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Welcome to the Community Call Podcast.
I am Melissa Travers, Director of Community here at BevNET & NOSH, here with my co-host Sarah Casagrande, Principal and Sales Advisor at Generation CPG.
If you're enjoying the show, please follow and review us wherever you listen.
Hello, Sarah.
Hello, my dear.
I did wanna start off with just a quick announcement on the LA fires.
We did post some ways for folks to be able to get involved with folks who are there and businesses who are operating out of there.
Those are in our Slack community, slack.bevnet.com.
And man, it's just, it's so heartbreaking to watch and to listen.
And certainly, you know, we hope the best for everyone out there.
Yeah.
There are no words.
Just thinking of everybody and so sorry.
No words.
It's, that's a tough way to start off January.
But on a more uplifting note, there are some great M&A updates for 2025 already.
January isn't even over and we've got some really good ones.
The first one I wanted to mention was Simple Mills.
So Simple Mills was acquired for 795 million by Flowers Foods.
Flowers Foods also acquired Dave's Killer Bread.
I mean, that's a huge one.
And of course, Simple Mills is such an amazing brand.
They were at 240 million in sales in 2024, 30,000 doors.
That's a big one.
It's a really big one.
Do you know how long they've been in business independently prior to the sale?
Simple Mills was launched in 2012, so they have been at it for a while.
Yeah, but that's also a pretty short period of time if you think about it, I mean to get to exit.
And quite an exit.
I mean, some exits are much smaller than that.
Bravo.
I'm a big fan of their crackers.
Just a plain.
They're so good.
I know.
The cheddar ones too are really good.
Those are really good.
I really like their pita chips.
Oh, I haven't tried those.
Those are so good.
They're cookies.
And Caitlin Smith launched Simple Mills with her line of paleo baking mixes.
Just in, I think it was just in one Whole Foods.
And it just goes to show you, I mean, not only do you have to start somewhere, but where you end up very well may not be where you start at all.
Exactly.
In different categories.
So much of this too is sequencing, right?
Like, there's a lot of what ifs.
What if she had started in another retailer, right, where it wasn't a fit and or she ran out of cash, right?
Because she paid a lot of slotting in the first year.
I'm really glad that it worked out the way that it did.
But sequencing is everything, product placement, having the right product for the moment, huge part of being acquired eventually.
When you say sequencing, you mean which retailers you go into first?
The entry point into the market, right?
Like, take non-alcoholic beverages, which we've been talking a lot about.
A couple of years ago, right?
It was just the beginning.
And so, like, if you were a non-alcoholic beverage brand in, say, like 2018, it was probably really hard to gain traction, right?
So, a lot of those brands went under because it just took too much time and capital to get to get there.
And now it's a very different point in time, right?
Being ahead of the curve with trends is the other piece, too, right?
Like, being the first brand to pioneer a new category.
That's sequencing right there.
And sometimes you have to wait 10 years, like Jesse Merrill from Good Culture.
The name of the game in CPG is slow and steady growth, right?
Like, nothing happens overnight.
Nothing happens even in, like, just a couple of years.
It takes time.
And all these brands, right, that we've been talking about, Siete, Simple Mills, they didn't just get started.
They've been in the game, pivoting accordingly, changing things up, testing and seeing what works, right?
There's also been a lot of failures, I'm sure.
As human beings, we're not really, we don't talk about our failures enough.
We just talk about our successes.
Well, I never fail at anything.
Well, yeah, neither do I.
I just mean other people.
Right, right, when other people fail, of course.
Yeah, I mean, I just thought Simple Mills was so promising, you know, for one, because they've evolved so much and it just goes to show you that if you keep moving forward and keep your ear to the ground and be observant about what's going on, you may just be able to evolve the brand and the products to fit the current environment.
But also, Kaylyn Smith, I think she's such an impressive founder.
I remember hearing an interview with her on Taste Radio, actually, years ago.
And she was talking about how her initial strategy was to do as many demos as possible.
So her first retailer, as we mentioned, was Whole Foods Market.
So she would demo Friday night after work, Saturday and Sunday.
And she would book herself for three demos every weekend day, even though you're only supposed to do two.
But I mean, it just really is just so impressive that all of that hard work made such a big difference.
And it just really makes you feel good when someone's worked so hard and really gone after it to be successful.
Agreed.
I mean, it is a lot of hard work.
And some of these founders are just, they're putting in the time, they're figuring out, like Caitlin, right?
She broke the rules a little bit, right?
With the three demos, but she knew, she honed in on like that was effective for her.
