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General Mills Inc
Laura Rude-Barbato, a coffee shop owner in Imperial Beach, Calif., used to feed her kids Nutella several times a week. It was easy for her to identify with its ads depicting a frenzied mom serving up the chocolate-hazelnut spread with the tagline “breakfast never tasted this good.” Then she realized the product is loaded with 10.5 grams of sugar per tablespoon. “I had no idea,” she says. “I might as well have been giving my kids a Brownie for breakfast.”
Rude-Barbato kicked the Nutella habit. Then she joined a class action filed in a federal court in California that claimed Ferrero U.S.A., Nutella’s manufacturer, misled consumers via labeling and marketing into thinking the spread was healthy. In January, Ferrero settled the case and a similar one brought in New Jersey, without admitting guilt, for almost $7 million.
It turns out Rude-Barbato is no outlier. In 2011, Kellogg (K) consented without admitting guilt to a $5 million settlement in a class action claiming it touted Cocoa Krispies and Rice Krispies as helpful to children’s immunity without any clinical studies to back up the marketing. A false-advertising lawsuit filed in a federal court in Ohio that alleged Dannon (BN) lacked conclusive evidence to say its Activia and DanActive products prevented illness came to a close in 2009, with Dannon agreeing to pay consumers and lawyers at least $35 million. The company says it stands by its advertising.
Stephen Gardner, litigation director for the Center for Science in the Public Interest (CSPI), a Washington consumer advocacy group, says all he has to do to find candidates for such cases is conduct yearly “supermarket sweeps.” In 2011 his group filed a federal lawsuit in California against General Mills (GIS) for marketing Fruit Roll-Ups, Fruit by the Foot, and Fruit Gushers as “fruit flavored.” CSPI says the snacks mostly consist of sugars, and Strawberry Fruit Roll-Ups don’t have any strawberries in them. “We stand behind our products and the accuracy of the labeling of those products,” says General Mills spokeswoman Maerenn Jepsen.
Jack Fitzgerald, a plaintiffs attorney in California, says suing food manufacturers “can be more lucrative” than the patent law practice he left in 2010. He’s among a group of lawyers that was awarded about 66 percent of the Nutella settlements—about $4.6 million. Fitzgerald is also representing consumers suing Quaker Oats (PEP) for touting some of its oatmeals and granolas as wholesome even though they contain trans fats. He’s filed a similar case against Kraft Foods. Quaker declined to comment. “We do our best to make sure our labels give consumers accurate and useful information that complies with applicable government regulations and is presented responsibly,” says Basil Maglaris, a spokesman for Kraft.
Angel Garganta, a San Francisco attorney who defended Dannon, says, “A lot of these cases are just kind of silly. Most consumers don’t care. You tell them what these cases are about, and the responses are, ‘You’re kidding, someone is suing over that?’ ”
The Food and Drug Administration has the power to enforce rules requiring food and drink labels to be truthful. Yet it doesn’t always have the bandwidth to do so, says Marion Nestle, professor of nutrition, food studies, and public health at New York University. “So private lawyers are going into action,” she says. “They’re making real progress.”
Companies are overhauling their advertising as part of the settlements. On its Nutella labels, Ferrero consented to swapping “an example of a tasty yet balanced breakfast” to “turn a balanced breakfast into a tasty one.” That was a sweet vindication for Rude-Barbato, who says a blogger called her an idiot for joining the Nutella case. “Moms are busy, and we don’t have time to stop and read every label,” she says. “There should be truth in advertising.”
The bottom line: Ferrero settled class actions over claims that ads for its sugar-filled Nutella spread made it seem healthy, paying out about $7 million.