The UK sugar tax for sweetened drinks is now in effect and with consumer and regulatory attention increasingly turning to the amount of sugar contained in food and drink, manufacturers are facing new challenges, in order to manage the often conflicting demands of health, flavour and cost.
Public Health England say the UK food industry should remove 200,000 tonnes of sugar from every day food per year by 20201. The subject is very much in the public eye and will remain so for the foreseeable future especially with on-going news reports about obesity-related diabetes and increasing pressure on the NHS.
Food and drink producers have a number of options as to how to respond. Some might change the manufacturing process, such as replacing or reducing sugar volume with coconut sugar or sweeteners. Others will introduce new “lite” brands, typically marketed with different colouring and branding. Nestle has responded by increasing the cocoa content of their KitKat product by 13% in an effort to cut sugar2 and Coca-Cola are to launch three new low-sugar drinks3.
Whatever the change, manufacturers must reconcile consumer demand with the legislative requirements for packaging and labelling. For example changes to branding must not obscure the dietary information. There will also be very real clearance and freedom to operate challenges, not only for new brands but also new recipes, as they navigate third party trade mark registrations and patents.
Whilst there are risks, there are also new opportunities available. Is brand extension or diversification an option? Are new markets and territories available? For example McVities has a wide range of “Light” biscuits. New markets also emerge and expand, so Nairn’s Oatcakes Ltd has seen a 45% increase in annual profits in 2014 with sales at £22.1m4 due to consumer demand for oat-based and gluten free food. Lampados International have introduced a patent pending next generation” sweetener, which has a significantly lower calorie content than sugar5.
Intellectual property is a key part in this process and is likely to be a valuable asset or, indeed, weapon. If the manufacture of a product is altered and either that process (or the product itself) is novel then it may be possible to retain exclusivity over that change by obtaining patent protection. If a company were to develop new and innovative ingredients to add to a food or drink product, such as new sweetener or flavour modification compounds, then these could themselves benefit from patent protection.
For example, if a company’s R&D department was to come up with a way to replace sugar then that could form part of an extremely valuable technology that could be monetised, such as through patent licensing or by excluding the competition. Likewise, ensuring that the brand name is protected for the new product means it is possible to prevent competitors adopting a confusingly similar name. As the brand grows, it could add real equity to the business as Coca-Cola has seen with Coke Zero, Diet Coke, Coca-Cola Vanilla and so on.
Whether a company is a global competitor, serves a single national market or is a new entrant, there are common challenges. Most importantly there must be open and regular dialogue between the marketing team and the legal team as intellectual property rights continue to be created as a result of new products and improvements and modifications to established brands. Some of the key issues are as follows:
Freedom to operate searches are crucial. Is the chosen brand name available to use or is there a third party with a conflicting right? Is the new brand name registrable as a trade mark?
If the shape or pattern of the packaging is an important part of the brand identity then design protection is recommended.
A product or manufacturing process that is novel and inventive could benefit from patent protection.
Adaptations to the manufacturing machinery may also be patentable.
But beware – tweaks to recipes could also accidentally lead you in to an infringement of someone else’s patent if you’re not careful.
What is the international business strategy? As intellectual property rights are limited by territory it is imperative to ensure freedom to operate in all relevant countries and to identify the most efficient and cost effective way of extending protection.
Police your rights – keep an eye on competitors and take any necessary action to consolidate and strengthen your position in the market.