That worked.
And then she kept pivoting and leading into her strengths, which I think is the other really important piece of getting to that next level of acquisition.
When I was at Whole Foods, I ran our demo program and just the craziest, you just see the craziest, craziest things when people are eating free food.
It's such a strange environment.
I remember seeing one time, there was a guy who came up and took a sample from a demo table and he ate it and crumbled up the cup and he threw it in another customer's basket.
I was like, that's such a bizarre thing to do to not only to throw the cup, but to throw it in another person's basket.
That's pretty bizarre.
Yeah.
I mean, demos are important.
You have to get your product into people's mouths.
Are you seeing demos in the places where you're shopping?
I do once in a while, but I feel like I see a fraction of what I used to see.
Yeah, it has shifted a lot fewer demos for sure, but I feel like in smaller specialty stores, I see it.
Obviously, Costco, that's a big part of their model.
They're always going to do those demos.
That's the reason why everybody loves shopping at Costco.
But I think Wegmans pulled back on sampling.
I think they actually had a moratorium on it for a while.
I don't know if that's been lifted, but...
I remember that as well.
I think they did lift it, but I think their policies changed.
Yeah.
Well, big congratulations to Simple Mills.
We also heard that Urbay was acquired by functional beverage maker Safety Shot, which is very exciting.
Urbay was at 12 million in sales in 2023, and that's a really exciting partnership.
Urbay and Todd Gibson was on Community Call doing a show about crowdfunding.
So if you haven't checked that out, check that out, but very excited for Todd Gibson and Urbay.
Congratulations.
And then, I mean, this is a really big one, Spindrift.
Yeah.
I was so pumped for that.
Long ago, I think it was like 2010, we worked with Spindrift when I was at Ignite.
Back when they, I remember this, they were really only in Trader Joe's at the time, totally different packaging, different pricing.
And then they released a few new flavors, and now it's just been wild just to see their growth over the years.
And Bill Kreelman, have you met him before?
So Spindrift has their offices just a few doors down from BevNET.
I was going to say, yeah, he's such a nice guy.
I mean, he has such a great reputation in the industry.
Seltzer has evolved so much since then, right?
Like, I feel like right when Spindrift was really taking off, the only other Seltzer that people knew about, at least here in New England, was Polar Seltzer, right?
Now you go in, I mean, there's a million different Seltzers, and Seltzers are a huge booming business.
There's Rambler, there's Nixie, there's...
Sanzo.
Yes, there's a million of them now.
But way back when, Spintriff was really a pioneer in that space, right?
And for me, it's the one I tend to gravitate to.
They have just enough fruit juice to make it tasty, but there's barely any sugar in it.
Yeah, me too.
I buy it weekly, and I think they're really smart too.
I mean, they grew their presence, right?
They started in natural, doing really well in Whole Foods, Independence, Trader Joe's, and then now, I know you're a market basket shopper.
They're in market basket, and have been for a while, so true omni-channel placement.
Well, big congratulations to Bill Kreelman and the entire Spindrift team, our neighbors, really, really amazing stuff.
I also saw that Duke's Mayo maker Sour Brands was acquired by Advent International, and man, when I just seeing the name Duke's Mayo makes my heart skip a beat.
I love, and I know it's sort of like a big controversy.
Are you a Hellman's or Duke's person?
Duke's, right?
Oh, 100 percent.
Deviled eggs.
You know I have a thing for deviled eggs, right?
I know you love deviled eggs.
Yes.
Didn't you say you put fly by jing on your deviled eggs?
I do sometimes.
I mix it up.
I add, you know, I go rogue on occasion.
I know what would be really good is mixing the egg yolks with Duke's mayo and fly by jing.
Do you put it in the mix or do you put it on top or both?
Last time I did it on top, but we can experiment with this.
You guys have a kitchen upstairs.
I need to find myself some eggs.
Which are skyrocketing in price.
I should stock up now so we can do lots of R&D.
Yes.
Well, distribution, innovation, brand loyalty, margins, and having your legal ducks in a row are all critical when raising capital, or planning to exit.
In this episode of Community Call, I sit down with Justin Prochnow, shareholder at Greenberg Traurig to unpack all the legal challenges brands could face in the upcoming year.
We explore key issues like class action lawsuits, ingredient compliance, labeling pitfalls, and how brands can address legal risks.
Justin will also shed some light on what's ahead in 2025, including California's additive bans, potential regulatory shifts under the new administration, and a heightened focus on ultra-processed foods.
Please enjoy.
Today on Community Call, our guest is Justin Prochnow.
