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TTB Funding

I read about TTB funding a few days ago in Wine & Spirits Daily. It is good but I still don’t understand why they don’t use more links. I had to look elsewhere for the letter, to the Senate, about TTB funding. The letter is here.

Here are some highlights and observations:

  1. The letter seems to cover the powers that be, in the beer, wine and spirits industries (BI, WI, DISCUS, etc.).
  2. They, and TTB, seem to set TTB’s funding needs at $101 million, for 2015.
  3. The letter says “Since 2007, TTB has had to shrink its workforce by 10% ‐ more than 50 full‐time positions – and this has had a direct, negative impact on the businesses that depend on it to operate and grow.”
  4. The letter reads like a big wet kiss:  “The Business Insider claimed in 2012, that ‘the TTB is the government’s third‐biggest revenue collector, after the IRS and Customs and Border Protection.’ It may also be its best: In fiscal year 2013, it took in $23 billion. That amounts to $457 for every dollar the agency spent collecting taxes ‐ more than twice the IRS’ ratio. No other federal agency does so much for so little, while also having a huge impact on the industry it regulates.”
  5. With a further embrace, the letter says:  “We need a well‐funded TTB to be able to process label requests quickly in order to get new products to market in this highly competitive global market place. We also need a wellfunded TTB to prevent and guard against unscrupulous actors from entering our marketplace who otherwise could harm the public with dangerous products, which has occurred outside of the United States with counterfeit alcohol.”
  6. “In recent years, the alcohol beverage industry has seen explosive growth across the United States and the number of businesses that the TTB regulates has skyrocketed.” Since 2007, “the number of wineries, breweries
    and distilleries in the country has grown by an astounding 53.1%.”
  7. While heaping praise upon TTB, the letter also takes a small jab at other agencies:  “In short, now is not the time to cut funding to one of the few federal agencies that is performing well and actually helping a significant US industry grow.”

From my perspective, it does look plain expensive to run something like TTB. I would imagine that not handling paper and not mailing out tons of labels and formulas has saved TTB a lot of money in the past decade. It would seem that most of the costs for systems like FONL and PONL and COLAs Online are one-time only costs. While those systems seem to work reasonably well, it is very difficult to have a dialogue by phone, in-person, or email, and though this is unfortunate, I suspect it saves a lot of money (at least in the short-term). On the other hand, in TTB’s quest for some internet-based efficiencies, they may have succeeded too much in making it easy to submit all manner of stuff. This forces TTB to deliberate upon every hare-brained scheme with about the same exertion as the next big thing.

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Rye Beer

 

Latrobe did a “brilliant” job here, picking up on a lot of important trends.

Let’s see how many instructive legal issues this one label raises. Extra points for anyone who can raise additional issues. No more ALS challenges, please.

  1. It is beer but it more or less screams spirits.
  2. In a variety of ways. (For example, the brand name refers to moonshine paraphernalia, as Tickle’s sidekick helpfully explains.*)
  3. Within the rules, probably.
  4. Even though spirits terms are not allowed on beer labels.
  5. Even though this product contains and purports to contain absolutely no whiskey of any sort.
  6. It mentions George Dickel at least three times.
  7. It mentions Rye but not Rye Whiskey. This is very smart in that, though they mean about the same thing to most people, rye is just a grain, and it’s not necessarily whiskey without the second word attached. Like Bourbon is not sufficient on even a Bourbon Whiskey label, without the second word.
  8. Latrobe used a formula, notwithstanding that TTB has eased way up on formula requirements.
  9. The label raises a lot of good trademark issues, tied up with Latrobe’s use of another company’s highly protected brand name.
  10. TTB seems to be allowing the term “refreshing” these days, on a pretty liberal basis, even though this policy has wavered a bit over the years.

This Tequila-themed beer shows that the above Whiskey-themed beer label is not just a fluke.

What did we miss?

* John’s parents will be proud that we have done some work for Tim Smith, Junior Johnson, The Hatfields & McCoys, Jesse Jane, Popcorn Sutton, Jesse James and other rapscallions. And this guy just looks guilty — I am not sure of what — but moonshining at least.

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Non-GMO Beer

peak

I would like to know if the above beer qualifies as Non GMO. I would also like to know, without a big hassle. I am sitting here with blazing fast internet and a big screen, and yet I remain in the dark as to whether this beer can be considered Non GMO. It would only be more confusing at the point of purchase, with less time and a smaller screen.

