To succeed in the growing functional beverage industry, understanding key legal issues is crucial. As new functional beverage brands continue to emerge, business owners need to consider a variety of legal issues, including (1) proper product categorization, (2) appropriate advertising and marketing claims, (3) engaging with influencers, (4) working with contract manufacturers, (5) ensuring adequate IP protections, and (6) selecting the appropriate corporate entity structure.
Whether at 7-11 or at your local grocery chain, functional beverages line the aisles, touting their nutritional and health benefits. The functional beverage industry is becoming big business, but as this industry bubbles up, emerging brands need to think about the best corporate structure to hold their product.
Below, we have provided some pros and cons of three (3) standard corporate structures often considered by early-stage businesses: limited liability companies, S corporations, and C corporations.
In an industry full of buzzwords, “adaptogens” and “nootropics” are current standouts within the beverage industry.
The beverage industry experienced a significant shift in consumer preference following the COVID-19 pandemic, as consumers’ proclivity for nutrient-rich foods stimulated a rise in beverages designed to provide added health benefits, such as increasing energy, decreasing stress, and improving overall mental health. The increased popularity of these “functional beverages” (i.e., beverages that provide added health benefits) is more than a fleeting trend, as the industry is projected to reach $62 billion by 2027.
In the bustling landscape of consumer goods, caffeinated beverages stand out as a daily staple for millions of Americans. A recent shift towards “clean caffeine” and caffeine alternatives has further energized consumer demand for ready-to-drink caffeinated beverages.
Recently, however, the spotlight has turned to the highly caffeinated beverage industry for far less stimulating reasons, as cases of alleged caffeine overconsumption have led to severe health repercussions. As highly caffeinated beverages continue to expand their market share, it is crucial for ready-to-drink beverage brands to carefully consider their product’s caffeination levels and the way those products are labeled and/or marketed.
In May 2022, when the Federal Trade Commission (FTC) proposed updates to its Guides Concerning Use of Endorsements and Testimonials in Advertising (Guides), it had been 13 years since the Guides were updated. Much has changed in the way that businesses marketed and sold their brands, products, and services over that period. While the use of social media marketing has been well established for the better part of the last decade, the use of social media influencers—that is, people who use their expertise, knowledge, and/or celebrity to promote ideas, products, services, and brands via the internet—has seen a dramatic uptick since the period preceding the COVID pandemic and is now estimated to be a $21 billion industry in its own right. The rise of this marketing approach—and the increasingly prevalent lawsuits against influencers and the companies they promote—played no small part in the FTC’s reconsideration of previous guidance, as evident from the finalized guidelines which were released June 29, 2023.
The question going forward is to what degree the new guidelines will change the way marketers approach the use of social media influencers. To get at the issue, it is helpful to review the substance of the FTC’s revisions.
Consumers’ increasing awareness of the advantages of nutrient-rich foods has prompted global food and beverage companies to begin enhancing their products with nutritional additives, leading to the creation of new products—and new categories of products—targeting consumers’ changing health and wellness needs.