It's so great to have you here.
We have a lot of really interesting stuff to talk about.
But before we jump into that, please tell our audience a little bit about what you focus on at Greenberg Traurig and the kinds of issues that you typically deal with.
So Greenberg Traurig is a small boutique law firm of about 2,800 lawyers in 43 offices in the US and around the world.
See you behind me here.
And I'm in the Denver office.
I'm the chair of our food and beverage practice.
So 100 percent of my practice is representing companies in the food, beverage, supplement, cosmetic space, primarily helping out with any sort of regulatory issues.
So certainly the packaging, the labeling, claims made on the website, social media, but also what ingredients are allowed, the manufacturing, if the company has to do a recall.
So a lot of preventative kind of advice, as well as reactive advice if the FDA or, as we're going to talk about later, plaintiff lawyers and others get involved.
My typical day is probably 20 to 25 different 10 to 30 minute interactions with different companies, whether it's a kombucha company or an energy drink company or a certain candy company in Hershey, Pennsylvania, or whatever it might be.
I probably lead the firm and people say, do you have just 15 minutes?
Can we just jump on the phone and talk through these two claims we want to make?
Or will you look at this video we want to post on the website?
Does it matter that they say it's, we'll cure cancer?
Well, certainly those 15 to 20 minutes are so important for the brands that you're working with.
Do you find that there are any categories of product, whether it's food, beverage, cosmetics, that tend to raise more issues than others?
Or is it kind of the same across the board?
The kombucha section has been somewhat of a lightning rod for class action lawsuits, whether it's over the sugar content or the alcohol content.
So whenever a category is kind of booming, like these days now, and I know we're going to probably talk about it in a little bit, the probiotic sodas that have really taken off.
Whenever you see a market like that kind of taking off, typically class action plaintiff lawyers are not far behind trying to get a piece of that industry.
I can see them hot on the trail.
We just finished BevNET Live, which I saw you at, which was great.
We had the brand Mellow there, which is a Cava brand.
And then in the office, we've had a Kratom product, New Brew, Seltzer.
Have you seen any issues come up with Cava and Kratom yet or is it maybe a little bit too early for that?
They've been around for a while, more so in the dietary supplement industry.
You know, both ingredients, I think there will be some issues in the beverage side of things, because both ingredients are ingredients for which the FDA has expressed some safety concerns in the past, especially when being sold as beverages.
And neither ingredient is what we call GRANDS, which stands for Generally Recognized as Safe.
In order to legally use an ingredient in a food or beverage, all ingredients have to be approved food additives or GRASS.
And neither Kratom nor Cava are proof food additives or GRASS pursuant to any particular regulation.
So to legally use them in a beverage product, you would either need to use a form that a ingredient supplier has what we call self-affirmed it as GRASS, or you need to go out and have your own dossier completed.
At this point in time, we're not aware of any of those.
So it will be interesting to see where that goes, especially with a new administration coming in, that seems to be in favor of some of those types of, let's say, natural ingredients that might be alternatives to drugs or some other forms of ingredients.
So it will be interesting to see how that goes.
But the FDA certainly has expressed some concerns and has specific pages on their website about those ingredients.
Well, it will certainly be interesting to see how those issues unfold.
But in the meantime, we have plenty of class action lawsuits that are already circulating.
I have three beverage brands that I thought we could go over briefly.
So for prime beverage, the actions include alleged presence of PFA's in their products and caffeine levels.
For Celsius, we have weight loss claims.
And for Poppy, we of course have gut health and added sugar.
What can you tell us about these three brands and the class action lawsuits that they're dealing with?
Oh, I guess advantage and disadvantage of working at, you know, what is right now, I think the third largest law firm in the US in terms of US lawyers is that we happen to be involved with each of those companies.
So I can't talk specifics about those cases.
But I would also say those cases are not one-offs.
I mean, these are cases that are being brought against a number of companies.
So as a kind of more overall view, I mean, the presence of PFAS, which for those who don't know, are para and polyfluoroalkyl substances, often referred to as the forever chemicals, although we don't refer to them as that.
But these are the microplastics, I guess is what they're also called.
And we're seeing more and more actions brought over this in packaging and in the products themselves.
And one of my beliefs is, this is not like all of a sudden these things have popped up in products that were never in there before.
It's just that we didn't ever have the type of testing where we could test to the levels that we can.
So it's not like all of a sudden they started appearing, although they probably weren't around 100 years ago.
But we also couldn't test to the level where all of a sudden now you're finding these in very small amounts.