On the one hand, a recent press release claims Peak beers are the first to qualify to use the logo depicted at upper right on the image above. On the other hand, I can’t find any approved labels with the same seal (and the above is of course not the actual label). The actual label, as approved, is here. As of 2011, TTB said:

TTB has received several Certificates of Label Approval (COLA) applications proposing to display bioengineered-related information on alcohol beverage labels. Terms frequently mentioned in discussions about labeling alcohol beverages with respect to bioengineering include “GMO free” and “GM free.”  “GMO” is an acronym for “genetically modified organism” and “GM” means “genetically modified.”  The terms “genetically modified organism” and “genetically modified” are not synonymous with the term “bioengineered foods.”  Plants can be genetically modified using any number of techniques, new or traditional.

TTB believes it is not necessary to mandate any bioengineered food labeling requirements at this time.  We also find that it is misleading to refer voluntarily to those bioengineered food labeling terms or any similar references on alcohol beverage labels.  This is consistent with the U.S. Food and Drug Administration’s position.

And yet FDA does seem to allow the Non GMO seal. Here is but one example (Silk almond milk). A Kashi cereal example is here. The seal and certifications are sponsored by the Non-GMO Project, “a non-profit organization committed to preserving and building sources of non-GMO products, educating consumers, and providing verified non-GMO choices.”

As of a few weeks ago, this suggests TTB was looking into it further.

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Craft Beverage Association, Survey

As of this date and writing, we have 168 good surveys.

Almost all of them are submitted by people with relevant experience; 77% of the respondents have more than two years of work experience in the alcohol beverage field.

The term “craft” has become crucially important to thousands of producers and millions of consumers in recent years.  And yet it has no agreed meaning.  We intend to change that within one year from launch, and fill the term with meaning in a fair, flexible, enforceable, modern way, to save it from abuse.

- Craft Beverage Association, July 19, 2014

These surveys provide solid feedback on what the term “craft” does mean or should mean, in relation to beer, wine and spirits.

ssIf you have not yet completed a survey, and you work in the alcohol beverage field, please complete the survey here. We would like to have at least 500 responses before drawing any major conclusions. We are off to a good start, with 152 responses in the first week.

The survey is sponsored by the Craft Beverage Association. This is a Washington, DC-based non-profit trade association that seeks to define the term “craft,” within one year from launch, in a fair, enforceable and flexible way, to fill it with meaning and save it from abuse. We would certainly appreciate your help. Please use the comments below, and the survey, to get involved, or to let us know the very best people who can help.

We will share the highlights on the Craft Beverage Association website, within a few weeks. But for now, we want to share a few excerpts from as below. Please note we will aggregate the survey data and keep it non-personally identifiable (like Google gathering traffic data) unless you clearly indicate a preference to the contrary (or we get your explicit permission). Based on the responses so far, it should take no more than 10-15 minutes to complete this thoughtfully.

Who should regulate?

whoMany responses say TTB is in a good position to help with this. The responses also say that trade associations would be good. Though parts of this are surprising, we need more responses on this point because there were many skips. But this is encouraging because our plan would leverage the strengths of TTB and trade associations.

Criteria?

criteriaLess surprisingly, a lot of respondents are saying that batch size and total annual production are crucial. Not so many respondents assert that the following criteria are at odds with true craft:  a) no change to ingredients or method in many years; b) the bottler grew/produced a majority of the ingredients.

Other

70% think the topic is important. 72% say they are more likely to buy a product marketed as craft and 60% say they would pay at least a few dollars more per bottle. 51% say they would like to help with this project.

Favorite quotes so far

Washington distiller:  Wow. Good luck with that. I mean that sincerely and without snark. I kind of think it’s like jumping into a shark tank with a sirloin in your shorts, but if you can get folks together on it, more power to you.

California distiller:  Without a meaningful definition that can galvanize everyone involved — makers, wholesalers, retailers, the media and the public — then craft beverage (liquor particularly) will become nothing more than a throwaway line. Most focus too narrowly on minuscule volumes and hobby level techniques without much regard for how customers see craft and what they’re looking for from craft made products. Am willing to help craft a new, better version with like-minded folk. This will create a level field and reduce the chances of confusion (or cheating)…assuming that craft can deliver on its promise to the public to deliver quality and innovation. If not — i.e., craft = amateur hour — then any small producer who makes decent products will run as far away from the term as possible. This is a tricky and touchy subject that will only get sorted out in time through a shakeout, but it’s important to discuss it openly.

mapMontana producer with 8-15 years of experience:  The term has very little useful meaning at this time. It has been diluted and there is no universally accepted definition, let alone an enforcement mechanism.

Colorado brewer:  We stir our mash by hand, turn every pump on/off manually, climb inside our kettle and tanks to clean and sanitize, etc. I would love to see craft have definition so that those who brew with robots separate themselves from those that brew by hand.

Colorado distiller:  I run all the mashes for my whiskey in-house. At the end of the day I’m picking grain dust out of my ears and eyes. That’s craft. Seriously though… it’s insanely hard to put words to, but I’ve heard folks propose that craft must involve substantial alteration of the initial ingredients for the sake of achieving a superior and/or interesting final offering.

