Dive Brief:

Kellogg is challenging an order by a California judge that certifies three classes of consumers in a lawsuit that accuses the cereal maker of false advertising of the allegedly "toxic" sugar levels in its cereal, according to Food Navigator. Plaintiff Stephen Hadley argued the company's use of terms such as "wholesome," "healthy" and "nutritious" suggested that its products were low in sugar, "when they are actually composed of 18% to 40% added sugar", he claimed.

The case specifically centers on "lightly sweetened" claims on Frosted Mini-Wheats and Smart Start cereals, as well as "heart healthy" claims on Raisin Bran and Raisin Bran Crunch cereals. Kellogg has submitted a petition to appeal the suit, arguing that the plaintiff's claims that eating Kellogg cereal can lead to greater risk of heart disease and diabetes, can only be adjudicated on an individual basis. The company also claims there is no way to determine which advertising messages consumers saw on packaging since there were different labels on the products during the class period (which begins August 29, 2012).

"This theory of deception cannot be adjudicated on a class-wide basis, as the health effects of eating Kellogg's cereals by its very nature is an individualized inquiry," Kellogg said in its petition. "This is not a case involving an ingredient like nicotine that is inherently unsafe in any amount. Instead, it involves sugar, which the body indisputably requires."

Dive Insight:

Whether or not this class action suit moves forward, it seems Kellogg may have underestimated the degree to which today's consumers fear sugar. A growing number of mainstream shoppers would disagree that the body "indisputably requires" some level of sugar intake, and other people also may compare the ingredient to addictive substances such as nicotine.

This sentiment is reflected in an uptick in "low/no/reduced' sugar claims, which a Kerry survey found increased 45% last year compared to five years ago. Food and beverage products with "no artificial sweeteners" claims have also jumped 4.4% from a year ago, and those with "no added sugar" claims rose 2.6% during the same period, according to Kerry research.

What could be more telling, however, is the survey's finding on consumer perception of sugar. Kerry found one-third of Americans link sugar with weight gain, 71% read the sugar content on product ingredient labels and 46% strongly want to cut back their sugar consumption.

It could be argued that sugar's status as a "no-no" ingredient has eclipsed the past notoriety of saturated fats and carbohydrates. And while it's not certain if this mass rejection and avoidance of sugar is just another consumer fad or the new normal, one thing is clear: consumers no longer include the sweetener in their definition of a healthy diet — a lesson Kellogg, and countless other Big Food companies, would be wise to take seriously.

Still, this is a difficult tightrope for cereal companies to walk. The category has struggled to find growth for years as consumers shifted toward on-the-go smoothies and protein bars for breakfast. Many brands attempted to emulate the benefits of these products to lure consumers back, infusing their cereals with protein, probiotics and real fruit. Others repackaged their product in portable bars. But consumers have proven to enjoy nostalgic, ultra-sugary cereals as a snack or dessert rather than breakfast, a trend that has led to General Mills' Lucky Charms Frosted Flakes or Post Holdings bringing back Oreo O’s after a 10-year absence.

Consumers also have rejected "healthier" versions of their favorite cereals in the past. After Trix phased artificial colors out of its products, customers complained that the new colors were "depressing." General Mills quickly brought back the original colors, selling them alongside the new natural product.

Kellogg and other cereal companies — as well as the broader food industry — will need to thread the needle between consumer desire for indulgence and low-sugar options in order to be competitive, or risk yielding market share to better-for-you upstarts. They also must be careful in claims they place on their packages, especially as consumers demand more transparency from CPG manufacturers. As the Kellogg lawsuit shows, when shoppers don't feel like companies are being honest with them they are not afraid to take them to court.