There are certain state laws that have prohibited the use of intentionally added PFAS in packaging.
But there's currently no law or regulation establishing a limit of parts per billion or parts per million in products themselves.
And a little bit, it's kind of the same as BPA, you know, which was banned in cans.
But if you test, there's probably a little bit of BPA in everything.
So that's why for the cans, the can manufacturers will not print BPA-free cans.
They're BPA-NI, which stands for non-intent, meaning there's no intention to include BPA.
But it's kind of a little bit everywhere.
And so it's kind of the same with PFAS.
It'll be very interesting to see where these cases go, because the plaintifflers are bringing them basically, taking the position that any amount of PFAS is inherently damaging to health, although there's no specific law or regulation that they're pointing to.
So we continue to see these kind of actions against, both against companies for the containers, and now more for the actual products themselves.
I was just picturing when you talked about 100 years ago, people walking around with prime, which makes me giggle.
The PFAS, are those coming from the pa-
solely from the packaging that the beverage is in?
No, I mean, we're seeing those from the packaging, but also just from the actual products themselves, where they're tested.
And so we see those in both the packaging and the actual liquid in the beverages.
And so we've seen a number of those actions.
You know, there's also probably a lot.
There was a lot of, I guess, press earlier in the year, obviously, with prime a lot having to do with Logan Paul being one of the founders of it, related to the levels of caffeine.
And, you know, the levels of caffeine has also been an ongoing, you know, discussion about 10 years or so ago.
You know, there was a big push by certain US senators and congressmen against companies like Red Bull and Monster and Rockstar and levels of caffeine.
And there were hearings on Capitol Hill.
And kind of out of all of that came the result that the FDA still, as a general rule, is not concerned about caffeine.
That's under 400 milligrams per day.
And there still is no actual requirement to declare the amounts of caffeine on labels.
You have some retailers like Whole Foods that requires, you know, the disclosure of caffeine on the front of package if it's added.
But there's still no actual law requiring a disclosure of caffeine or prohibiting a specific amount.
So again, a lot of these cases brought by plaintiff lawyers are not based on a specific violation of any law, but just an overall belief that somehow the products are inherently unhealthy in some way.
The fact that there's no regulation that requires brands to put the amount of caffeine on the front of the package is, it's curious to me, we get so many samples into BevNET, and sometimes it really takes some doing to figure out how much caffeine is in any given product.
So it's interesting to me that that's not a requirement.
Do you see that changing in the future now that there are so many energy drinks and it's such a focus in the category?
I thought that might be a possibility 10 years ago when all this kind of focus was on it, and then it never really happened.
So I don't see that happening anytime soon.
I would say, most companies view it as a best practice to disclose the amount of caffeine because you're going to get questions from consumers, anyway.
I think what the FDA really focused on when they were looking at and they had hearings and everything else was the proliferation.
And it's a little bit like what happened with hemp and CBD three, four years ago.
You just started seeing it in everything.
So with the caffeine, they had a product called Wired Waffles, and it was caffeinated waffles.
And then you had a syrup with caffeine in it, and you had a number of different gum companies had caffeinated gum.
And there was, I believe, a Cracker Jacks that was called Cracker Jacked, and it had caffeine in it.
And so the concern for FDA was really, look, you know when you have a Coke, you're probably, you know, there's a certain amount of caffeine in there.
You know when you have coffee.
But it's when you start compiling it from all of these other sources, all of a sudden, you're getting way more caffeine than you actually realize.
I agree with you that it seems like it's certainly a helpful thing to have the amount of caffeine on there because it's something that most people would like to know, but it still technically isn't a requirement.
And, you know, the gut health action against Poppy is one I think we're all watching and interested in.
If you were a beverage or a food brand right now, are there any considerations that you'd be making in terms of formulation, packaging, marketing around how you communicate any gut health benefits, knowing what you know about the action?
I mean, it's an interesting, and you're right, with the proliferation of products like Ollipop and Poppy and...
Belly Welly, yeah.
Right.
I mean, there are so many...
A lot of times, I find myself, when I'm counseling people, is saying, not so much, you know, are you in compliance with the law or not, but do you want to take the risk of having to deal with a class action lawsuit?
Because, of course, with any of these lawsuits, whether it's Poppy, Celsius Prime, or any other company, the fact that someone filed a lawsuit by no means, means that they're actually doing something in violation of the law.
And in many times, and especially in some of these cases, it's a plaintiff lawyer's position that they're in violation.
But in many of these, there's not a, you know, sometimes there is, you know, a specific labeling violation.
