Unwrapping recent developments in the food sector

By Tiernan Christensen, Nick Li
ACCC Food & Beverage Risk & Compliance

In brief 8 min read

Associates Tiernan Christensen and Nick Li report on some noteworthy developments relevant to the food industry in Australia.

Health Star Ratings system under review

Most Australian consumers are familiar with the Health Star Rating – the voluntary front-of-pack labelling system adopted by many food manufacturers and intended to rate the nutritional profile of packaged foods. The Health Star Rating first appeared on shelves in 2014 and has recently been the subject of a five-year review.

In February this year, mpconsulting released a draft Health Start Rating Five Year Review Report. The report recommends the system continue to be implemented and promoted, but that the calculation of star ratings be changed to penalise foods containing higher total sugar content, and that ratings for various 'fresh' or 'natural' foods (including fruits, vegetables and certain dairy products) be increased.

The Health Star Rating system has been the subject of some criticism in recent times.

Consumer group Choice, while supporting the report's key recommendations, commented that more should be done to strengthen the underlying Health Star Rating algorithm to distinguish between added sugars and intrinsic sugars in foods. Intrinsic sugars occur naturally in many nutrient rich foods and Choice argues that added sugar is a far better predictor of a food's health profile than total sugar.

Others have criticised the system for its lack of transparency and have even accused it of being driven by the interests of the food industry.

For now, the system will continue, but it remains to be seen what changes will find their way into the recommendations of the final review report (due for release soon) or reforms going forward.

New whistleblower laws call for the carrot, not the stick

Significant changes to the Australian whistleblower framework came into force on 1 July this year with the commencement of the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019. The new law will affect around 33,000 Australian companies, including those in the food industry.

The key changes include:

  • broadening the scope of persons who can be protected for whistleblowing to include former officers, employees and suppliers and their family members;
  • narrowing the range of company personnel who are eligible to receive protected disclosures from whistleblowers;
  • allowing persons to make anonymous disclosures and, in limited circumstances, allowing external disclosures to journalists or politicians;
  • greater protections of a whistleblower's identity, including a new offence prohibiting disclosure of a whistleblower's identity (except in certain circumstances);
  • reversal of the onus of proof where a whistleblower suffers adverse consequences. The onus is now on the business to prove any adverse outcome suffered by the whistleblower did not relate to them making a protected disclosure;
  • abolition of the requirement that whistleblowers make allegations in 'good faith' – all that is required now is 'reasonable grounds to suspect' misconduct has occurred;
  • increased civil and criminal penalties for contraventions of the whistleblower protection laws; and
  • a requirement for all public companies and large proprietary companies to have a compliant whistleblower policy in place.

Companies have been given 6 months (until 1 January 2020) to implement a compliant whilstleblower policy.

The whistleblower protection reforms are particularly important in the food industry, where leaks from employees can have drastic effects on consumer perception of the brand. Having clear and transparent policies and processes, and training staff to understand them, may see employees feel more comfortable escalating their concerns internally, affording the business an opportunity to respond and address any issues, and helping it avoid the harmful consequences of external leaks.

Statistics shed light on food recalls

Food Standards Australia New Zealand (FSANZ) has published its 2018 statistics on food recalls. The statistics reveal FSANZ coordinated 100 food recalls in 2018, up from 69 recalls in 2017. The causes of the food recalls included microbial contamination, labelling errors, foreign matter, chemical/other contaminants, undeclared allergens and biotoxins. The statistics revealed that, overall, the food categories most affected by food recalls from 2009 to 2018 were processed foods, dairy products, and meat and meat products.

Undeclared allergens were the most common reason for recalls in 2018, making up 46% of the total recalls. In the last ten years, undeclared allergens have caused 266 recalls, with the most common undeclared allergens being milk and peanuts. These recalls for undeclared allergens most commonly affected processed foods, confectionery and baked goods. According to FSANZ, undeclared allergen recalls are typically caused by a lack of skills and knowledge of labelling requirements, supplier verification issues, packaging errors and accidental cross contamination during product processing. FSANZ found that packaging errors were the cause of over half (51%) of the allergen related recalls in 2018. Errors included products being packed in the wrong packaging or packaging making a 'dairy free' claim instead of a 'gluten free' claim.

