PepsiCo, Monster challenge India 'energy drink' label ban citing business impact

By Aditya Kalra and Arpan Chaturvedi

NEW DELHI, Oct 1 (Reuters) - PepsiCo and Monster Beverage have sued India's food regulator for banning their use of the "energy drink" label, non-public court filings show, escalating a regulatory fight that has jolted a sector expected to be worth $1.6 billion by 2028.

The food safety regulator ordered makers of high-caffeine beverages sold ​as "energy drinks" to stop using the description on June 30 amid growing concerns about the health risk of such products - part of an unprecedented food safety crackdown.

In a court filing in New Delhi, PepsiCo India said the prohibition will have "grave commercial consequences" and hurt "substantial investments", given that it had 492 million bottles and 26 million cans with those labels in circulation on July 31.

PepsiCo PEP.O was not given an opportunity to explain its position before the directive, and so the decision should be set aside, said the 358-page September 29 filing, which is not public and has not appeared in media but was seen by Reuters.

The regulator privately gave the companies 90 days to drop "energy drink", or any similar description, from high-caffeine beverages, saying that using that term breached regulations, Reuters has reported. The company filings say several Indian states began seizing the stock straight away.

MORE CHALLENGES, RELIEF FOR SOME FIRMS

The energy drink market in India boomed after PepsiCo launched Sting in 2017, with its 20-rupee ($0.21) plastic bottles proving popular among 15- to 19-year-olds and in rural areas, Euromonitor says. PepsiCo also sells its energy drink Adrenaline Rush in the market.

In the non-public court filing of Monster Beverage MNST.O unit, Monster Energy India, the company said it was given no prior notice before the decision was taken.

The company "is suffering grave financial loss and reputational harm," said Monster's September 30 filing in the Delhi court, which Reuters has reviewed.

Monster did not respond to Reuters queries, and neither did the Food Safety and Standards Authority of India.

The cases are likely to be taken up by a judge next week.

India's energy drink retail ⁠sales are growing 12.6% annually, faster than in the United States and China.

Energy drinks have sparked health concerns among regulators in several countries around the ⁠world who worry they contain significant amounts of caffeine, sugar and taurine, an amino acid, which research suggests can contribute to health problems including high blood pressure and heart problems.

They will be banned for under-16s in England from April ⁠next year.

Beverage companies, including Mukesh Ambani's Reliance RELI.NS, lobbied hard against the move in August, but the regulator didn't agree to their requests.

However, the Delhi court this week quashed the food regulator's order to Austria's Red Bull, after the company flagged worries about investment impact, Reuters has reported.

Following a separate challenge by Hell Energy, another global energy drink brand, a court in western India put the government's decision on hold for the company, an order showed on Thursday.