jim takes a business and entrepreneurial approach to the law.

Jim's practice serves public, private, and corporate clients in diversified fields, including the food, manufacturing, distribution, health care and technology industries. Jim has particular expertise in serving closely-held and family multi-generational firms facing business and corporate governance challenges, including the structuring of M&A transactions, refinancing, public and private offerings and succession plans. Jim places heavy emphasis on the strategic decision-making surrounding these transactions and focuses particularly on the negotiation process, through all its stages.

► For more information about the speakers, you can visit: http://theknowledgegroup.org/event_name/food-beverage-marketing-significant-issues-in-2014-and-beyond-live-webcast/ 4

Page 5: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Featured Speakers:

September 16, 2014

5

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

SEGMENT 2:

Catherine BatePartnerMiller Thomson

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

Page 6: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Legal Pitfalls inMarketing and Labeling of

Food and Beverage Products

September 16, 2014

6

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 7: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

U.S. Pressure Points: Who is Looking at Food Labels and Associated Marketing?

September 16, 2014

7

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Consumers- Esp. social media

Government- FDA, USDA, FTC

Class Action Lawyers

CompetitorsActivists

CSPI, bloggers,academics,

Self-Regulatory Bodies

- NAD, CARU, CFBAI

Page 8: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Common Themes of All Pressure Points

FTC, FDA and private litigation claims (under state consumer protection and false advertising statutes)

focused on deceptive / misleading labeling and advertising.

True Statements can be Deceptive:

“50% MORE RECYCLED CONTENT THAN BEFORE” is deceptive if total recyclable content only

increased from 2% to 3%.

Claims - Express and Implied (net impression)

September 16, 2014

8

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 9: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

September 16, 2014

9

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

United States

1. FDA: Regulates Labeling of Consumer Packaged Products and, recently, Restaurants.

2. USDA: Regulates Labeling of Meat, Dairy and Egg products.

3. FTC: Regulates “Advertising,” including Food and Beverage Products.

Canada

4. Health Canada: Responsible for setting food labeling policies with respect to health and safety matters

5. Canadian Food Inspection Agency (CFIA): Establishes and administers policies and standards for food safety, nutritional quality and labeling.

Page 10: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

• Nutrition labeling /“Nutrition Facts” Statement.• Statement of Identity on Primary Display Panel.• Basic information identifying Manufacturer.• Net Quantity Statement / Amount of Food.• Allergen Information.• Many special rules, e.g., “Beverages that are 100% juice can be

called “juice” but diluted beverages must qualify word “juice” with a term such as “beverage,” “drink,” or “cocktail.”

September 16, 2014

10

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 11: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Regulated FOP Claims

1. Nutrient Content Claims Any claim that, directly or by implication, characterizes the level of a nutrient in the food, such as "low fat," "good source of oat bran" or "contains 100 calories." “Healthy” is an implied nutrient content claim.

2. Health ClaimsAny claim that, expressly or by implication, including “third party" references, written statements (e.g., a brand name including a term such as 'heart'), symbols (e.g., a heart symbol), or vignettes, characterizes the relationship of any food substance and reduced risk of a disease or health-related condition.

Must meet Significant Scientific Agreement standard.

September 16, 2014

11

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 12: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

3. Qualified Health ClaimsHealth claims that don't meet the Significant Scientific Agreement standard and which must therefore include "qualifying" language so that consumers are not misled.Authorized by FDAExample: " Adequate calcium throughout life, as part of a well-balanced diet, may reduce the risk of osteoporosis.“

4. Structure / Function ClaimsClaims that describe the effect that a substance has on the structure or function of the body without reference to a disease. Examples: "Calcium builds strong bones," "fiber maintains bowel regularity," or "antioxidants maintain cell integrity.”

September 16, 2014

12

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Regulated FOP Claims

Page 13: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

• Oversees all domestic and imported meat, poultry and related products (e.g. meat or poultry-processed egg products).

