Archive for March, 2015
It looks like moonshine.
But it’s not spirits. It’s not even beer or wine, and yet it is 28 proof.
I stumbled on Great America “Carolina Clear” at a gas station in Bardstown, Kentucky, of all places. It was just a couple miles from Jim Beam and Four Roses. I would have assumed the heart of Bourbon Country is roughly the last place for a product such as this to thrive. And yet, the guy loitering and smoking out front advised it is an excellent product and will get one messed up almost as good as the illegal stuff. The display had about 40 jars of the product, in various flavors, a couple days ago. When I went back today, only one jar was left.
The front label describes it as Carolina Clear, Malt Specialty. There is no mention of beer, and there is no TTB label approval, because the product apparently lacks the hops and malted barley required to fit within the U.S. definition of a “malt beverage.”
The back label explains, in the FDA-style ingredient list, that the product only has three ingredients. I don’t think anyone will be surprised, at least at this point, that those ingredients are not the ones elevated in the Reinheitsgebot (the German Beer Purity Law of 1487, allowing beer to be made with water, barley and hops only). The North Carolina-made “malt specialty,” selling for $5.99 a jar, is made only with high fructose corn syrup, distilled water, and sodium benzoate. It is tough to imagine an alcohol beverage that could be produced at lower cost.
The product can’t fit within TTB’s label rules for beer-type beverages due to the lack of hops and barley. It falls outside the spirits labeling rules due to the lack of distillation. It is harder to see why the product falls outside TTB’s wine labeling rules, because it is like saké, at least in the sense that is also fermented from grain, and the federal government treats saké as wine, for labeling purposes. It is clear that Great America views the product as outside the TTB labeling rules because:
- TTB would have required a label approval. I see one label approval for this company, but none that match this product.
- TTB might have eventually said it looks too much like a spirits product, and might have required a clearer and more prominent statement of identity on the front label.
- The product seems to do a decent job of complying with the FDA food labeling rules (as opposed to the somewhat different TTB labeling rules). The serving size, however, at 3 ounces, seems very small (and the 7.8 servings per container seems absurdly large). This Joose-brand flavored malt beverage has a similar net contents and alcohol content, and yet is sold in single-serve cans.
Notwithstanding these distinctions, the federal taxes and permit requirements would be the same for this product as compared to typical beer.
This product is put out by Stout Brewing Company and also comes in common moonshine flavors such as peach, apple pie, and strawberry. Stout also markets similar products in 3 ounce tubes (as in the image immediately above).
3/23/2015 Update. Caution. The above headline seems fairly skewed. See below for what we think really happened last week. The case is not halted at all.
Tito had another bad day yesterday, this time in federal court in San Diego. This further makes it obvious that the world of labeling has changed markedly since the Supreme Court’s Pom decision of June 12, 2014. On March 18, 2015, Judge Jeffrey Miller (of the U.S. District Court for the Southern District of California) ruled that the Tito’s vodka case, relating to deception and the term “handmade,” should move forward. Since the case was filed on September 19, 2014, Tito has argued that the case should be dismissed.
The judge did agree with Tito on a few points, but agreed with the complainants on the larger points. Tito had argued that the case should not move forward because there was no real damage to anyone. In response, the court’s Order Granting in Part and Denying in Part Tito’s Motion to Dismiss, noted some consumers care a lot about “processes and places of origin” when deciding what to buy. By way of example, the court pointed to past controversies about kosher, halal, diamonds from conflict zones, and wine appellations.
Background about the case is here (the main complaints) and here (the main defense). This posting is a short version, and more commentary will be available at Wine & Spirits Daily, later today (or upon request). The nub of the matter is, the label and indeed the main selling proposition for Tito’s vodka, all the way back to its inception, center on its “handmade” aspects. This claim (the biggest word on the label) is now the subject of at least five lawsuits all over the U.S. They are 1) Hofmann (as here), 2) Pye (filed in federal court in Florida), 3) Aliano (filed in Cook County and removed to federal court), 4) McBrearty (filed in New Jersey state court and removed to federal court), 5) Cabrera (filed in San Diego, federal court), and 6) Grayson (filed in Las Vegas, federal court).
