Peatos brand is ‘exploding right now,’ says CEO; Cheetos cease and desist letter ‘the highest form of flattery,’ says legal expert
Kevin Bell, managing principal at law firm Porzio, Bromberg & Newman, was speaking to us after the Wall Street Journal reported that Peatos' brand owner Snack it Forward had been contacted by attorneys at Frito-Lay alleging that the branding of Peatos (which feature a tiger on pack) is “confusingly similar” to Cheetos (featuring Chester the cheetah).
“Those of us who litigate patent and trademark disputes refer to it as the highest form of flattery,” said Bell.
“Snack it Forward [which owns the Peatos brand] is now ‘worth’ being sued.”
Dropping the tag line and putting a peacock or panda on the front, would potentially have gone a long way to avoiding this dispute
He added: “The biggest problem such companies face is they often are not the direct target until they demonstrate success. PepsiCo did not oppose the PEATOS mark in 2017 [The mark was published for opposition in March 2017 and no objections were filed], assuming it monitors diligently… It chose to send a cease and desist letter when PEATOS demonstrated success with consumers in grocery stores.
“I think the tag line, ‘Tigers live longer than cheetahs,’ [contested by PepsiCo] combined with the face of a tiger on the front of PEATOS favors PepsiCo's position and is probably what bothers them more than the word PEATOS. In this case, if the company was wed to using the word PEATOS, dropping the tag line and putting a peacock or panda on the front, would potentially have gone a long way to avoiding this dispute.”
We ask clients a simple question: How do you and your investors want to spend your money?
He added: "My guess is that PepsiCo has not filed a formal lawsuit because they are in settlement negotiations to have Snack It Forward make changes sufficient to satisfy PepsiCo.
"Tigers may live longer than Cheetahs, but not all tigers, especially if they are hunting in the same herd... I would expect them [PepsiCo] to want the tagline changed or removed. There are other statements on the website insinuating that Cheetos are 'junk food,' comparing Peatos' protein and fiber content to that 'corny cheetah' and 'flashy feline.' I'm not saying companies cannot use product comparisons, but here it appears that Peatos is wrapping its arms around Cheetos to gain brand awareness among consumers and then pushing the differences.
"If PepsiCo does file a lawsuit in federal district court, my guess they will also have a couple other claims they will allege."
In cases such as this, he said, “We ask clients a simple question: How do you and your investors want to spend your money? If the PEATOS mark is significant to the future success of the company and you have good defenses, then spend money on attorneys and fight, but be prepared for contract manufacturers and retail customers to be cautious in doing business with you until the fight is resolved.
“Alternatively, if you can avoid a costly-dispute without losing your entire brand recognition and related value, then pick another name or tagline and move on. Litigation and business are both investments, so choose wisely.”
There were people saying, we’re in the right, but if these guys try to sue us, how will it play out?
Pepsi has not responded to requests for comment, while Snack it Forward CEO Nick Desai acknowledged that there had been a “healthy debate” internally upon receipt of the letter, although he remained confident in the branding having consulted multiple attorneys ahead of the launch.
“Frito-Lay had a particular issue with the tagline, but it was a case of throwing a bunch of stuff at the wall and seeing what sticks.”
But he added: “Whether we win in court is almost irrelevant because they know we might not have the budget to go the distance. There were people saying, we’re in the right, but if these guys try to sue us how will it play out? But in the end, we said we’ll cross that bridge when we come to it. The board, the management team and our investors were all aligned, so we fired back and said hey you know what, we’re not going away guys."
That said, there is no active litigation at present, he said: “Our [respective] lawyers have been talking but you know if we were to end up calling this product Tiger Puffs or whatever, you can’t stifle innovation. The product, the formulation, is completely different [to Cheetos], and people love it.”
Peatos is not a niche natural brand
Made from pea and lentil flour, fava bean protein, pea fiber, high-oleic safflower oil, rice, and seasonings, Peatos target consumers that want the taste and texture of Cheetos (which are denser and crunchier than puffs), without the empty calories, said Desai.
And it's squarely targeting mainstream consumers and retailers, he said: “Right now there is one behemoth with brands like Doritos and Cheetos with pretty universal appeal and they market their snacks based on taste and fun, and then you have hundreds of smaller guys out there with more niche products on the better for you side, where the branding is all about nutritional value, or doing good.
“We want to bridge the gap between the two. This is not a niche natural brand and we didn’t want to be a goody two shoes brand. That’s not fun, it’s not exciting.”
Our business is exploding right now
And so far, the strategy is paying off big time, he said: “We’ll hit $4-5m this year and we only launched in May. And based on current projections, we’re looking at $20m in 2019.”
Currently, Peatos are in the produce aisle in leading retailers including Kroger (nationwide), Safeway (Northern California), Albertsons (Southern California), and Walmart (northeast), with multiple new accounts coming online shortly, said Desai, who said the brand is also growing strongly on Amazon and gaining traction at big tech companies where Millennial staff expect free snacks, but are bored of legacy brands and seeking something new.
The brand - which is backed by some high profile food industry veterans including Lenny & Larry's CEO Apu Mody (a former president of Mars Food North America) - plans to raise $20-30m in the next few months to fuel its ambitious growth plans, added Desai.
“We’ve just participated in Kroger’s free Friday downloads program [whereby loyalty card members can download coupons for free items on Fridays] and 1.7m people downloaded a coupon to get a free bag of Peatos and 600,000 people have already redeemed that coupon since August 31. Our business is exploding right now.”
The factors courts use to decide trademark infringement cases are often referred to as 'Polaroid factors' because they come from a case involving the Polaroid company (Polaroid Corp. v. Polarad Electronics, Corp., 287 F.2d 492 (2d Cir. 1961), and include:
(1) strength of the trademark;
(2) similarity of the marks;
(3) proximity of the products and their competitiveness with one another;
(4) evidence that the senior user may 'bridge the gap' by developing a product for sale in the market of the alleged infringer’s product;
(5) evidence of actual consumer confusion;
(6) evidence that the imitative mark was adopted in bad faith;
(7) respective quality of the products; and
(8) sophistication of consumers in the relevant market.