You know, if someone says something is high in antioxidants, that's a violation of a regulation because the regulations say you can't say something is high in something unless you have at least 20% of the daily value.
And there's no daily value for antioxidants.
So that is just on its face an impermissible claim.
But taking the position, we believe there's too much caffeine in here, or we believe your claim of gut health is wrong because there's also sugar in there.
I mean, there's not a set law on that.
These are theories that the plaintiff lawyers are bringing along.
And so oftentimes, they'll say, look, the packaging is compliant with the law.
But I will tell you that there's these cases and litigation out there.
And let's be honest, the plaintiff lawyers are not reinventing the wheel each time.
It's not some new theory for every one of these cases.
Instead, they come up with a particular theory, and then they try to find everyone else who's making that same claim or in the ballpark and use that same letter with the arguments.
And as we've talked about, swap out the name of the company and the name of the products and send out 10 different letters.
And sometimes they don't do a good job of swapping them out, and you have one company's name with someone else's products in there because they forgot to fully change the last letter.
So yeah, whenever we have a case that is kind of a high-profile case, it certainly is something that I at least like to bring up with other clients and say, hey, you should be aware that this is kind of a topic that is on the radar of people these days.
And you have to decide how much that claim is worth to you, as opposed to potentially having to defend it.
So certainly sugars and especially added sugars is a hot topic.
This particular law firm that brought the case against Poppy and has brought others, they are hot to trot on the issue of added sugars.
And basically taking the position that any amount of added sugars is inherently unhealthy.
Again, doesn't mean that, hey, if you do it, that you're going to lose, but you kind of got to know that if you do it, you're likely to run into these guys at some point and have to deal with it.
There are just so many challenges that come with running a brand and starting up a brand.
I think one of the last things that a founder or someone who's working for an emerging brand wants to see is a letter like that.
Why don't we do a little class action suit 101 to sort of help the brands out there understand a little bit about what these actions look like and how to deal with them?
Why don't we start off with, how do you even know that you're in hot water to begin with?
Typically, it starts with a letter from a plaintiff lawyer asserting that you're in violation for one or more reasons.
I guess there's really three ways.
That's the most typical, and we'll go back to that.
Second one is sometimes you don't even get a warning.
They just file an action in court and you get served the complaint.
And they haven't even tried to talk to you beforehand.
There is another way that some companies find out about things.
And there are some plaintiff lawyers who, let's say from the bias point of view, are trolling people on the internet for, on websites like consumeraction.com or others and saying, hey, have you bought so and so brand?
We're looking at a potential class action lawsuit, so please let us know if you're interested in participating.
And so you'll see these notices all sometimes hear from brands say, hey, someone forwarded this to us.
These guys are kind of looking for people.
And so you're kind of you have some at least indication that you might be hearing from those plaintiff lawyers sooner rather than later.
Most of these are not consumer driven class action lawsuits.
There's not a line of people waiting outside the door of these plaintiff firms.
So grieved by what they read on their label that they want to do a class action lawsuit.
These are typically driven by these class action law firms, and they're either trolling the Internet to get potential class plaintiffs so that they put this information out there, or they have designated people who will be their class action plaintiffs.
Sometimes the receptionist at the law firm, sometimes a babysitter, sometimes a neighbor down the street, sometimes a relative of the law firm who is purchasing the product so that they have a class representative that they can move forward with.
And some people have been representatives on 40, 50 different cases.
There was one woman in particular a couple of years ago, I mean, we just saw her name all the time.
And I wanted to call them up and say, maybe we could get her a personal shopper because she's apparently the worst shopper in the world because everything she buys tends to result in a class action lawsuit.
But typically you're going to get a letter from a plaintiff lawyer.
And the reason is because most of these plaintiff lawyers are looking for a settlement as opposed to having to go through the rigmarole of a whole, putting on a case and having to go to court and win it.
So you're going to get a letter that says, hey, your product is violating one or more laws by doing the following things, whether it's got PFAS in it or you're making claims that we don't think are supported or you're saying the product is sugar-free, but you didn't include the disclaimer that it's not a low calorie food, you know, some of these technical things.
And we're going to file a class action lawsuit, but if you want to talk to us about it first, you know, maybe there's a way we can work it out.
There's some, you know, high-powered firms that do it.
And then you have the solo practitioners who again are hoping, hey, if they send out 20 letters and you get 10 companies that respond, that are willing to settle out between 25 and $40,000, you just made $350,000 for, you know, whatever amount of hours that it takes you to address all of these.
