Too Much Sweetness

Splenda has taken the artificial sweetener market by storm, much to the disappointment of Merisant, the manufacturer of Equal. The lawsuit made known to the public in early 2007 is all over the interpretation of how McNeil, the makers of Splenda have been marketing their product. The gist of the lawsuit is that the makers of Equal believe that the makers of Splenda have been misleading consumers by inferring through all of their marketing campaigns and even on their product that Splenda is made from sugar and is all natural, when this statement is not true. The makers of Splenda state that they have not been misleading consumers by inferring a sugar reference, as the process involved in making Splenda does in fact start with sugar.

What is the problem you ask? The problem is that the artificial sweetener market is a very competitive one. In fact, if someone comes out ahead in this lawsuit the estimated $1.5 billion artificial market may be theirs. Equal was once the most well name and best selling artificial sweetener on the market and could be found in more than 6,000 different consumer products such as Diet Coke and Diet Pepsi, two companies that are known to be the biggest buyers of artificial sweeteners anywhere in the world. These are huge contracts and one company does not want to give them up to the other.

Unfortunately for the makers of Equal, when Splenda was introduced to the market in 1999 sales have dropped off and Splenda is now the number one artificial sweetener in the world, holding onto 62% of the United States artificial sweetener market.

The thing that is odd about this case is that disputes over advertising rarely make it in front of a jury. But, this case is difference as there is an argument about the slogan that Splenda used, which was “Made from sugar, so it tastes like sugar” which is what the makers of Equal are so opposed to, as it indicates to a consumer that they are consuming a natural product when Splenda is in fact an artificial sweetener. Both sides are expected to come before the court with scientific explanations of the processes that are involved in making both Splenda and Equal, which will be meant to do support the argument of whether or not the slogan was in fact misleading or not.

The term “made from sugar” is where a lot of the problem lies because McNeil, the maker of Splenda has stated that the term excludes the meaning that Splenda is in fact sugar but the makers of Equal disagree. Language, and the use of it, is what will come into play here and the jury will clearly have their hands full when they are handed the case and they have to determine whether or not McNeil Nutritionals, is in fact guilty of misleading consumers with their verbiage.

Merisant is seeking as much as if not more than $176 million in Splenda’s profits as well as the ability to force the maker of Splenda to change its marketing strategy and slogans to offer a clearer picture to consumer as to what it is they are actually buying. It should be interesting to watch the approach that each side takes to defend its position in this war to secure the #1 spot in the artificial sweetener market, which is what many contend this is actually all about.

The Jury Has a Tough Job

What the jury will need to determine in this case is if McNeil Nutritionals, which is a division of Johnson & Johnson, has intentionally misled consumers. The Sugar Association believes that the company has misled consumers because it states in its marketing for the product and even on the packaging that the product contains sugar. This is troublesome for the Sugar Association because it believes that the company is trying to dupe consumers and food manufacturers into believing that this is an all natural ingredient that is exactly like sugar with just fewer calories when this is not true.

Merisant, which is the manufacturer of Equal and NutraSweet, has a problem with the makers of Splenda because Splenda does not contain sugar, despite the fact that it has been marketed that way. Merisant says that Splenda is sweetened with a synthetic compound that involves a very complex chemical process. Of course, McNeil replies that Merisant is just trying to win a battle since they have lost the battle in the grocery stores where consumers are buying more Splenda than NutraSweet and Equal.

The lawsuit is based upon the fact that McNeil has led consumers to believe their advertising and even their packaging that Splenda is safer and healthier than other artificial sweeteners on the market, though many studies show that it is no more safe or healthy than the aspartame based products that are out there. Merisant lawyer Gregory LoCascio stated, “McNeil documents show that they knew consumers were confused and they didn’t do anything to stop it.” Being that the judge has decided that this case should go before a jury, the jury will certainly have a tough job as it wades through all the evidence in an attempt to determine what is fact, fiction, and what is simply competition.

Troublesome Taglines

Many believe that the tagline that McNeil has used with Splenda is what has made them a target for all of this legal action. When the product first hit the markets their tagline was “Made from sugar so it tastes like sugar. But it’s not sugar.” When sales were not as impressive as the company had hoped they dropped the last sentence and suddenly sales skyrocketed. The company used this slogan as they didn’t want it to be labeled an “artificial sweetener” as they thought this would be the death of the product before it even got its start yet it is an artificial sweetener.

The tagline not only attracted consumers but it also attracted companies like Pepsico that wanted to use the product as they thought it was healthier and they knew their customers thought so, as well. Merisant believes that McNeil has made $183 million in unfair profits since 2003, all based on what many believe is a misleading tagline.