California beverage lawyer with more than 32 years of industry experience:  It is a term of art that needs to be defined.

Idaho producer with 8-15 years of industry experience:  Putting “craft” on our packaging would be akin to a woodworker doing the same on a chair. It is unnecessary.

Texas producer with 16-32 years of industry experience:  The term has already been defined too broadly to be useful and it would be effectively impossible to narrow the definition now. The term no longer carries any practical meaning.

Virginia producer with 8-15 years of industry experience:  It is a term that is loosely used and I think lost meaning. Currently, are you more likely to buy a product marketed as “craft,” or more willing to pay more for it? Yes; I am a sheep. If TTB or another entity set out fair and enforceable rules for the use of this term (“craft”), would you be more likely to market your product as such, or to buy a product marketed as such, or pay more for a “craft” product? I do like rules and clearly defined lines.

From a Virginia brewer:  The most ridiculous excuse used by politicians to not make rules is that someone will take advantage of them. That may be true but there is no other choice in a society based on the rule of law.

New Jersey producer with 16-32 years of industry experience:  There is quite a lot of debate, it would be great to have a definition. Craft does not mean it is good or a good value.

South Carolina distiller:  For Jack Daniels, if they made a small batch product I do not see why they would not be able to market it as “craft”. I don’t think that they will though. For Anheuser Busch, I believe they already make a craft product called Ziegenboch that is limited in production, differentiates itself from all other mass produced beers and is only available in Texas. And is delicious. Who cares about wine.

Hawaii producer with more than 32 years of industry experience:  We practice craft methods and believe in them. Craft methods are the kind of work that humans are engineered for. That kind of work is satisfying and enriching. The words should be protected so that the trade and the consumer are not misled. There is a lot of mediocre product labeled craft. Also, non-craft producers are using it. If the product was genuinely craft-made, why not? Gallo has made excellent small-production wine. E&J is better than most VS Cognac.

California distiller:  It’s really more about where the inspiration for a beer, wine or spirit comes from, the methodology used in making it and the transparency shown by the craftsperson. Too many people insist on size of production being a criterion, while I would argue that there are large producers making better products than many of those who would qualify based on size alone. Others would argue that the founder has to be responsible for producing every batch, which is like saying that the chef at a restaurant has to make every dish to qualify for their Michelin stars. When we first started distilling, the terms “artisan distiller,” “craft distiller” and “micro distiller” didn’t exist. [We were] a great, world-class distillery that just happened to be small. I’m willing to argue obnoxiously about this.

Virginia distiller:  It is an inherently difficult topic. The people at Jack Daniels, for instance, spend a great deal of time crafting their product, and make use of a good bit of automation in doing so. Who am I, Joe Littleguy, to say that they are not craftsmen any more than I am?

Tennessee distiller:  I think this craft thing is mostly a marketing trend. It is a bad idea to make legislation that will increase bureaucracy and make the TTB more difficult to work with based on current marketing trends. I’m a small producer and don’t see the need to explain to my customers that I make my product by hand. I think it’s pretty self-explanatory. My iphone is made by hand in China. Should that be considered a craft product?

Colorado distiller:  Please don’t let those with the largest pocketbook be the ones to define what Craft truly is. It will be a travesty to those who consider themselves craftsman, those who work with their hands and hearts to produce as high a quality and enjoyable a product as possible.

Ontario distiller:  Consumers enjoy authentic craft products because it gives them a connection to community and geography. If consumers grow to mistrust these misrepresentations, something meaningful will be lost.

Please make sure to complete the survey and share it with knowledgeable people if you have not already.

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Coke Gets Served (and Pommelled)

Last week’s U.S. Supreme Court decision, Pom v. Coca-Cola, is not just about juice. It has massive implications for small brewers, big distillers and all other alcohol beverage marketers. It shows that TTB rules and other agency rules set a floor, not a ceiling, on how companies need to market their products. It shows that the government is only a part of the web of review, in concert with competitors. Just as we predicted that Pom would win this case, we now predict that some alcohol beverage companies will soon take legal action against others, even though such cases, other than trademark cases, were very rare in the past 50 years.

It was bad enough for Coke when Pom called out Coke for going quite a bit too far in posing its apple juice as pomegranate juice. It got even worse when various Supreme Court Justices suggested, orally, that Coke was trying to trick people. And on June 12, 2014 it got even worse, when the Supreme Court unanimously disagreed with Coke’s position. In Pom v. Coca-Cola, the Court said, if there is trickery on food labels, and it hurts a competitor, of course they can do something about it, even if FDA (for whatever reason) does not.

