RPC Bites #59: Festive Bumper Issue

Welcome back to RPC Bites. Our aim in the next 2 minutes is to provide you with a festive flavour of 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 and Happy Christmas and New Year to all of our readers!!

CMA groceries sector review: what's the story so far? 

The CMA released its Autumn update in respect of its ongoing review of grocery sector competition and price increases at the end of November. At a glance, the CMA noted:

1. Despite declining from a recent peak this Spring, food price inflation remained high (above 10%) for a multitude of reasons, including rising input costs i.e., fertiliser, energy, labour and packaging.
2. Own-label food and drink manufacturers compete to both win and retain retailer contracts, allowing retailers to obtain competitive prices (and encouraging consumers to switch to own-brand alternatives). The CMA reports this as a positive sign for competition and a way to alleviate pressures facing consumers.
3. However, branded manufacturers tend to have more pricing power, particularly those which are traditionally viewed as "must-stock" items, such as Heinz Beanz and Hellmann's mayonnaise. Such brands saw a boost in their unit profitability, contributing to increased food inflation.
4. Baby formula brands have increased their prices more than their input costs with prices rising by 25% over the past couple of years, but this category has seen little evidence of own-brand switching. The CMA plans to investigate this category further to ascertain the barriers faced by cheaper baby formula options.

It's crunch time: OHA finds certain supermarkets 'blatant disregard' for HFSS rules

Just over a year since the Government introduced restrictions on the placement of HFSS products at aisle ends, store entrances, checkouts and online equivalents, the Obesity Health Alliance (OHA) (a coalition of organisations working to reduce obesity in the UK), has reported that up to a third of supermarkets surveyed in 2023 were flouting the restrictions, "showing a blatant disregard for the policy and for child health".

The report cited lack of awareness of the restrictions from staff as a crucial factor in non-compliance with the regulations. Director of food and sustainability at the British Retail Consortium (BRC), Andrew Opie, also noted the "lack of clarity and guidance from Government on how to apply [the regulations] in store", meaning that many stores have been left to their own devices in terms of interpreting and applying the regulations. Even so, he noted the BRC's confidence that, overall, most supermarkets are adhering to the regulations.  

Although non-compliant retailers could be issued with local authority improvement notices, fines and face criminal prosecution, earlier this year, the Grocer revealed that local authorities would be given limited funds to enforce, suggesting that the restrictions may be somewhat toothless. Indeed, Trading Standards officers interviewed by the OHA for the purpose of producing its report noted that they lacked the resources to properly carry out store inspections.

New ASA rules on NoLo products side-step dry January

In response to the rapid expansion of the NoLo alcohol beverage market over the last few years, the ASA has recently announced that new rules and guidance on the advertising of such products will come into force on 14 May 2024 (narrowly missing the inevitable dry January marketing spree). The rationale for the rule renovation is that the advertising of NoLo beverages often uses imagery redolent of alcohol and refers to drinking occasions despite the limited alcohol content in the products themselves.

The new rules will apply to the advertising of beverages with an ABV of 0.5% or less, which are marketed as alternatives to alcoholic drinks and will encompass definitions, presentation of ABV statements, responsibility, and targeting and scheduling restrictions. The key points for NoLo advertisers to bear in mind are:

1. Cross-promotion and shared branding – ads for alcohol alternatives which (accidentally or intentionally) promote alcohol drinks or a wider alcohol brand (for example, by advertising alcohol alternatives alongside alcoholic drinks) must comply with the CAP Code rules relating to alcoholic drinks. 
2. Unsafe circumstances and consumption habits – ads for alcohol alternatives are not permitted to depict scenarios where the consumption of alcoholic drinks would be inappropriate or unsafe, unless it is made clear in the ad that the product being advertised is an alcohol alternative. 
3. ABV statement – the ABV of alcohol alternatives must be clearly presented with reasonable prominence in ads. 
4. Target audience restrictions – in line with rules on the promotion of alcoholic drinks, ads for alcohol alternatives are prohibited from being directed at, or designed to appeal to, individuals aged under 18 and must not prominently feature individuals who are, or appear to be, under 25.

Since the new rules are largely dependent on the content of an ad and the context in which it appears, the ASA has also published guidance explaining the interpretation and application of the rules in a bid to help keep retailers off the ASA's naughty list this Christmas.

