NOSHscape

The Courts: Trademarks Battle Popping in Snack Aisle

Amplify Snack Brands, the company behind SkinnyPop Popcorn, and snack giant Snyder’s-Lance began a legal battle over the word “skinny” last month. Amplify filed a federal trademark infringement and unfair competition lawsuit against Snyder’s over the company’s plans to start selling Metcalfe’s Skinny in the U.S.

Metcalfe’s is a U.K.-only line of healthy popcorn that was purchased by Snyder’s last year as part of the company’s expansion of its better-for-you portfolio.

Snyder’s filed their own suit the same day in response to Amplify’s claims, asking the court to find that there is no infringement. In Synder’s filing, the company states “skinny” is descriptive and can’t be trademarked.

Amplify, however, is alleging otherwise. The company says the potential launch infringes on its Skinnypop brand, which brought in $200 million in sales in the U.S. last year. Skinnypop is a company Amplify has been actively growing. The brand recently expanded beyond ready-to-eat popcorn with its launch of microwave popcorn and popcorn cakes in February.

“We believe in fair play and fair competition,” Amplify’s CEO Tom Ennis said in a press release. “Snyders-Lance’s and Metcalfe’s effort to copy our brand name is flattering but not how trade competitors should behave.”

The case is currently assigned to Judge Lee Yeakel of the U.S. District Court for the Western District of Texas. To prove infringement and prevent Snyder’s from bringing Metcalfe’s to the U.S., Ryan Kaiser, Chair of Amin Talati Upadhye’s Class Action and Business Litigation team, said the Austin-based snack maker will need to “allege and prove that it owns prior rights in a protectable mark, and that the junior mark is likely to cause consumer confusion.” But, unlike standard trademark issues, Kaiser told NOSH it’s more difficult to protect words or phrases rooted in descriptive or every-day terms.

“The real battle will be over whether the marks are confusingly similar, and more importantly, the scope and strength of Amplify’s rights,” Kaiser, who does not represent either company, said.

There is also a question of timeline. Skinnypop was launched in Chicago in 2010, while Metcalfe’s was established in 2009.

Kaiser said he expects Amplify will argue that SkinnyPop could be confused with any brand that tries to use “skinny” in connection with popped or corn products. If the ruling favors Amplify, it could set a precedent for future cases that trademarks can apply not only to a word itself, but also to the context of a word with certain goods.

It can be difficult – and expensive – for a brand to protect a mark that’s arguably descriptive. Kaiser said companies planning to use descriptive terms in their branding should weigh their options before proceeding. He also suggested that brands involve counsel in the selection and clearance of any new mark early in the process.

“There’s an inherent conflict, when choosing a trademark, between the marketing and legal teams,” Kaiser said. “Marketing likes to use descriptive terms, or variations of descriptive terms, because it helps convey the marketing message about the product to consumers, with less marketing dollars. But the legal team has to explain that descriptive terms don’t make strong trademarks – at least not initially – and that the marketing spend a company might save by using a descriptive mark will often be eaten up by the legal budget required to police and enforce the mark.”


Investor: Sunrise’s Vital Investment in Grass

The hens have come home to roost for pasture-raised egg maker Vital Farms, which has announced a new minority investment from Sunrise Strategic Partners. The investment will help the Austin-based egg company scale its operation and grow its distribution.

Terms of the deal were not revealed but Sunrise typically invests $10-$25 million per investment. Vital Farms has previously taken capital. Vital Farms CEO and Owner Matt O’Hayer, said it only considers investment from “organizations that invest in sustainable and humane practices.”

Founded in 2007, Vital Farms has a partnership with over 100 family-owned farms in six states who produce eggs for the brand. Previously Vital Farms had used an external facility to clean, sort and pack its eggs but the company will be opening its own processing facility in Springfield, Missouri this fall. Sunrise Strategic Founder and CEO Steve Hughes told NOSH that the new facility will allow the brand to lower costs and pass that savings along to consumers.

Vital plans to get its price point to roughly a $1 premium to conventionally-raised eggs; Hughes says research has shown that customers are willing to pay that increase for a better, more humanely-raised product.

Along with a new pricing model, Vital Farms is also launching new packaging that features “augmented reality” via an app, said O’Hayer.

The app is part of the company’s 2017 focus on educating consumers through packaging or marketing about the differences between caged, cage-free, free-range and pasture-raised eggs.

“Cage-free has certainly been in the spotlight given that retailers and restaurant chains are all pledging to go cage-free in the next 3-5 years,” O’Hayer told NOSH. “This is a move in the right direction, but as consumers learn that cage-free is not at all that they think it is, and we continue to do our work in educating them about the difference, they will continue to turn to pasture-raised eggs.”

That’s not to say consumer demand and awareness has not been high. Hughes says Vital Farms’ all commodity volume (ACV) is 15 percent, implying there is much room for expansion. O’Hayer told NOSH that in 2016 Vital Farms had the top-selling egg item across the natural channel.

Following consumer demand, Sunrise has made grass-fed and pasture-raised based companies a key focus area of the fund’s portfolio. Of the group’s seven investments, three – Vital Farms, Maple Hill Creamery, and Teton Waters Ranch – are in companies where pasture-raised or grass-fed products are central to the company. One other, Perky Jerky, has begun to shift its beef supply to grass-fed.

By investing across the space, Hughes believes, any investment in consumer education around grass-fed and pasture-raised products benefits several of Sunrise’s portfolio companies.

“Cage-free and free-range are the biggest pieces of marketing BS I’ve ever seen,” Hughes told NOSH. “I’m a marketing guy from way back, what people think cage-free and free-range are is a gimmick. It’s no better for the animal, it’s no better for the egg.”

Having spent time working at White Wave and ConAgra and then founding Boulder Brands, Hughes has been exposed to a variety of consumer trends and marketing strategies. He believes that grass-fed and pasture-raised have the potential to be as big as low-fat or gluten-free.

But, unlike those trends, Hughes noted, it’s not necessarily easy to launch a grass-fed or pasture-raised product. “The nice thing about [Maple Hill, Vital Farms or Teton Waters] is that it’s hard to follow. The barriers to entry are high,” Hughes said. “It’s hard for people to follow you quickly. Because they have to do what Matt did for the last ten years at Vital Farms.”