Pom and the Supreme Court have made it clear that one company can go after another for dubious labeling, and the government no longer has all the authority in this area.

The Court said, rather than the Food, Drug & Cosmetic Act (FDCA) knocking out the Lanham Act, the two Acts can happily coexist, complement each other, and provide synergy. The former protects consumers as to health and safety. The latter protects competitors as to commercial interests.

We have lots more coverage of this important case, and the background, in this post from earlier this year.

Coke went astray fairly early in the multi-year litigation, trying to invent a theory under which FDA “approved” the label at issue. FDA did no such thing. To approve is an act, and FDA’s posture here was the opposite of an act. FDA did not condone, approve or disapprove the label at issue. Perhaps FDA was busy with many other pressing concerns, or it was a gray area. This is in stark contrast to how TTB handles most labels — with a rigorous, case-by-case, and explicit pre-market approval regime. To say that FDA approved the Minute Maid label is like Donald Trump getting one $500 haircut per week, every week, calling it a business expense and taking an IRS deduction for 10 years — then saying the IRS approves of his hairstyle and his deduction. The IRS would, of course, have done no such thing. Rather, it would be the case that the IRS, simply, had so far refrained from any adverse action. To use the terms in the opinion, there is a difference between approving something and merely tolerating it.

There are not a lot of juicy quotes in the opinion, but the case does have massive implications. The Court noted, in a realistic way, that:

FDA … does not have the same perspective or expertise in assessing market dynamics that day-to-day competitors possess. Competitors who manufacture or distribute products have detailed knowledge regarding how consumers rely upon certain sales and marketing strategies. Their awareness of unfair competition practices may be far more immediate and accurate than that of agency rulemakers and regulators. Lanham Act suits draw upon this market expertise by empowering private parties to sue competitors to protect their interests on a case-by-case basis.

It is very refreshing to see Washington give some credit to those who work in an industry long-term, every day. The huge implications of this case would seem to be:

  1. A massive shift of enforcement authority, from bureaucrats in Washington, to private parties all around the world. Professor John Duffy noted:  “A second important point about POM is that the reasoning in the decision shows the Supreme Court’s increasingly ambivalent approach to administrative regulation.  More than a century ago, administrative agencies were often cast in nearly heroic terms; they were thought to be wise experts who could bring intelligent, centralized regulation to remedy the abusive marketplace tactics.  In yesterday’s decision, however, the Court shows just how little is left of that notion.” Duffy nails it, saying: “It is … hard not to think that some of the reasoning in this case reflects a new skepticism – or perhaps it should be described as a healthy realism – about the capabilities of administrative agencies.”
    1. Justice Roberts, in the oral arguments, actually said, in reference to misleading labels:  “What does the FDA know about that? I mean, I would understand if it was the FTC or something like that, but I don’t know that the FDA has any expertise in terms of consumer confusion apart from any health issues.”
  2. The ready ability of Coke to police Pepsi’s business practices, Bud to police Coors, Gallo to police other wine companies, Bacardi to regulate Diageo — on and on. Not only can the big regulate the big, but the small can regulate the big and vice versa. It could be a free-for-all. Duffy explained that this case, along with another:  “is almost certain to produce a significant expansion in competitors bringing Lanham Act claims against each other over false or misleading statements.”
    1. Even more, this means little craft brewers and distillers can go after big guys with a claim that:  “you are BS’ing about craft, and it hurts us.”
    2. An advertising law expert said:  “It opens the floodgates to increased litigation. The message to marketers is now that compliance with the FDA is only a first step and is by no means insurance against other types of claims.”
  3. This will give us a bit of a taste of what libertarian-style government might look like, and a bit of relief from command-and-control government, perhaps.
  4. Even though there is affirmative pre-market approval for alcohol beverages, and this is not the case for most foods and other beverages, it would seem that the same basic principles apply. It would seem that the FAA Act was likewise not intended to impair or preclude the Lanham Act.
  5. On behalf of food clients, food lawyers now get to serve as mini-FDAs, and private TTB lawyers have been deputized to serve as mini-TTBs (on behalf of any aggrieved beverage company clients).
  6. This makes it easy for TTB and FDA to deflect many complaints, and remind the aggrieved that they have a ready means for self-help.
  7. After many decades to the contrary it may turn out that the federal food and beverage laws are a floor, rather than a ceiling. CSPI said:  “The Court recognized that companies don’t have a safe haven from being sued for deception just by complying with FDA’s minimal regulations.”

It will be ironic indeed when a competing food company goes after Pom. But Pom seems more than able to protect itself and I have rarely seen a better example of a company being on the defensive, after the various FTC inquiries — and turning it into such a major victory. There should be a cliche about turning bitter fruits into profitable fruit juices.

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