• FDA and USDA work to harmonize their labeling requirements.

• Unlike “Natural,” “Organic” has a robust definition under the USDA’s National Organic Program based on national organic standards.

September 16, 2014

13

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 14: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Section 5 of FTC Act prohibits “unfair or deceptive acts or practices” and, in the case of food products,

Sections 12 and 15 prohibit "any false advertisement" that is “misleading in a material respect.”

FTC focus:

• Whether claim is false, unfair or deceptive.

• Main issue is whether claim is substantiated.

• Considers reasonable consumers’ “net impression” of ad, not just claim language, in determining

claim made.

September 16, 2014

14

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Federal Trade Commission- Protecting America’s Consumers

Page 15: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Explosion of Class Action Lawsuits in U.S.

Food company behavior shaped by consumer activism, threats of litigation and class-action lawsuits.

Plaintiff’s Attorneys work with consumer watchdogs groups (e.g., Center for Science in the Public Interest) and are facilitated by consumer activism targeting “Big Food” companies.

FDA warning letters, FTC warning letters, and NAD reports are all major sources of labeling litigation. Claims include:• Unfair Competition Law• False Advertising• Consumers Legal Remedies Act• Breach of Warranty

September 16, 2014

15

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 16: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Explosion of Class Action Lawsuits in U.S.

• Concentrated in jurisdictions with relaxed standing and causation requirements (California is epicenter).

• Can aggregate many small claims that would not otherwise be worth pursuing. • Class action amenable

– Unlike personal injury claims • Damages incentives (attorney fees, treble damages, civil penalties). • Amenable to Copycat suits. • Significant settlements.

September 16, 2014

16

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 17: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Targets of Food Class Action Lawsuits in U.S.

• Natural / All Natural: Products that are allegedly “unnatural” because of processing, use of GMO’s, inclusion of artificial or synthetic ingredients, etc.

• Wholesome / Healthy: Products that contain allegedly unhealthy ingredients but labeling / advertising suggests product is healthy and/or wholesome.

• Health-Benefit claims, such as proven to reduce cholesterol, life-enhancing, improves brain function.

• Ingredient Quality relating to claims such as, 100% fresh squeezed orange juice or pure coconut water.

September 16, 2014

17

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 18: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

“Natural” Claims

• In 1993, FDA said it would maintain its informal policy “not to restrict the use of the term ‘natural’ except for added color, synthetic substances, and flavors” and that, for enforcement purposes, “natural” means “that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.”

• Courts generally unwilling to find consumer claims under state law preempted as a matter of law.

• Uncertain state of the law and sheer breadth of ingredients and processes in the food supply make “natural” advertising a risky proposition for food companies.

September 16, 2014

18

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 19: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

“Natural” Claims

Bolerjack v. Pepperidge Farm Inc., Case No. 1:12-cv-02918 (D. Colo. 2012)• Product described as “Natural” with claim

somewhat qualified by “No Artificial Preservatives” statement. 

• Alleged to include GMO’s in soybean oil .• As with all GMO cases, complaint contends that plaintiff

paid premium for a “natural” product but GMOs, “by definition,” are not natural.

• Case still pending. A key issue will be whether a “reasonable consumer” perceives use in context of “natural” as a qualification.

September 16, 2014

19

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 20: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Almost a “Natural” Claim

Nobles et al. v. Coca-Cola, Case No. 13-cv-5017 (N.D. Cal.)

• Coca-Cola target of three recently-filed class action lawsuits.

• Plaintiffs  contend that Coke includes phosphoric acid but the

products are not labeled as including an “artificial flavor” or “chemical

preservative.”  Plaintiffs contend  that phosphoric acid, as used in

Coca-Cola, is more consistent with chemical preservatives or

artificial flavoring under the Food Drug and Cosmetic Act than natural

flavoring and “[c]ontainers of Coca-Cola do not contain a statement

that they contain artificial favoring and or chemical preservatives.”  

