- Kellogg will pay $20 million into a settlement fund for a class action lawsuit filed in 2016. The case argued the company falsely advertises some of its cereal as healthy and nutritious when it contains added sugar, according to Food Navigator.
- The cereal maker also agreed to refrain from using the words "healthy," "wholesome," "nutritious" or "benefits" to describe products as a whole. The words "Heart Health" and "Lightly Sweetened" must be removed from boxes of Smart Start, Raisin Bran and Frosted Mini-Wheats.
- The settlement was granted preliminary approval by a federal court judge in the Northern District of California this week. After more than three years of litigation, the parties came to this settlement agreement only a few months before the scheduled trial.
This case is one of several class action lawsuits that have been making their way through U.S. courts. In many of these cases, manufacturers are accused of inappropriately using the term "healthy" on products that contain high amounts of unhealthy ingredients, including sugar.
Litigation is an expensive undertaking. In agreeing to shell out $20 million, Kellogg must have sensed a lengthy legal battle ahead. It chose to pony up the penalty cash and forgo potentially steeper expenses — as well as the possibility of damage to its brand — that could result from a guilty verdict in court. In the settlement, Kellogg denied any wrongdoing.
Other brands that have been involved in similar cases — like General Mills, which recently had a similar case about sugar in its cereals dismissed — also denied they printed falsehoods on their labels. That does not, however, seem to deter motivated consumers from looking more deeply into those claims and sounding alarm bells.
This settlement may not set a legal precedent, considering the recent dismissal of the General Mills case. A similar case against Post is still working its way through court. And in August, a federal judge denied a request for dismissal for a nearly identical case filed against Clif Bar.
However, companies facing these accusations might want to follow Kellogg's lead. By paying its consumers with this large fund, it can work to absolve itself of any wrongdoing through a quiet, personal interaction.
Perhaps the most important outcome of the lawsuit are the claims Kellogg is now prohibited from using on its cereal boxes. The terms that are now off-limits are those the lawsuit took issue with in the first place. The settlement terms in effect validate the concerns that were brought before the court. Taking these terms off of cereal boxes prevents future litigation on this topic against Kellogg, and also shows these claims may soon no longer be acceptable for other cereal manufacturers.
Upcoming federal labeling changes requiring added sugars to be separately listed may make a difference in how companies — and consumers — treat sweetened cereal in the future. Long-pending changes to FDA's definition of the "healthy" label claim could also clarify messaging to consumers. However, the most important piece of this puzzle is making sure consumers know where to find the information and can understand what it means.
Much like the term "natural" — which also has no federally regulated definition and has been the reason for other class-action lawsuits — has fallen out of favor with CPG manufacturers, it may soon be the case that touting a health halo when sugar makes up a substantial portion of the nutrients in a bowl is no longer accepted by consumers.