Despite legal action and research that suggests that Splenda may not be any better for you than Equal and NutraSweet, Splenda is outselling Equal four to one. Most Americans state that the reason they buy products with Splenda is that the products taste more like sugar than those with Equal. No one knows how this legal battle will ultimately turn out, one thing is for sure, both companies are in it to win.

Hard Times for Tate & Lyle

After telling stock holders and consumers about the legal battles with the different import and distribution firms at the International Trade Commission shares for Tate & Lyle closed down 40p at 605p with 30 million shares changing hands, which is three times the usual daily average. Consumers are obviously responding to the announcement and they feel like it is better to sell than stay on board, at least for the time being. This fall in stock prices came after an announcement in January of 2007 when the company warned that the product was not selling as quickly and as much as they had expected, which caused shares to fall by 16%. Apparently after the fall in prices in January and then another ominous report in May many stock holders were ready to jump ship and watch from a distance as those who stayed on either sink or swim.

A lot of the problem for Tate & Lyle is that the makers of Splenda are involved in an ugly court battle in the United States. The problem is that the maker of NutraSweet and Equal believe that the makers of Splenda are guilty of false advertising by likening their product through unclear language to sugar. While times seem a bit grim for Tate & Lyle their product is gaining market share internationally with shares going up from 26% to 28% for the year to March 31, 2007.

While there are struggles stateside with Splenda and Tate & Lyle have been seeing some drops in shares as a result, the chief executive, Iain Ferguson, has stated that he will continue to produce Splenda and they are expected to reach a respectable 70% of capacity by 2012. This is good news for the group because until the fall of 2006 they had been unable to meet the demand for Splenda and was even forced to ration the product that they did have on hand because its one plant in Alabama did not have the ability to produce any more. Luckily for Tate & Lyle, the plant has been expanded and is now two times as large as it was and the group has also added a £100m plant in Singapore that has tripled the previous capacity.

Tate & Lyle jumped on the Splenda wagon when consumers who were following the Atkins and South Beach diet were looking for low calorie sweeteners, especially in the United States. Production of Splenda took off and has quickly become the number one seller of artificial sweeteners. In fact, Splenda outsells Equal four to one in the United States, and though shares have suffered a bit because of legal action, the numbers don’t lie: Splenda is a force to be reckoned with and Tate & Lyle knows it.

The Details

This lawsuit is a long standing one between Johnson & Johnson and the Sugar Association because it is being said that the Splenda slogan, ‘Made from sugar so it tastes like sugar,” is deliberately misleading customers. The thought is that the slogan leads consumers to believe that the product actually contains sugar, but just doesn’t have the calories associated with sugar, when this is not the case. It was Johnson & Johnson that was requesting the summary judgment stating that the plaintiffs have delayed bringing suit.

It was the United States District Dale Fischer that would ultimately reject the request for a summary judgment. Fischer denied the summary judgment stating that he thought that claims against Johnson & Johnson should be heart by a jury at a trial. The Sugar Association will count this ruling as a win. In fact, Andy Briscoe who is the president and CEO of the Sugar Association said, “this ruling will give consumers a chance to hear the facts in this case. Consumers have a right to know what they really are buying and an equal right not to have a big corporation try to tell them something else.”

McNeil Nutritionals, who is the company that actually makes Splenda, has been faced with similar accusations in the past. The company, of whom Johnson & Johnson is the parent company says that its marketing slogans “are true and in no way state or imply that Splenda contains actual sugar or is natural” but apparently many don’t believe this is the case and a judge has decided that the claims have enough merit for the face to go forward and to be decided on its merits.

A Troubled History

This is not the first time that the two companies have butted heads in the recent past. In November of 2006, the Sugar Association filed a complaint with the Federal Trade Commission, requesting that there be an investigation into the marketing of Splenda. But even that was not the first time that the two companies came together at opposite ends of an argument as McNeil Nutritionals filed a lawsuit against the Sugar Association stating that the association was employing false advertising on a website that it had established. This case was shut out quickly as a federal court judge dismissed the case stating that McNeil didn’t have a right to maintain an independent action.

The Sugar Association isn’t the only entity giving McNeil a hard time. In fact, McNeil has struggled with Merisant, who is the provider of Equal and NutraSweet, the other two big artificial sweeteners on the market. The two companies were involved in a legal battle in 2007 and they finally came to some sort of settlement, though no information was shared with the public about this settlement.

The battle between Johnson & Johnson (and by extension McNeil Nutritionals) and the Sugar Association is one that is still ongoing and may be for some time. One thing is for certain, there are a lot of people ready to weigh in on this case or at least watch it progress to see if any changes will be made to the way that Splenda can be marketed in the future.