- Health-Ade agreed to pay $4 million to settle two lawsuits citing inconsistencies between the sugar and alcohol levels in the beverage and what was stated on the label, Food Navigator reported. The settlement was approved by a California court.
- The company denied any wrongdoing, but agreed to conduct regular testing of sugar and alcohol levels. It will also place a warning statement on the bottle about the importance of refrigeration and the potential presence of trace amounts of alcohol for the next 12 months.
- As part of the settlement, Health-Ade also agreed to make formulation changes. The company would not disclose the specifics of the change, but told Food Navigator that kombucha producers have been working on this challenge for years and will be transitioning to an "adjusted process."
This kombucha case is one of many that has been filed against a variety of drink manufacturers. Health-Ade itself has been sued five times since 2017, so it makes sense that the company wants to put these legal battles behind it for good with a formulation change. The other three lawsuits the company faced were dismissed, Food Navigator reported.
Kombucha toes the line between being considered "raw," with live cultures in every bottle, and complying with regulations associated with commercial distribution. "Raw," much like "natural," does not have a formal definition, but is generally considered to be unprocessed food. Kombucha, however, requires some processing in order to prevent alcohol and sugar levels from fluctuating too much and violating federal regulations.
The fizzy drink is made from tea, sugar and a kombucha culture made from bacteria or yeast. When these bacteria eat the sugar, it produces alcohol. According to federal regulations, this may not rise above 0.5% ABV if the drink is to remain qualified as non-alcoholic.
Finding a balance that keeps kombucha raw but prevents alcohol from forming as the tea sits on the shelf is not easy, and Health-Ade is dealing with those consequences.
But Health-Ade is not the only kombucha company to face legal battles as a result of the natural sugar and alcohol content of the beverage. O Organics, Better Booch, The Bu and Rowdy Mermaid Kombucha all faced similar lawsuits, but all have been dismissed by the attorneys involved.
With so many court cases against kombucha companies, it’s hardly a surprise that Health-Ade would look to avoid expensive litigation — both financially and to its reputation — and instead favor a penalty payment. The decision to settle could also have to do with the fact that Coca-Cola invested $20 million in Health-Ade this summer. Although Health-Ade has the power to take these cases to court, a straightforward payment allows Coca-Cola to easily disentangle itself from a web of lawsuits and start fresh with an unencumbered brand.
In addition to paying $4 million, Health-Ade will also work toward a formulation change that will control the variability of the sugar and alcohol content in the beverage. This, however, could affect sales for the brand since it has developed a fan base due to its probiotic content, variety of flavors and use of cold-pressed juice from organic local produce. The company says it only uses four ingredients to make its fermented tea products, and the process is the same as making kombucha at home. Regulating sugar and alcohol content will likely involve some form of pasteurization or distillation to kill off excess bacteria and alcohol, a process that has the potential to damage the craft image of the drink.
Food Navigator reported sales for the year ending February 24 of refrigerated kombucha and other fermented beverages rose 21% to $728.8 million. Compared with a year before, sale velocities of the beverage were down, meaning more places are carrying kombucha, but may not be selling it as fast as before.
With so much controversy associated with alcohol content of kombucha, there could be some compromise on both the part of the manufacturers and the government in the future. Food Navigator reported there has already been some discussion about raising the ABV threshold to 1.25%. Another potential option could be for the government to define the term "raw" to include some clarity around how much processing is permitted for commercial products. But these potential solutions could take years.
Nevertheless, large CPG manufacturers are investing in the beverage showing that despite the flurry of lawsuits, industry titans are seeing its long-term potential.