WRAP calls for regulation as voluntary plastic packaging initiative falls short of targets

The charity Waste & Resources Action Programme (WRAP) recently published its annual report on the UK Plastics Pact. The Plastics Pact (the Pact), a partnership between the UK government, NGOs and businesses from across the plastics value chain, aims to eliminate unnecessary plastic packaging by 2025. One of the Pact's key targets is for 30% of fruit and veg to be sold loose. However, WRAP's latest report shows that only 19% of fruit and veg is currently being sold this way. This could be due to various factors including the cost-of-living crisis and a lack of checkout weighing equipment.

To further the goals of the Pact and encourage consumers towards loose produce, WRAP is also trialling initiatives such as clearer pricing and discounts for unwrapped products across supermarkets. However, according to WRAP, voluntary industry measures are no longer sufficient in and of themselves. Pointing to the EU (where France and Spain have banned packaging on many items of fruit and veg by law), WRAP now plans to recommend official regulation to government ministers next spring, which will likely include greater focus on Extended Producer Responsibility and changes to the Plastic Packaging Tax.

All Campari wants for Christmas is Courvoisier

Italian beverage giant, Campari Group (home of Campari and Aperol) has committed to acquiring, Courvoisier, the smallest of the top four cognac houses globally, from Beam Suntory for an estimated $1.2bn USD (approximately £950m). The deal encompasses the entirety of the Cognac brand as well as its property and operational facilities in Jarnac, its maturing stocks and finished goods.

The acquisition is the biggest in Campari Group's history and is set to elevate the Group's exposure across key markets in the US and Asia and boost net sales by roughly 9%. The Group's CEO, Bob Kunze-Concewitz said: “we are very pleased to acquire a top four historical Cognac house, Courvoisier, with great latent equity and highly acclaimed expressions. The addition of Courvoisier Cognac to our portfolio of global priorities is a rare and unique opportunity to expand our premium spirits portfolio and Cognac offering."

That being said, a deal of this size is not risk free; shares in Campari took a downturn after the deal's announcement and although Cognac seems to slot nicely into the Group's portfolio of premium French brands including, Grand Marnier and Trois Rivières rum, if US consumers ditch cognac for spirit growth brands such as tequila and whiskey, the deal could prove to be an expensive strategy. 

Lab-grown turkey out of the equation in Italy this Christmas 

Citing "the social and economic risks of synthetic food," Italian MPs have voted to ban the production, sale and import of lab-grown cultivated meats and animal feed, with many Italian farmers fervently backing the ban. 

The new law means that producing, selling or importing synthetic meat in Italy will be met with fines of up to €60,000. Synthetic meat in this context means food produced by growing animal food cells in labs (although critics have pointed out there is nothing "synthetic" about the process because the cells are not genetically modified).

In the short and medium terms, the law is unlikely to have a major impact outside of the political landscape as the banned meats are only approved for human consumption in Singapore and the US anyway. Even without the ban, the meats have numerous regulatory hoops to jump through at both EU and member state levels, before arriving on any European dining tables. Nevertheless, this development may offer a flavour of things to come as the environmental benefits of synthetic meat come to the fore.

Waste not, want not: Industry welcomes Defra's U-turn on mandatory food waste reporting

In 2018, Michael Gove (the then Secretary of State for Environment, Food and Rural Affairs), announced plans to force big businesses to report their food waste volumes. Despite the plans being met with support, this summer, Defra (Thérèse Coffey as environment secretary at the time), announced its intention to scrap the mandatory reporting requirement due to concerns that it might further increase food prices. This decision faced widespread opposition, culminating in a judicial review being filed in October of this year - an alliance of celebrity chef Hugh Fearnley-Whittingstall, campaign group Feedback and various industry figures prompted the review.

The clear support for the original proposal and hostility towards the suggestion that it might be scrapped has now prompted the current environment secretary, Steve Barclay to U-turn on Defra's decision; Defra has now issued a press release stating: "the secretary of state for Environment, Food and Rural Affairs will reconsider whether there should be mandatory food waste reporting in the future. The government response to this consultation has been withdrawn."  

Whilst the U-turn is a positive step, it has been met with cautious optimism; Feedback's executive director, Carina Millstone urged greater urgency in introducing a measure that has now been in the works for over five years noting that, "the time for delay is over – the government must introduce this popular, effective and no-brainer measure to reduce emissions and tackle the scourge of food waste during the cost of living crisis now."