Pepsico, Inc.’s (PEP - Analyst Report) popular Naked Juice range has been charged for misleading buyers by making lofty claims about the beverage’s health benefits.
On Oct 4, the Center for Science in the Public Interest (“CSPI”), a consumer advocacy group, filed a lawsuit in the United States District Court for the Eastern District of New York against PepsiCo’s Naked Juice packaging claims.
The lawsuit seeks class-action status on behalf of shoppers nationwide and in New York as well as California. It also seeks unspecified damages.
The CSPI stated that the company portrayed its Naked juices and smoothies to have "high-value" ingredients such as acai berry, blueberries, kale and mango, while in reality the main ingredient is cheaper “nutrient-poor apple juice”.
The group further argued that PepsiCo’s “NO SUGAR ADDED” claim on labels is inappropriate as the drinks contain high levels of sugar. Furthermore, CSPI said PepsiCo hasn’t disclosed that the drinks are “not a low-calorie food” as is mandated by the Food and Drug Administration.
In the words of CSPI litigation director Maia Kats, “Consumers are paying higher prices for the healthful and expensive ingredients advertised on Naked labels, such as berries, cherries, kale and other greens, and mango”. “But consumers are predominantly getting apple juice, or in the case of Kale Blazer, orange and apple juice. They’re not getting what they paid for.”
In its defense, PepsiCo stated that each Naked juice bottle contains the fruits and vegetables it claims and the sugar content is "clearly reflected" on the label.
Investors should note that back in 2013, PepsiCo had agreed to stop calling Naked juices "all natural" as part of a $9 million settlement.
Zacks Rank & Key Picks
PepsiCo carries a Zacks Rank #2 (Buy). Other beverage stocks worth considering are Dr Pepper Snapple Group, Inc. (DPS - Analyst Report) , Coca-Cola Amatil Limited (CCLAY - Snapshot Report) and Primo Water Corp. (PRMW - Snapshot Report) .
Primo Water is expected to witness a 140% rise in 2016 earnings. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Dr Pepper holds a Zacks Rank #2 and full-year 2016 earnings growth is projected at 8.5%. For Coca-Cola Amatil, full-year 2016 earnings growth is expected at 10.8% and the stock carries a Zanks Rank #2.
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