And one of my colleagues wrote a book on all of this, and he had a whole, he called it the jackpot justice formula.
But they have a whole formula as far as, you know, time, you know, to prepare it and send it out and, you know, where they set those settlement amounts, you know, is kind of the sweet spot of just low enough that people will pay it and not spend the money going to court.
Because that's really what they're trying to do is put companies in the position of, are we going to just pay these guys off or are we going to fight it?
Which now typically is going to be several hundred thousand dollars if you can get past the initial spot.
And so companies like it's going to cost us $400,000.
And we still might not win it.
Or we could settle out with these guys for $50,000.
Most companies are going to look at that and go, I guess, you know, we hate to do it, but we just don't have the time and money to fight it.
There are a lot of people, plaintiff wars, who are doing this on a volume basis and hoping, you know, it's a little bit like fishing, like keep throwing the line out till you get a nibble.
And if not, we'll move on to the next hole and find something.
Let's talk about those letters a little bit.
You mentioned, you know, they send out a number of letters and they get how many ever responses.
What does the letter look like?
Who sends it?
And can you can you just ignore it?
Or what happens if you just ignore it?
Well, so I mean, the letter comes from one of the lawyers at the law firm and arbitrarily imposed deadlines in the letter.
Like, we don't hear from you by next Friday.
You know, we're going to take action.
I would say more often than not, they're going to just file if they don't hear from you, that you're probably going to get a second inquiry.
Like, OK, we didn't get a response to your last one, but we are going to file.
But we'll give you one more chance to do it.
And some firms are, you know, there are some people who will send out five of those notices.
Like, we really mean it this time.
This is the last chance.
And then there are others who are like, we told you we're going to court.
So definitely from being around enough, we know which law firms are mean business and which guys have never filed a court case before, you know?
And so if you're dealing with the guy who sends out a letter who's never filed a court case before, guess what?
You're probably not going to respond to that letter in the same way you are with the law firm who's brought a bunch of big actions and gotten big-time settlement amounts.
And you know that they're willing to go to court.
Those are two different stories.
So again, there are varied reasons why the plaintiff lawyers send these out.
As I've watched it more and more, I also believe that one of the real hopes from these plaintiff lawyers is they send out letters to companies and happen to catch a company that's in the middle of due diligence on either financing or an acquisition.
Because what that company doesn't want is to have an outstanding liability while that's going on.
Because if it's an acquisition, then they're probably going to have to set aside some money to, you know, have an indemnity for that issue and probably set out, you know, some carve out from the from the sale amount to to deal with that.
And so what will happen is a company might be willing to settle that case for more than they would otherwise just to get it off the books.
And so these plaintiff lawyers have been doing enough.
They know that, so they send out a bunch and hope they catch a couple that they're going to get, you know, a bigger settlement than usual because they know that company just needs to have it done.
And also, truthfully, the plaintiff lawyers are sending these out, hoping they catch some companies that look at it and go, we don't have the money to hire an attorney.
We're just going to handle this directly.
And they call them up and they haven't talked and they don't know that that's a guy who doesn't even live in the country and hasn't filed a case in seven years.
And so they end up writing a check to that guy when we probably would never, ever respond to a letter from that person.
So it sounds to me like if you get a letter like that, call a firm like yours to see whether it's something they need to pay attention to or not.
It is, I mean, totally unbiased.
Yes, you should definitely call a law firm like that.
But yes, I mean, if we're thinking about it, this is not the time to just try to figure it out on your own.
I mean, you can do it, but it's probably going to be more costly in the long run.
Or you could have someone who hasn't done it.
I had someone tell me the other day, the most expensive lawyer they ever had was a cheap lawyer.
You should find someone who really is involved in the space and knows the people, because this is kind of a, most of the people acting in this, they're not in there for the first time.
These are people who, they have a whole kind of modus operandi for doing these things.
And so you want people who are familiar with it.
Well, that was certainly very helpful in helping our audience understand how these actions come about, and what to do if they get a letter like that.
So thank you for that.
Let's move on to some of the issues that came up this year, and what we're looking forward to in 2025.
Starting off with California, we see California certainly as a leader in setting guidelines for, you know, all kinds of regulations, but certainly in food and beverage.
Food dyes and additives and preservatives, those were two topics that came up in 2024.
I mean, we've seen them before and we saw them again in 2024.
Can you talk a little bit about what those regulations look like and what might change or progress in 2025?
California has always believed that they know what's best for everyone and issued laws accordingly.
Last year, they started with the California Food Safety Act banning four different additives, red dye number three, propylparaben, brominated vegetable oil, potassium bromate.
