Published on: Saturday, October 12, 2013

Energy Drinks, Supplements: Big Business or Big Legal Trouble

 
 

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Energy, the kind associated with physical stamina, is a big business, exploding in growth. That can continue.  Or the momentum can collapse.

Energy drinks, both non-alcoholic and alcoholic, and supplements have been targeted by law enforcement, regulatory bodies, and individuals filing personal-injury lawsuits. That trend could wind up making energy drinks and supplements the "Next Tobacco." Those associated with the industry, ranging from investors and corporate executives to retailers and direct sales forces, could wind up losing lots of money, facing prosecution, and/or paying fines.

According to Packaged Facts, the energy drink industry grew 60% from 2008 to 2012, when it hit $12.5 billion. For energy supplements, Packaged Facts documents a 7% growth spurt from 2011 to 2012, when revenues totaled $11.5 billion.

A sign of the good times rolling, THE NEW YORK TIMES reports that, in 2012, Coca-Cola considered a buyout of Monster Beverage Corporation. PepsiCo has its AMP energy drinks. And, Game Plan Holdings, once an interactive resource for sports enthusiasts, is now in the supplement product business. For its profile, BLOOMBERG BUSINESS WEEK states, Game Plan "offers scientifically tested products in targeted nutrition, weight management, and energy enhancing snacks categories." Yes, it migrated from web to product. These days, it's usually the other way around.

What those energy niches offer consumers is essentially a way to have more control over their lives.  They are the ones with the say on how long they will party.  Energy drinks with alcohol can facilitate that for some people.  Students can study and lawyers can prepare briefs through all-nighters instead of conventional schedules. Consumers can participate in extreme sports.  They can lose weight. They can add muscle. For this right, they will go to the mat, no pun intended.  And their kind of lobbying support for the industry could help save it.

The same kinds of individuals and groups who went after tobacco are going after personal energy products. It is possible and increasingly likely that energy drinks and supplements could be the "Next Tobacco." 

The phrase "Next Tobacco" is shorthand for the infamous class action lawsuit, filed by 46 state attorneys general, against several tobacco companies. That was resolved in 1998 with $206 billion to be paid over 25 years. How that lawsuit was structured and the public relations messaging which supported it was considered to be the platform for other major lucrative lawsuits, both class action and individual. Essentially, asbestos litigation followed that model. Meanwhile regulations, including the imposition of sin taxes, have continued to beat down what remains of the tobacco industry. Those on the front lines of all this have, at least in some circles, been considered "heroes."

That anti-energy players have been busy bees. Last year, New York attorney general Eric T. Schneiderman looked into labeling in the category. It is around labeling issues that prosecution, regulation, and litigation get started. When the powers that be begin studying labels, watch out. Then. on the West Coast in San Francisco the City Attorney Dennis Herrara sued Monster Corporation for allegedly marketing to children products which present health risks.

On the federal level, veteran of the tobacco litigation, current U.S. Senator Richard Blumenthal has joined with colleague Dick Durbin and Representative Ed Markey to investigate energy drink companies. Earlier this year they sent letters to more than a dozen companies demanding information about their labeling and marketing practices. Note their focus on labeling. The three got plenty of headlines. Also on the federal level, The U.S. Food and Drug Administration had issued a press release explaining how it is investigating adverse events reports. Obviously, it is positioned as protectors of consumers.

Individual lawsuits have been part of the anti-energy mix. A typical one was filed by the family of of 14-year-old Anais Fournier. They contend her heart stopped because of energy drinks. The media have been tracking topics such as the surge in ER visits associated with energy drinks and alleged deaths from supplements promoting weight loss. The American Association for Justice, whose members are plaintiff lawyers, posted online a membership application for the Energy Drinks Litigation Group.

Where consumers who love their energy products and business interests have leverage is through public relations tools. Tobacco litigation and regulation could keep crossing the finish line primarily because of one and only one issue: That BigTobacco was chasing youth as the next generation of smoker. That public relations issue was hammered and caught traction.

The energy drink and supplement industry hasn't been a slouch on the public perception front. Some companies such as Monster have already rebranded, classifying the product as a beverage not a supplement. That also eliminates compliance with certain regulations.  Monster sued Herrera in response to demands that it discontinue marketing to youth and reduce the level of caffeine. Suing sends a powerful signal. The message is that the company is right and is plowing in its money to prove that. The public notices that.

Also, the industry recognizes this is no time for amateur hour. It has been hiring seasoned lobbyists to counteract measures at all levels of government. For example, in Chicago, former aide to Mayor Richard M. Daley Victor Reyes is representing the American Beverage Association. The issue is a proposal to ban high-caffeine energy drinks. 

The question is: Will energy drinks and supplement companies and its consumers be effective in managing the public perception of their products? If so, political leaders will likely move onto other causes which resonate with their constituencies and media. Lawsuits? They can be quietly settled, with non-disclosure as a term and condition. Meanwhile demand remains high among those who want what they determine is the energy edge in their personal life, work, and sports.

 UPDATE:   THE INDEPENDENT reports that a man in the UK allegedly died from consuming a lot of sweet energy mints.  Each contained 80 mg of caffeine.  Here is the article.

 

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