• Accordingly, plaintiffs allege that Coca-Cola containers  are

misbranded under both the FDCA and corresponding provisions of

California state law.  

September 16, 2014

20

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 21: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

“Wholesome” / Health Claims

• Nutella: A healthy hazelnut spread made with skim milk and "a hint of cocoa” OR a sweet, fatty chocolate spread?

September 16, 2014

21

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

• Please click the picture to download the video or you may download it from: https://www.hightail.com/download/ZUcwT0NaMGtEbUpsQXNUQw

Page 22: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Ingredient Quality

Lam v. General Mills, Inc., No. 11-CV-05056 (N.D. Cal. 2011)

September 16, 2014

22

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 23: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Litigation Between Competitors

Pom Wonderful v. Coca Cola, 572 U.S. ___ (2014) – POM alleged that Coke’s marketing of its Minute Maid "Pomegranate Blueberry - flavored blend

of 5 juices” violated Federal Lanham Act by misleading consumers to believe that the drink consists primarily of pomegranate and blueberry juices.

– Product only contained 0.3% pomegranate juice and 0.2% blueberry juice. 99.4 percent is apple and grape juice.

– Coca-Cola’s labeling complied with FDA regulations including with respect to the naming of juice blend.

– Coca-Cola argued that FDA regulation of this subject matter precluded the Lanham Act claims.– Supreme Court ruled 8-0 in POM’s favor: “Because the FDA acknowledges that it does not

necessarily pursue enforcement measures regarding all objectionable labels, if Lanham Act claims were to be precluded then commercial interests – and indirectly the public at large – could be left with less effective protection in the food and beverage labeling realm than in other, less regulated industries.”

September 16, 2014

23

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 24: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Food Marketing Litigation in Canada

• Far more limited than in the U.S., in part due to distinct regulatory environment where many ingredient and health claims are specifically prescribed by legislation or regulatory guidelines.

• For example, “natural" defined as meaning foods that have not been significantly altered by processing and provides examples of processes that do and do not significantly alter “the natural character of foods.” In addition:

1. A natural food or ingredient of a food is not expected to contain, or to ever have contained, an added vitamin, added mineral nutrient, artificial flavoring agent or food additive.

2. A natural food or ingredient of a food does not have any constituent or fraction thereof removed or significantly changed, except the removal of water.

September 16, 2014

24

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 25: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Balance Marketing Needs v. External Pressures

• Comprehensive review of labels and claims– Use FDA and USDA guidance as starting point.– Understand overall message and net impression of the label, not just each claim and picture.– Monitor suppliers and know your ingredients.– Monitor consumer complaints and adjust messaging accordingly.

• Cross-Disciplinary Communication– Early and frequent communication among R&D, Marketing and Legal– Understand what is in the product, how it is processed, to whom it is targeted, etc.– Develop claim substantiation data early.

September 16, 2014

25

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

Page 26: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

AGENDA - Canada

1. Who regulates what?

2. Product claims and classification

3. Nutrition labelling and related amendments

4. Highlighted Ingredients

5. Other labelling and advertising amendments

6. Safe Foods for Canadians Act

7. Organic, natural and other hot-button issues

September 16, 2014

26

SEGMENT 2:

Catherine BatePartnerMiller Thomson

Page 27: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Who Regulates What?

• Health Canada:– Food Directorate– Drugs & Health Products – Canadian Food Inspection Agency

• Competition Bureau

• Provincial legislation

September 16, 2014

27

SEGMENT 2:

Catherine BatePartnerMiller Thomson

Page 28: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Advertising Preclearance

• Advertising Standards Canada– Canada’s primary industry self-regulatory body– Preclearance of broadcast advertising for: food & non-alcoholic beverages, alcoholic beverages,

consumer drugs and natural health products, advertising to children, and cosmetics– Review of advertising for compliance with legislation and guidelines of applicable regulators

September 16, 2014

28

SEGMENT 2:

Catherine BatePartnerMiller Thomson

Page 29: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Product Claims and Classification