The Hofmann court said the class action claimants need not show that the vodka was defective or that the vodka was worth the price paid. Instead, the relevant inquiry is whether consumers were deceived about the “handmade” claim, and persuaded to buy on the basis of that deception. In essence, the judge is saying the plaintiffs made a mistake by arguing that class member would pay less – instead of arguing that they would not buy the product at all – but for the label claim at issue.
The Order has a funny typo on page 11 (stemming from the plaintiff’s brief), referring to the label term as “homemade,” when in reality the label shows the term “handmade.” A pillar of Tito’s defense, so far, is that TTB has approved the label on many occasions and after careful review. The court was not impressed by this point: “the court concludes that [Tito] has not shown that the safe harbor bars Plaintiff’s claims.” The court said TTB’s review was peripheral and informal at most, especially in view of the fact that TTB does not even have standards or rules for the term at issue.
The order seems careful and even-handed, but then seems to lean against Tito more, by saying:
In the court’s view, the representation that vodka that is (allegedly) mass-produced in automated modern stills from commercially manufactured neutral grain spirit is nonetheless “Handmade” in old-fashioned pot stills arguably could mislead a reasonable consumer. This is not, therefore, an issue that can be resolved at this stage.
Judge Miller further ruled that the 2013 Forbes article, that largely raised the questions about the Tito claim, is reliable enough, to form a basis for the allegations. Relatedly, the court was not too impressed with Tito’s argument that this article sufficiently alerted consumers that the claim might be dubious.
Finally, the court asserted that the complaint is not too vague for Tito to prepare an adequate response. The court said Tito’s “cogent” responses prove it. The court sided with the plaintiffs in most areas, but went against the plaintiffs in dismissing three major claims, on the basis that they were not pled properly. The court also, however, provided the plaintiffs with 14 days to fix those deficiencies and so this order is overwhelmingly helpful to the plaintiff side.
Simon Fleischmann (a top class action litigator at Locke Lord in Chicago) explained:
While this is a disappointing ruling from a defense standpoint, it is important to remember that this is just one trial court decision on the pleadings in what will likely be a broader war waged in several courts across the country on similar issues. And perhaps most importantly, the opinion emphasizes the highly individualized nature of that particular plaintiff’s purchasing decisions in a way that will make it difficult to certify a class of similarly situated consumers later on in the litigation.
Simon knows the context well. He is litigating very similar issues on behalf of Templeton Whiskey.
The court’s order is here.
Palcohol is back.
After approval from out of nowhere about a year ago, and cancellation of the same approvals a few days later, it is back. I have it on good authority that TTB has ironed out the kinks and approved the labels this week. Sen. Schumer will not be pleased (aka, he may be very pleased to have this whipping boy back within striking distance). Many states have already banned it. But this gives new life to this new category. Hats off to Mark Phillips for weathering the storm and persevering.
Below is the approved label as of 2014 alongside the label as approved on March 10, 2015. There are small, technical changes, mostly relating to how to measure the taxable commodity. Boxes 20 and 23 reconfirm that it took Mark almost a year to get this approval. The back label makes it look like an awful lot of work and controversy for a small amount of alcohol (when prepared, it only has half the liquid of a beer, and 1/4 the abv compared to vodka?!?).
In an email on the day of re-approval, Mark, the force behind Palcohol, explained:
Yes, Palcohol is back. It’s been quite a journey, over four years to get Palcohol approved by the TTB. I do want people to know that the TTB has been great to work with. Very fair and professional. And I’m not just saying that to kiss up to them as they have now approved Palcohol and it’s done.
The next challenge is trying to stop the states from banning it based on misinformation and ignorant speculation. It is a mistake for a state to ban Palcohol because…
First there was ARTAL the list. Then there was ARTAL the blog post. And now, there is ARTAL: The Movie. In which Oli tries to help you remember the power and pitfalls of the big list of Allowable Revisions to Approved Labels. In brief, this should help you remember that you don’t need a new COLA every time you make a change to your already-approved label. There are dozens of small and not so small changes that are ok to make, without any need of a new COLA — or the wait, frustration, and expense.