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UPDATE 1-British court rejects Kellogg's arguments against new sugar rules

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(Adds Kellogg comment)

By Richa Naidu

LONDON, July 4 (Reuters) - Kellogg on Monday lost its legal challenge to government plans to crack down on less healthy food after a British court rejected its claims that the government's formula to measure the nutritional value of cereals is wrong.

The new rules, which Kellogg first challenged in April, would stop some of the company's breakfast cereals being displayed prominently in grocery stores because of their high sugar content.

According to the government, the rules are part of its strategy to tackle childhood obesity. They will in October introduce restrictions on the promotion, in supermarkets and online, of food which is classified as high in fat, sugar or salt.

The maker of Frosties and Coco Pops has pushed back, saying cereals are almost always eaten with milk, which changes the "full nutritional value" of the meal.

"Kellogg's argument is not that its products are themselves lower in fat, sugar or salt; it is that they should be assessed in combination with other foods and ingredients, namely semi-skimmed milk."

"At least 21% of consumers of "Frosties" are children aged 0-15 ... The suggestion that "Frosties" should not be regarded as a less healthy product because of the nutritional value of the milk with which they may be consumed is surprising," Judge Thomas Linden said in a case filing.

"While disappointed with this judgement, we respect the decision of the Courts and do not intend to appeal," a Kellogg spokesperson said. "We still believe that it is important that cereals are measured in a way which reflects how most people eat them – with milk. We also remain concerned at the way the Government introduced these regulations – which, in our view, was without proper Parliamentary scrutiny." (Reporting by Richa Naidu; editing by David Evans)