Post Holdings unit Dakota Pasta Growers has agreed to spend US$7.9m to settle a lawsuit challenging claims that its Dreamfields pasta brand contains fewer digestible carbohydrates that conventional pasta.
The US company will reimburse consumers for Dreamfields purchases dating back to February 2004, with total claims capped at $5m. The group has also acquiesced to a $2.9m fee award to cover the plaintiffs’ legal costs, according to the settlement papers.
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The class action lawsuit argued the labelling of Dreamfields as a low-carb alternative was misleading. Independent testing found blood sugar levels rose the same amount after eating Dreamfields and regular pasta, the plaintiffs claimed.
In addition to the cash settlement, the deal will also see the company remove disputed health claims from Dreamfields labelling for one year.
None of the cash consideration will revert to Dakota, the settlement said. If the $5m fund is not exhausted, claimants’ recoveries will rise by up to 50%, with the remainder going to the American Diabetes Association as a cy pres award.
Dreamfeilds pasta appealed to consumers targeting a low-carb diet – including diabetics – and was sold under the slogan “Healthy Carb Living”.
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By GlobalDataAccording to the complaint, the brand purported to be made using a patent-pending process that prevented 31 grams of carbohydrates per serving from being digested, lowering its glycemic index by 65% when compared to conventional pasta. The complaint alleged that Dreamfields as much as twice the price of alternative products.
“The only reason consumers pay such a premium for Dreamfields Pasta is defendants’ claim that Dreamfields Pasta has only 5 grams of ‘digestible carbs,’ a ’65 percent lower glycemic index’ and/or ‘helps limit the rise in blood sugar levels that normal normally occur after eating pasta’ – claims that scientists and nutritionists alike have debunked,” the suit said.
Dakota was owned by Canadian grain handler until Viterra was bought by natural resources giant Glencor in January 2013. Glencore sold Dakota to Post in September last year for $370m.
Acquisitive Post has followed a strategy to grow the top line through M&A in recent years. However, profitability at Dakota’s parent company has come under pressure from higher financing expenses and costs have hampered profitability. Last week, the firm revealed first-half losses plunged to $27.7m.
