Revenue and Customs V P&G UK - The $160 million "Pringles court case": Are Pringles Chips or Crisps?
Who doesn't love Pringles? The perfect crisps , stacked with utmost perfection in a good quality packaging , available in many flavours. Most of us compare Pringles to other potato chip brands like Frito Lays , Bingo or the local wafers.
Fun Fact: The local wafers, the one without any particular branding are also a HUGE part of the Indian chips market sized at Rs. 7000 crores according to Euromonitor's report in 2016. The Desi Chips giving a tough competition to the Videshi Brands!
The main question here is, Are Pringles Potato chips? Lame question, right? Not when $160 million are at stake!
This was the question raised in the court of the United Kingdom- Revenue and Customs V P&G UK. Food Products in UK are generally zero-rated for VAT purposes , which means most food products do not have to pay the Value Added Tax. I mentioned "most" because there are exceptions to this rule.
Schedule 8 , Group 1 of the VAT ACT 1994, Item 5 states that-
"Any of the following when packaged for human consumption without further preparation , namely , potato crisps , potato sticks , potato puffs or similar products made from the potato or the potato flour , or from potato starch and savoury products obtained by the swelling of cereals"
So, in short, potato chips and other potato snacks are an exception and thus have to pay VAT. P&G lawyers argued that Pringles are not actually potato chips as they contained only 42 percent potato content , the potato content is around 40 percent and changes according to the flavour. The ingredients of Pringles are corn flour , wheat starch , rice flour , salt , fat and emulsifier and seasoning. Basically , since the potato content of Pringles is low , the company thinks it doesn't qualify as a potato product. However, the Revenue and Customs and the court declared that PRINGLES IS A POTATO PRODUCT/ CHIPS and they had to pay 17.5 percent VAT. A simple question lightened P&G's pocket by $160 million.
Well, Pringles are still not exactly called "chips" , they are advertised as "Crisps" , Pringles are sold in 140 countries in many many flavours - every flavour you can think of! Sour cream, cheesy cheese, pizza , BBQ , Pringles original and the list goes on. Bacon flavoured Pringles are also a thing!
In Japan, Pringles has even launched a "Pringles-flavoured instant ramen" along with some exclusive flavours.
Fredrick Baur, the man behind the stackable shape of Pringles spent about 2 years to find the perfect shape for the Pringles "crisp" , he was so committed to the brand that when he died his ashes were buried in a Pringles box, the red ORIGINAL PRINGLES box!
Now that's some dedication!
Do you think Pringles should have qualified as Potato chips? Let us know in the comments section!