The truth may shock you
Think ginger ale and you probably think Canada Dry. The iconic brand has been around for more than 100 years. In the U.S., it far outsells any other competitor.
A decade ago, the company behind it began boasting it was “Made from Real Ginger” in a campaign aimed at wooing health-conscious consumers.
In an embarrassing climb-down, that boast has been abandoned. Keurig Dr Pepper KDP, +1.11% has agreed to pay $11.2 million to settle claims that it misled consumers. It has agreed to drop the words “Made from Real Ginger” from its labels. The company defended itself against claims made in court that the iconic “ginger ale” contains too little actual ginger even to taste.
No reasonable consumer would misconstrue the words ‘Made from Real Ginger” to convey a promise that a soda contains a significant amount of ginger ingredients, sufficient to convey unspecified ‘health benefits.’
—Keurig Dr Pepper in court papers
The case, brought by California residents Jackie Fitzhenry-Russell and Gegham Margaryan, was filed in the U.S. District Court in Northern California. The settlement was approved January 10.
Keurig Dr Pepper says it settled only to avoid “protracted litigation.” It says there is at least some real ginger extract in the soda, despite the climb-down. “Canada Dry Ginger Ale has and will continue to be made using real ginger extract,” a spokeswoman told MarketWatch.
How much? “We’re not quantifying the amount,” she said.
Too little to have any health benefits, the company itself admitted in court: “The labels do not promise that Canada Dry contains a certain amount of ‘real ginger,’ nor does Canada Dry purport to be a good source of ginger,” Keurig Dr Pepper told the court.
“No reasonable consumer would misconstrue the words ‘Made from Real Ginger’ to convey a promise that a soda contains a significant amount of ginger ingredients, sufficient to convey unspecified ‘health benefits,’” it added.
The ginger content is so low, she said, that it is ‘at best, at the minimum detectable taste threshold for humans and more likely is significantly below the taste threshold.’
—Annette Hottenstein, executive director of the Maryland Academy of Nutrition &
An expert chemical analysis of the soda, conducted for the plaintiffs, went even further. The ginger content of Canada Dry and Canada Dry Diet ginger ales is “minimal,” argued Annette Hottenstein, executive director of the Maryland Academy of Nutrition & Dietetics, in a report presented to the court.
The ginger content is so low, she said, that it is “at best, at the minimum detectable taste threshold for humans and more likely is significantly below the taste threshold.” Hottenstein, a former food scientist for Pepsi PEP, +2.95% and for McCormick & Co., has been in the business for 30 years.
“The main reason that consumers would think that Canada Dry tastes like ginger,” she added, “is because it says ‘ginger’ on the product label and the beverage contains other flavor compounds that mimic the sensory properties of ginger.” The amounts of ginger were “insufficient to provide consumers with any of the therapeutic benefits of ginger.”
Keurig Dr Pepper declined to comment further.
By contrast, niche competitor Reed’s REED, +7.79% says there are between 2.5 grams and 7.5 grams of Peruvian ginger in each bottle of its own ginger beer, depending on the strength.
Judge Nathanael Cousins from the U.S. District Court was unimpressed. He cited Keurig Dr Pepper’s own marketing research, which suggested the boast that the ginger ale was “Made from Real Ginger,” and the associated “health halo,” had significantly boosted sales. “It would be odd for the court to conclude that Dr Pepper’s advertisements do not affect consumer expectations regarding Canada Dry, when Dr Pepper itself believed that it had,” he wrote. He dismissed two of the company’s requests for summary judgment.
‘It would be odd for the court to conclude that Dr Pepper’s advertisements do not affect consumer expectations regarding Canada Dry, when Dr Pepper itself believed that it had.’
—U.S. District Court Judge Nathanael Cousins
Keurig Dr Pepper’s claims that it had not intended to mislead consumers about the “health benefits” of its ginger ale were undermined by the marketing materials presented in court, the judge in the case said. A “Real Ginger Goodness Strategy” would attract customers because “real ginger connotes health,” and ginger is “considered to be a natural remedy,” said one internal marketing report disclosed in court.
Consumers “will feel better about” drinking Canada Dry ginger ale, instead of other sodas, because “consumers know that ginger is BFY,” said another. BFY means “better for you.” Ginger has a “strong health halo,” and “for many consumers it links [the soda] to a healthier option,” said other internal documents. Consumers “love” the new message that Canada Dry is “Made from Real Ginger,” and it helps reach people concerned with “Health & Wellness,” said others.
Ginger is a favorite ingredient for health-conscious consumers, and it’s said to help relieve upset stomachs and arthritis pain — though there’s apparently no hard data to support the pain-curing claims, according to WebMD.
The case highlights the legal risks for companies contemplating marketing campaigns. Mark Bartholomew, a professor at the University at Buffalo School of Law, said companies need to walk a fine line when it comes to boasts about their products. They’re allowed to engage in “commercial puffery” or obvious exaggeration, he says.
But they can face legal trouble if they offer false information that might fool a “reasonable person” into buying a product. “It has to be material,” he says. In other words, it must affect someone’s decision to purchase the product.
Meanwhile, a similar case is being pursued against Coca-Cola KO, -0.77% the manufacturer of Seagram’s ginger ale, also brought by Fitzhenry-Russell. Coca-Cola refused to comment.
Keurig Dr Pepper is also being sued for claiming that A&W Root Beer and Cream Soda are “made with aged vanilla.” The company said it does not comment on pending litigation.