For manufacturers, the recall statistics highlight the importance of implementing and regularly reviewing appropriate policies, practices and procedures to ensure compliance with the mandatory allergen labelling requirements contained in the Food Standards Code. Recalls can be expensive and resource intensive, and the mislabelling of foods in relation to allergens can have serious consequences. It is in every food business' interest to deliver adequate training and quality control procedures to minimise the allergen risk.

Queensland Government bins junk food ads

The Queensland Government has announced it will ban junk food advertisements at state government-owned sites in an attempt to reduce childhood obesity. Over the course of the next several years, junk food advertising will be phased out at over 2000 advertising spaces, including on billboards at bus stops, train stations and road corridors. The ban will not initially apply to advertising space in stadiums due to complexities in the advertising contracts relating to stadiums. According to the Health Minister, Steven Miles, the ban will apply to junk foods based on the salt, sugar and fat content of the food being advertised. However, it is unclear exactly which foods will be affected.

The government hopes the spaces will be used to advertise healthier food options. However, the Outdoor Media Association (OMA) has calculated that the decision will affect $34 million in annual state revenue. OMA chief executive Charmaine Moldrich said the Association is 'working with the Queensland Government to find a way to achieve its objectives without creating adverse and unintended consequences for the state'. The ban follows a similar position taken by the ACT government in 2015, when it banned junk food advertising on government-owned buses.


ACCC prioritises impact of advertising to young consumers on social media

The Australian Competition and Consumer Commission (ACCC) announced its compliance and enforcement priorities for 2019 in February this year. Relevant for the food sector is the ACCC's focus on '[e]merging consumer issues in advertising and subscription service practices on social media platforms, with a focus on the impact on younger consumers'. Indeed, with the proliferation of social media usage among younger generations, food and beverage companies have found social media platforms to be a more effective medium for advertising their offerings to this younger demographic than 'conventional media'. Social media has allowed these brands to develop marketing content for food and beverages that are entertaining, immersive and engaging for younger consumers. It has allowed them to receive immediate feedback on new offerings through user comments and engagement on their posts, while also leveraging the valuable data collected by social media platforms to target their marketing to younger consumers. While advantageous to brands, these platforms have increasingly exposed Australian children and adolescents to unhealthy advertising, including for fast-food and alcohol, with minimal regulatory oversight or parental control. In a study conducted in 2016, one in five young people aged 16 to 24 reported they had visited an alcohol brand on Facebook, including 10% of those aged under 18 years.

The ACCC addressed this growing concern in its final report into Digital Platforms published on 26 July 2019, stating 'the ACCC recommends that there should be requirements for digital platforms to minimise the collection of children's personal information'. As a key priority for the ACCC, we could likely see increased enforcement actions in relation to the social media and other digital marketing activities of businesses.

(Un)Happy Meal: McDonalds in trouble over gaming app

Earlier this year, the Advertising Standards Board (Board) upheld a complaint by the Obesity Policy Council (OPC) against McDonald's for the advertising used on its Happy Studio gaming app. In its complaint, OPC submitted that the Happy Studio App contravened the Quick Service Restaurant Initiative for Responsible Advertising and Marketing to Children (QSRI), under which advertising of its products to children under 14 years of age is permitted only if those products represent healthier dietary choices, as determined by QSRI's Nutrition Criteria. OPC successfully argued that although McDonalds only depicted foods that met the criteria, such as apple slices, the advertisement was an advertisement for all Happy Meals, components of which did not meet the nutrition criteria.

The Board did not accept OPC's claim that the Happy Studio App had breached the AAANA Food and Beverages Advertising and Marketing Communications Code by creating advertising that prompted children to urge their parents to purchase foods such as Happy Meals for them.

The Board's decision received significant media attention and caused McDonald's to temporarily remove its Happy Studio gaming app from the Google Play and the App Store. This decision is a reminder to food businesses that representations made outside product packaging can have a significant impact on the business and its reputation.