Spice maker McCormick & Co. may have deceived the public when it reduced the amount of pepper in its containers without shrinking the size of its nontransparent tins, a federal judge said.
Winona-based Watkins Inc. sued McCormick — which dominates the U.S. in black pepper sales with 45 percent market share — in June 2015 after discovering the company had removed 25 percent of its product while maintaining the same package size. On Monday, Ellen Huvelle, a U.S. District Court judge in Washington, filed her opinion allowing the lawsuit to move forward and denying McCormick’s motion to dismiss.
Watkins alleges that under federal law, McCormick’s actions constitute false or misleading advertising. While McCormick changed the product weight amount listed on the bottom of its front label, Watkins contends most consumers don’t look to see if the inner contents have changed. As a result, Watkins said, its own sales were negatively impacted as consumers, seeing the two products side-by-side, may have selected McCormick’s product under the belief they were getting greater volume and value with the competitor.
McCormick also faces a class-action lawsuit from consumers over the same issue. The Maryland-based company tried to have Watkins’ suit thrown out of court, but the judge denied the request on four of the five allegations, stating that “McCormick’s insistence that the size of its containers does not constitute advertising or promotion defies common sense and law.”
The judge also said, “The size of a package signals to the consumer vital information about a product and is as influential in affecting a customer’s choices as an explicit message on its surface.”
Watkins viewed that assessment as a win.
“[The judge] gave her point of view very clearly, and that is that we have a very good case and that McCormick’s arguments defy common sense,” Mark Jacobs, Watkins chief executive, told the Star Tribune.
McCormick, a publicly traded food company with $4.3 billion in sales last year, doesn’t see it that way.
“Judge Huvelle’s ruling on this pretrial motion did not make any substantive determinations of the merits of the case itself,” the company said in a statement. “We stand behind our products and will continue to defend our packaging and dedication to customers.”
The Watkins lawsuit was originally filed in the Minnesota U.S. District Court, but it was consolidated in the District of Columbia with consumer suits from California, Florida and Illinois.
Watkins, best known for its personal care products and food extracts, is new in the spice business. But Jacobs said the company, which has claimed some shelf space victories with its extracts at major U.S. retailer centers like Wal-Mart, believes McCormick was trying to prevent Watkins from similar growth in spices.
“As we have started to grow, and started to get some shelf presence, this was their way of unfairly knocking us off the shelf,” Jacobs said.
Since 2010, black pepper commodity prices have been rising, with an especially large spike in 2014-2015. Jacobs said his company noticed a McCormick price drop, “and we were wondering, ‘How are they pulling this off?”
That’s when they realized McCormick had increased their “slack-filling” — industry parlance for airspace — in each pepper tin and in its peppercorn grinders. There are different types and slack-fill and legal justification for using it if the slack serves a function, such as the head space in a potato chip bag, designed to protect the brittle product.
“For us to compete with them, with the cost of black pepper being so high, we would’ve had to do the same thing, and we did not want to play that game,” Jacobs said.
The case will likely hinge on whether or not consumers were actually deceived and if whether Watkins can prove economic damage.
Since the lawsuit was first filed, McCormick has reduced the size of its pepper tins to more closely resemble the amount of pepper inside. Jacobs said this “is essentially admitting guilt,” but wants to see McCormick fess up.
“It’s giving the whole business a bad name,” Jacobs said. “We want McCormick to admit what it did, apologize for trying to take advantage of the whole industry and give customers who were misled appropriate refunds.”