• Food: “any article manufactured, sold or represented for use as food or drink for human beings, chewing gum, and any ingredient that may be mixed with food for any purpose whatever”

• Drug: “any substance or mixture of substances manufactured, sold or represented for use in(a) the diagnosis, treatment, mitigation or prevention of a disease, disorder or abnormal physical

state, or its symptoms, in human beings or animals,(b) restoring, correcting or modifying organic functions in human beings or animals, or(c) disinfection in premises in which food is manufactured, prepared or kept

• Natural Health Products: “a substance set out in Schedule 1 or a combination of substances in which all the medicinal ingredients are substances set out in Schedule 1, a homeopathic medicine or a traditional medicine, that is manufactured, sold or represented for use in

(a) the diagnosis, treatment, mitigation or prevention of a disease, disorder or abnormal physical state or its symptoms in humans;

(b) restoring or correcting organic functions in humans; or

(c) modifying organic functions in humans, such as modifying those functions in a manner that maintains or promotes health…”

September 16, 2014

29

SEGMENT 2:

Catherine BatePartnerMiller Thomson

Page 30: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Nutrition Labelling and Related Amendments

1. Establishing consistent serving sizes among similar foods

2. Sugars. Declaring sugar content together in the ingredient list and the NFT, and setting a Recommended Daily Value for sugar; and

3. Changes to the appearance and content of the NFT and ingredient list.

September 16, 2014

30

SEGMENT 2:

Catherine BatePartnerMiller Thomson

Page 31: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Highlighted Ingredient Policy

• Guidelines for Highlighted Ingredients and Flavours– Issued by CFIA (final in March 2014)– Informs the regulator’s interpretation of the false or misleading representation provisions of the

Food and Drugs Act

September 16, 2014

31

SEGMENT 2:

Catherine BatePartnerMiller Thomson

Page 32: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Highlighted Ingredient Policy (cont’d)

September 16, 2014

SEGMENT 2:

Catherine BatePartnerMiller Thomson

32

Page 33: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Other Labelling and Advertising Amendments

• Halal Labelling– Effective April 2016: Halal claims (labels or ads) must include name of the certifying body.

• Labelling of Mechanically Tenderized Beef– Effective August 2014: Mechanically tenderized beef must be labelled to identify processing and

proper cooking instructions

• Country of Origin Labelling (COOL)– Canada wins appeal before WTO

September 16, 2014

33

SEGMENT 2:

Catherine BatePartnerMiller Thomson

Page 34: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Safe Food for Canadians Act

• To come into force in 2015

• New prohibitions against deceptive practices, hoaxes and tampering

• Increased traceability and recall protocols

• Increased import controls (licensing and registration)

September 16, 2014

34

SEGMENT 2:

Catherine BatePartnerMiller Thomson

Page 35: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Other Hot Button Issues

• Organic: – Permitted: Organic Claims, Organic Ingredient– Not Permitted: 100% Organic, Certified Organic, Made with Organic Ingredients

• Natural:– Maple Leaf “Natural Selections”: A Case Study

• Canadian Approaches to Recalls and Class Action

September 16, 2014

35

SEGMENT 2:

Catherine BatePartnerMiller Thomson

Page 36: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

The Food & Beverage Company’s Guide to Dealmaking

September 16, 2014

36

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

Page 37: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Start With a Strategy

September 16, 2014

37

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Strategic goals:Auction vs. limited auctionFinancial buyer vs. strategic buyerInternal growth

• Sourcing acquisitions and other strategic relationships• Types of deals: licenses, stock sale or asset transactions, joint venture• Sale or purchase from or to public vs. private companies – pros and cons• Interaction with angel investors, venture capitalists and private equity firms• The Food Institute recorded 311 mergers in the food industry in 2013, similar to the numbers in 2012.

Food processors increased from 76 to 96, mostly dairy, meats and other processors.

Page 38: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

How Much is Your Company Worth?

