RPC Bites #46 – new rules on advertising alcohol free drinks pending, Portman Group issues guidance for hard seltzer labels and a taxing finding for flapjacks

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!!

Alcohol free drinks to get the ASA treatment

With the no/lo category continuing to soar in popularity, the ASA is seeking to create a unified set of rules for the marketing of alcohol free products.

Following a public consultation in January 2022, the ASA amended advertising rules in relation to low alcohol drinks (i.e. products with an ABV of between 0.5% and 1.2%). Under the new rules, low alcohol drinks can now legitimately be promoted as preferable to standard, higher strength alcoholic drinks.

Turning to alcohol free alternatives to alcoholic drinks (i.e. products with an ABV of under 0.5%, which are not currently covered by the CAP Code), the ASA is consulting on the introduction of new advertising rules to cover their promotion. The proposed rules include a definition of "alcohol alternatives" and cover (amongst other things) the concurrent promotion of alcohol alternatives and alcoholic drinks, as well as the inclusion of ABV statements for alcohol alternatives with an ABV higher than 0%.

The ASA invites responses to its proposals by 5 May 2022 and the consultation can be found here. For a comprehensive list of key actions to consider in light of the ASA's new and proposed rules (and a guide to the upcoming legal and policy changes affecting retailers and brands alike), please see our spring edition of Retail Compass (here).

Flaptax – snack is not a cake and must be taxed at the standard rate, Tribunal finds

In September 2018, HMRC concluded that global nutrition brand Glanbia had incorrectly classified a range of flapjacks as zero rated, for VAT purposes. As many readers will know from the famous and similar dispute involving Jaffa Cakes, cakes are zero rated for VAT purposes, whereas confectionary and chocolate covered biscuits attract VAT at the standard rate.

Glanbia appealed HMRC's decision to the Tax Tribunal but in a decision that was handed down last month, HMRC's decision was upheld. In reaching its decision, the Tribunal noted that the healthiness (or not) of a product has no bearing on its VAT classification. The fact that Glanbia's flapjacks were high in protein and part of a nutrition bar range did not therefore assist in distancing it from 'confectionary'. The Tribunal also noted that if a product is said to be zero rated on the basis that it is a “cake”, the sole question is whether it can be categorised as such.

Here, the Tribunal concluded that Glanbia's products could not be categorised as cakes: the ordinary person would consider a cake to be (amongst other things) sweet, high in calories, aerated during the baking process and made (predominately) from a mixture of flour, eggs, fats and sugar. By contrast, Glanbia's products contained little (if any) flour or fat and no, or only traces of, egg. They were also dense, high in protein and were low calorie, when compared to traditional cakes.

The Tribunal therefore concluded that Glanbia's products could not be categorised as cakes and must be standard rated, for VAT purposes. The decision is a useful reminder to manufacturers on the classification of products for VAT purposes, especially those operating in the health and fitness sector.

Labelling required: "hard" equals alcoholic

The Portman Group has urged hard seltzer producers to make the alcoholic nature of their products sufficiently clear. The announcement follows research, which showed that the word 'hard', in relation to seltzers, was not necessarily synonymous with alcohol content in the eyes of 65% of UK respondents.

Concerned with consumer confusion around the term 'hard seltzer', the Portman Group has issued guidance on the labelling of the drinks. Under rule 3.1 of the Group's Alcohol Marketing Code (the Code), "the alcoholic nature of a drink should be communicated on its packaging with absolute clarity". When it comes to hard seltzers, the Portman Group encourages businesses to:

• Include the ABV on the front of the packaging;
• Include references to 'alcohol' or 'alcoholic' on the front of the packaging; and
• Ensure that so-called 'positive alcohol cues' (i.e. ABV, alcohol phrases etc.), are given more prominence than negative cues (such as fruit images and cartoon illustrations).

Mindful that seltzers appeal to health-conscious consumers, the Group also warned against the use of health claims and suggestions of therapeutic qualities. This dovetails with rule 3.2(j) of the Code and the Nutrition and Health Claims Regulation which: (i) contains a blanket ban on health claims for alcoholic drinks containing more than 1.2% ABV; and (ii) provides that the only permissible nutrition claims for alcohol drinks are those referring to a reduction in alcohol / energy content.

The Portman Group's full guidance on hard seltzers can be found here.

Upcoming HFSS restrictions appear set for October...

In Issue 45 of RPC Bites (here), we reported that the Government had hinted that it might delay the introduction of the upcoming restrictions on the promotion of HFSS products, in light of the cost of living crisis.

However, on 6 April 2022, the Department of Health & Social Care published guidance to assist businesses and enforcement bodies who will be affected by the new rules. The guidance provides a clear summary of the scope and application of the new legislation and outlines the potential penalties that retailers could face for non-compliance. Crucially, it reiterates that the regulations will come into force on 1 October 2022.

Whilst offering valuable support to food and drink businesses by illustrating how the new regulations will work in practice, the publication of the guidance will disappoint those hoping that a further delay was on the cards.

The plastic packaging tax has arrived

From 1 April 2022, companies that import or manufacture more than 20 tonnes of plastic packaging annually will be taxed £200 per tonne on packaging that is not made from at least 30% recycled materials.

Whilst the Government's intention was to incentivise businesses to use recycled matter, key players in the food and drink industry (including the Food and Drink Federation) have warned that the tax will only serve to exacerbate current strains. Some also question whether the tax will have the desired impact, in light of figures which suggest that up to 83% of plastics used by supermarkets are for 'food contact' and are thus "restricted in their ability to incorporate recycled content."

Despite potential pitfalls with the scheme, studies have shown that if all plastic packaging in the UK contained at least 30% recycled materials, the country would save 2.9 million tonnes of carbon emissions per year.

EU regulations on Geographical Indications to be bolstered

The European Commission has adopted a proposal to strengthen current regulations relating to EU Geographical Indications (GIs) for wines, spirits and other agricultural products. GIs identify products as having a specific geographic origin and possessing qualities, characteristics, or reputation due to such origin (for example, 'Scotch Whisky').

There will be no change to the structure of GI systems established by current EU Regulations. The Commission does, however, propose simplifying the procedure for registering a GI, increasing protection for GIs online and making it easier for producers to validate sustainability credentials in their product specifications.

The Commission hopes that the changes will increase the uptake of GIs by EU producers, thereby benefitting rural economies and preserving gastronomical and cultural heritage.