Those will be banned in food as of January 1st, 2027.
They followed up that in September of this year with the California School Food Safety Act banning six different dyes and additives.
And what you would consider like synthetic coloring.
So red, 40, yellow, five, yellow, six, blue, two blues, and a green.
So you won't be able to have any of those in food that's provided at schools.
And again, there's a couple of years that doesn't go into effect until December 31st, 2027.
So companies have a couple of years, but these are indicative of just a lot of the types of things that California has been coming up with, whether it's specific additives to food or things related to the packaging.
There's something called the Extended Producer Responsibility Act, the EPR.
California is one of at least six states.
It started off with Oregon, California, Colorado.
I think we've got Maine, Maryland, Minnesota, and certainly others on the books.
And basically this is an effort of states to just basically make everything recyclable.
So by the goal of this and the direction is 100% of packaging and plastic foodware, so forks, plastic forks, spoons, knives, must be recyclable or compostable by the year 2032.
So companies have eight years, which seems way longer than it actually is, that 100% of packaging has to be recyclable or compostable, which seems like a very ambitious goal.
And it's not just like, okay, companies have eight years.
There are kind of staggered, like at least, 30% of it has to be done by, I don't have the exact dates, I would 2028 and then more.
So this is a very ambitious, and then a recycling rate of 65% also is a goal by 2032.
So we have these, we have California passed laws on happy meals.
You know, you can't have toys and happy meals in California anymore.
And you have to have, for drink options, you can't have, you know, there has to be a water or a milk or some sort of healthy option with a happy meal.
Why no toys?
California would say, because it's enticing kids to eat unhealthy, you know, fast food and meals.
This is an area we talked about a little bit at BevNET Live, cause marketing.
So cause marketing is when a company makes claims or information on the package or on the website that suggests that each purchase of a product will help with charitable donations.
So a company might say, you know, 1% of all sales goes to trying to address world hunger.
All very admirable goals of companies, but cause marketing because of the potential for fairly rampant misuse, you know, where someone might say, a portion of all proceeds goes to it.
And then when you find out, you know, it's 0.00001% of net sales after, you know, holdbacks and everything else.
There are a number of states that have very specific laws regarding cause marketing.
And in those states, you generally have to register with the state and you have to have a specific agreement in place with a charity and very specifics on not just a portion of proceeds, but a more specific amount of it.
And I'd say it's one of the areas, understandably, that companies have just no knowledge of those rules.
California, as of June of this year, requires all companies to register with the state if you're conducting any sort of cause marketing on the packaging or online.
If you don't want to go through all of that, then you can say something like, we support causes for the homeless, or we make a yearly donation to providing water to people in Africa without tying it to a specific amount per sale or the certain amount of sales will increase or decrease that.
So you can talk about supporting things, but if you tie sales to those things, then there's barely specific requirements.
And so just another law that California added to this year.
And do you see other states fall into line with some of the regulations that California puts into place?
How do you see the rest of the country follow up on some of the regulations that California puts into action?
To some extent, I think companies look at, if we're in compliance in California, we're probably going to be in compliance with most of the rest of the country.
You look at something like Prop 65, no other state has adopted anything close to Prop 65.
So in that context, I would say, you always know California is going to be probably more aggressive on these things than most states.
And it's also obviously the case for companies, like when we look back at the non-GMO laws that were circulating, you know, now it's been a good 15 years plus when there was a proliferation of non-GMO laws.
Vermont and New Hampshire were some of the first states that had actually approved non-GMO labeling.
You know, I think there were some companies who were like, we could probably just not sell in New Hampshire and we'll still be okay.
It's a little bit harder to say, we're just going to cut out California from our sales.
The fifth largest economy in the world.
Right.
So, you know, certainly from that standpoint, California does shape, you know, the way, I mean, Prop 65 again, I go back to that.
Could you explain Prop 65?
Yeah.
The state of California has identified 900 plus substances, chemicals, and other substances that they have determined may cause cancer or birth defects and other reproductive harm, and requires businesses in California to warn people that products might contain those substances, if they're being exposed to them in California.
Doesn't mean that you can't sell products with those substances, but the state of California requires that if it's, and some substances have no threshold limit, like any amount makes you subject to Prop 65.
Other substances have certain thresholds, like for lead, it's half a microgram per day.
So if you have a product that contains more than half a microgram per day, and you want to sell it in California, you're required to warn people of that prior to being exposed to it, in the case of a food or beverage, you know, prior to consuming it.