September 16, 2014

38

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Valuation matrix – value of brand, revenue model, EBITDA model, and earnings approach• Higher multiples in this sector for public companies • Stages of capital raising – “friends and family” vs. venture capital, private equity• Using FINRA broker dealers and risks of not doing so• Value of research relating to sources• Industry trends:

– Millennials drive demand– Importance of social media– Growth of specialty food sector– Commodity prices– Private labels– Gluten free and other health-related ingredients

Page 39: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Protecting the Brand

September 16, 2014

39

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Security for intellectual property – trademarks, formulas, recipes• There is sometimes a conflict between the need for trade secrecy and FDA disclosures (GRAS-

generally recognized as safe)• Work for hire agreements• Need for searches and research

Page 40: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Continuity in Supply and Distribution Agreements

September 16, 2014

40

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Degree of company’s vertical integration• Negotiation of co-packer agreements:

- Line time and penalty for non-compliance- Recalls- Product liability- Territory- Exclusivity

• Distribution agreements:- Dependent on company’s breadth- Club stores vs. smaller outlets- Territory

• Purchase order forms – “battle of forms”• Dealing domestically vs. abroad with suppliers

- Choice of law issues

Page 41: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Keeping Licensees in the Fold

September 16, 2014

41

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Partnering with a worthy sponsor• Negotiating license agreements• Exclusivity vs. non-exclusivity• Minimums• Territory

Page 42: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Retaining Key Employees

September 16, 2014

42

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Offer letters to key employees - be careful that they are not binding except for prior employers' restrictions

• Non-disclosure agreements• Restrictive covenant agreements - state by state law analysis is necessary • Employee handbooks - too extensive can create problems• Raiding issues

Page 43: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Personal Planning for Owners and Principals

September 16, 2014

43

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Timing an event before company reaches maturation point• Establishing valuation for estate planning purposes• Asset protection and creation of trusts• Personal liability – importance of state of incorporation, personal guarantees

Page 44: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Building (or Breaking) Partnerships

September 16, 2014

44

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Creation of governance documents• Shareholders or operating agreements• Disparate treatments - active vs. non-active shareholders• Stock options, cash incentive plans and restrictive stock plans

Page 45: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Negotiating the Terms of a Transaction

September 16, 2014

45

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Confidentiality agreements and non-solicitation agreements• Cash now, cash with a note or equity, or earn out• Value of tangible vs. intangible assets• Legal audit – condition precedent

Page 46: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Potential Issues on M&A Deals (whether from buyer or seller side)

September 16, 2014

46

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Time pressure • Imbalance between large and small company• Battle of “standard forms”• Aim for agreement on major ideas before focusing on pricing• No surprises at the end

Page 47: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Contract Considerations and Complexities

September 16, 2014

47

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Nuances, current trends and challenges in business contracts• Avoiding and handling Letter of Intent “landmines”• “No shops” in LOIs• Handling term changes and terms with unclear definitions

Page 48: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

Protecting the Business Through Insurance

September 16, 2014

48

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

• Claims made vs. occurrence policies• Coverage:

Product recallsProduct liabilityFidelity bonds

• Tails on liquidity events• Errors and omissions• Directors and officers insurance• First party priority insurance for food recalls• Exclusions for contaminations, pollutants, faulty workmanship

Page 49: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

► You may ask a question at anytime throughout the presentation today. Simply click on the question mark icon located on the floating tool bar on the bottom right side of your screen. Type your

question in the box that appears and click send.

► Questions will be answered in the order they are received.

Q&A:

September 16, 2014

49

SEGMENT 1:

David L. Ter MolenPartnerFreeborn & Peters LLP

SEGMENT 2:

Catherine BatePartnerMiller Thomson

SEGMENT 3:

James AlterbaumPartnerMoses & Singer, LLP

Page 50: Food & Beverage Marketing: Significant Issues in 2014 and Beyond LIVE Webcast

September 16, 2014

50

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