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The Coca-Cola Company (KO) Faces Lawsuit Over Vitaminwater Claims

The Coca-Cola Company (NYSE:KO)The Coca-Cola Company (NYSE:KO) must be breathing a sigh of relief after learning that a suit brought against its Vitaminwater brand for deceptive labeling will not be subject to financial damages. Consumers in California and New York, along with attorneys for health advocacy group Center for Science in the Public Interest, filed the class action suit. The claim states that Vitaminwater deceptively advertises that consuming the beverage reduces the risks of eye disease, boosts the immune system, and promotes healthy joints. The plaintiffs argue that they were misled to believe that Vitaminwater was healthier than other beverages.

No monetary damages

The courts decided the parties to the suit couldn’t seek monetary damages, only injunctive relief where The Coca-Cola Company (NYSE:KO) would not be allowed to make certain claims about Vitaminwater. If the claim wins in court, it would still be bad news for The Coca-Cola Company (NYSE:KO) despite the good news that a company payout isn’t required. Losing the suit would make the company lose credibility among consumers who are looking for healthier options to soft drinks. Soft drinks have become a popular example of a product containing excess sugar or worse, artificial sweeteners. Health experts have attributed excess sugar as one of the causes of obesity and other health problems such as diabetes. As a result, consumers have been replacing soda with other drinks.

Dwindling soft drink sales

This year marked the eighth straight year of falling soft drink sales and posted the biggest annual drop in sales since 2009. According to Beverage Digest, part of the decline is due to consumers seeking healthier options such as bottled water. Water sales grew in 2012 over 2011.

The Coca-Cola Company (NYSE:KO) gained a global sales volume of 1% in the second quarter, which was below company expectations. The company remains confident in the results for the remainder of the year as it focuses on delivering “the brands and beverages that consumers love.” In the long-term, this will probably mean other options besides soda, especially for the U.S. consumer. In comparison, Coke’s worldwide beverage volume rose 6% in the quarter and year-to-date. This was due to solid volume and growth in certain areas such as packaged water, juices and juice drinks, and ready-to-drink tea.

Rival PepsiCo, Inc. (NYSE:PEP) reported higher-than-expected second quarter earnings due to higher prices and better productivity. The company’s bottom line also received help from a lower tax rate and a $137 million gain related to refranchising its Vietnamese bottling operations. PepsiCo, Inc. (NYSE:PEP) is also dealing with weak soft drink sales, especially in North America and Europe. The company reported second quarter net income of $2.01 billion, or $1.28 per share, versus $1.49 billion, or $0.94 per share in 2012. The company stood by its earnings growth outlook for 2013 of 7%.

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