PepsiCo and Monster Beverage have taken India’s food safety regulator to court over a directive preventing manufacturers from describing certain high-caffeine beverages as “energy drinks,” escalating a regulatory dispute in one of the world’s fastest-growing markets for the products.
The legal challenges come as Indian authorities intensify scrutiny of high-caffeine beverages amid concerns about their potential health effects and as the country’s energy drink market continues to expand.
The Food Safety and Standards Authority of India (FSSAI) ordered manufacturers on June 30 to stop using the “energy drink” description, or similar terminology, on high-caffeine beverages, according to court documents and previous reporting.
PepsiCo India has argued that the directive could have significant commercial consequences because of the volume of products already in circulation carrying the disputed labels.
In a 358-page filing submitted to a court in New Delhi on September 29, the company said the prohibition would have “grave commercial consequences” and affect “substantial investments.”
The filing stated that, as of July 31, PepsiCo had about 492 million bottles and 26 million cans bearing the affected labels in circulation.
PepsiCo also argued that it had not been given an opportunity to present its position before the regulator issued the directive and urged the court to set aside the decision.
Reuters reviewed the non-public filing.
Companies given 90 days
The regulator privately gave affected companies 90 days to remove “energy drink” or similar descriptions from high-caffeine beverages, according to company filings and previous Reuters reporting.
The regulator's position is that the use of the term violates existing food regulations.
The companies have challenged both the substance of the directive and the manner in which it was issued. PepsiCo said several Indian states began seizing affected products soon after the order was issued.
The dispute has the potential to affect a rapidly expanding industry that has attracted major domestic and international beverage companies.
Monster cites financial and reputational damage
Monster Beverage has also challenged the regulator’s action through its Indian subsidiary, Monster Energy India.
In a September 30 filing before the Delhi court, the company argued that it had not received prior notice before the decision was taken.
Monster said it was “suffering grave financial loss and reputational harm,” according to the filing reviewed by Reuters.
Neither Monster Beverage nor the Food Safety and Standards Authority of India responded to Reuters’ requests for comment.
The cases are expected to be considered by a judge next week.
Sting drives market expansion
India’s energy drink market expanded rapidly after PepsiCo introduced Sting in 2017.
The brand’s ₹20 plastic bottles have become particularly popular among younger consumers and in rural markets, according to market research firm Euromonitor. PepsiCo also sells Adrenaline Rush in India.
The country’s energy drink retail sales are growing at an annual rate of 12.6 per cent, according to Euromonitor, outpacing growth rates in the United States and China.
The market is projected to be worth about $1.6 billion by 2028, making the regulatory dispute significant for beverage companies seeking to expand their presence in India.
Health concerns fuel regulatory scrutiny
Energy drinks have faced increasing scrutiny from regulators in several countries because of their caffeine and sugar content, as well as ingredients such as taurine.
Researchers and health authorities have raised concerns about the potential effects of excessive consumption, including possible links to elevated blood pressure and cardiovascular problems.
England, for example, is set to prohibit the sale of energy drinks to children under 16 from April next year.
In India, beverage companies including Reliance reportedly lobbied against the labelling restrictions in August, but the regulator declined their requests.
The dispute has nevertheless produced mixed results in the courts.
Red Bull, Hell Energy secure legal relief
A Delhi court this week quashed the food regulator’s order against Austria-based Red Bull after the company raised concerns about the impact of the directive on its investments, according to Reuters.
In a separate case brought by Hell Energy, another international energy drink producer, a court in western India put the government’s decision on hold for the company, according to a court order issued on Thursday.
The rulings could add another layer of uncertainty to the regulator’s attempt to tighten controls over the marketing and labelling of high-caffeine beverages.
For PepsiCo and Monster, the pending court cases now put the focus on whether the regulator followed the appropriate process and whether its restrictions on the “energy drink” label can withstand legal scrutiny.