And you can do that by putting a notice on the store shelf where it's being bought, or directly on the container.
The reality is that no retailer is going to agree to have to monitor and manage putting a disclosure on a store shelf.
So unless you own the store, you know, it's got to be on the container.
And then that puts companies in the position of, okay, I've got this protein powder made from plant-based pea protein, and there's lead in it just absorbed from the soil.
And it's over the threshold, so I'm going to have to put the warning on it in California.
Do I want that same warning that says, and typically the warning would say something like, this product may contain lead, which the state of California has determined may cause birth defects or other reproductive harm.
The reality is people in California, they see it on everything.
You go to Disneyland, it's on the rides and it's on the shelves where you can buy little metal pins.
You go to McDonald's, you go to Starbucks, it's on the parking garage and places.
No one probably pays much attention to it in California.
But if you're in Virginia or South Carolina or wherever, and you're getting a protein product that says, the state of California has determined this may cause cancer, you might not know about Prop 65 and be thinking twice about it.
So certainly something that companies have to put into consideration as to, are you going to have separate packaging just for California?
Well, in 2025 and beyond, we'll certainly be interested to see how other states follow suit.
We've got a couple of weeks left in December until we're into 2025, which is crazy to me.
What are some of the topics we're watching with the new administration?
Well, it's anyone's guess, right?
Based on some, let's say, pre-discussions and kind of actions from people that are intended to be in charge, I would say it could be an interesting four years under the new administration.
Certainly, it appears that RFK Jr.
might be the person in charge of HHS and FDA.
And he's been pretty outspoken of being a fan of natural, not processed products, and also not a huge fan of drug, of the regular drug industry and more looking at alternatives.
So depending on what segment you're in, that might be great news or not so great.
You know, I think for the dietary supplement industry, probably looking at it as potential for, you know, for increased ability to do things.
And maybe even as you were talking about, for ingredients like kava and kratom and some of those other ingredients, you know, psychedelic mushrooms, you know, these are all guesses, but certainly seems to be in the pathway of things that the people in charge of the FDA in this new administration might be a fan of.
At least the last time around when President Trump was in office, there was certainly kind of anything that President Obama had put in the place, you know, died on the vine.
And, you know, we'll see where that goes with this one.
You know, there was a notice out to be redefining the term healthy, a couple of years ago, and really focusing more on saturated fat, added sugars, and sodium, as kind of the three tempos for unhealthy or determine whether something is healthy or not.
Because under the current definition, I think, there are certainly companies and people thinking that the definition of healthy right now doesn't necessarily fit everything.
You have products with nuts that have high amounts of saturated fat or avocado, but still would be considered healthy by a lot of people.
You have the situation where you could have a sweetened product with 30 grams of sugar, that has vitamin C in it and meets all the other boxes and would be considered healthy.
But water doesn't really meet the definition of healthy under the current definition, because you have to have something that's low in fat, low in saturated fat, low in sodium, under 60 milligrams of cholesterol, and at least 10 percent or more of the daily value of vitamin A, vitamin C, calcium, iron, protein, or fiber.
So for water, it's got all the low things, but it doesn't have the protein, fiber, you know, or vitamins and minerals for just regular water.
So it's not healthy under the current definition.
The new proposed definition kind of covered that and said, water you can call healthy, even if it doesn't meet those other criteria.
You know, that was put out by Biden.
I do think we will see some renewed focus on healthy foods and then kind of outspoken on the ultra-processed types of foods.
And I wouldn't be surprised to see some more focus on that moving forward.
All really interesting topics and important for the brands in our ecosystem to keep an eye on.
Is there a way for brands to keep up to date with all of these topics through Greenberg Traurig?
So I have a podcast as well.
It's called Greenberg Traurig's Legal Food Talk.
I had all these great names and someone had it trademarked.
And we decided we probably shouldn't violate trademarks as a law firm.
So we went with the very defensible Greenberg Traurig's Legal Food Talk.
But it's a mix of some clients from the industry.
We have Madeleine Hayden from Nutpods, who was just speaking at BevNET.
Former Denver Bronco, Tarell Davis was on one.
So clients and other people in the industry talking about food issues.
Certainly, you can go to our website at gtlaw.com and look me up, and we typically issue out some alerts or just shoot me an e-mail.
And when things come up, we try to make that happen.
Well, thank you so much, Justin Prochnow.
It was such a pleasure to have you here.
And the information that you shared, I'm sure will be incredibly helpful to everybody who is listening.
So thank you so much for joining us on Community Call today.
That concludes another episode of the Community Call Podcast.
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