Vita Coco Settles Class Action Suit for $10 Million
When Mike Kirban told attendees at BevNET Live in December that the biggest low the company experienced in 2011 was getting slapped with the company’s first class-action lawsuit, he hadn’t yet had to deal with the pain that comes from writing the check that makes it go away. This past month, he finally did.
The settlement, negotiated with plaintiffs’ firm Labaton Sucharow LLP, was for $10 million. Of that settlement, $3 million will come from the donation of product for the next three years to charitable organizations, and the company will provide $2 million in refunds and vouchers for consumers who bought product from the company’s web site. The brand also agreed to change the wording on its packaging and provide better monitoring of the potential variations that can come from sourcing coconut water in different regions.
“Vita Coco is the largest brand in the hottest beverage category: coconut water,” Michael Kirban, the brand’s co-founder, said. “So attracting scrutiny was inevitable. Class action suits are doing bigger business than coconut water in the U.S., that’s for sure.”
The suit was filed in August following disclosure that a scientific testing firm, consumerlab.com, had found significantly fewer electrolytes in tested samples of Vita Coco and O.N.E. Coconut Water than had been claimed on the package.
Kellie Lerner, one of the attorneys in the action, stated: “For the millions of consumers who pay for products that claim to improve their health, this settlement sends a message that companies will be held accountable when they exaggerate or misstate the health benefits of their products.”
And that notion of accountability quickly leapfrogged to California (note: see “First Drop” and “Class Action Litigtion” in this issue for more information), where Vita Coco rival Zico, tea company Xing, and reservoir-cap functional water Activate are all now getting slapped with separate class action lawsuits, each filed under the California Consumer Protection Law.
For Zico, the case, filed in late October, is based on claims that the “from concentrate” nature of one of the company’s dual product lines, a Tetra Pak carton line with pure coconut water and a from-concentrate line packaged in plastic bottles, is an inferior product. According to the suit, Zico’s use of terms like “natural”, “pure premium” and “coconut water” fails to disclose that some of it is made from concentrate; additionally, the lawsuit charges Zico with failing to indicate in large enough letters on the front of the label that the PET products are made from concentrate.
“The suit is baseless,” said Zico founder and CEO Mark Rampolla.
Meanwhile, at Xing Tea, co-founder Tom LeBon also made it clear he planned to fight the claims against his company in court as well.
In the case of Xing, the suit focuses on the company’s use of citric acid in its ingredients — one that the lawsuit claims is not “all natural” even though Xing products are labeled as such. Additionally, the company is being sued for deceptive marketing : while the product comes in varieties like Green Tea with Pomegranate or Green Tea with Mango, according to the lawsuit, they do not contain actual fruit or actual juice. Xing’s ingredient panel does note that the products have “natural flavors” but according to the plaintiffs’ case, the consumer protection law requires more disclosure.
Lebon called the lawsuit “frivolous” and said that he had recently had his ingredient supplier, Archer Daniels Midland Co., supply a letter indicating that the citric acid used in the tea was all-natural. As for the flavorings, according to Lebon, a similar complaint had been filed with the FDA and that agency had not found fault with the company.
A third class-action lawsuit accuses Rising Beverage Co. – the owner of Activate — of dishonest and misleading statements in its advertising about the freshness of Activate’s key innovation, its “in-the-cap” reservoir of dry vitamins versus those pre-mixed in other beverages.
Asked about the lawsuit, Dan Holland, the CEO of Activate, stated simply, “We think it has no base.”
The general statutes under which the lawsuits were filed, California’s Consumer Legal Remedies Act and California’s Unfair Competition Law, are fast becoming issues for food and beverage manufacturers, who believe that they are opening the door to even more lawsuits. According to one lawyer familiar with the statute, a suit in California also opens the door to actions in other states, creating a situation in which plaintiff’s attorneys are able to use the threat of legal action to extract settlements from defendants who are unwilling to pay for long court battles.
Recently, other companies like Muscle Milk and even big company-owned companies like Alexia Foods (ConAgra) and Kashi (Kellogg) have been named in similar state and, in some cases, federal claims.