ALCOHOL LAW ADVISOR
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
Beer, Malt Beverages and Cereal Beverages
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Seasonal Considerations for Packaging and Selling Alcoholic Beverages

by and | Sep 6, 2024 | , , ,

The final quarter of the year is the alcohol industry’s busiest period, accounting for approximately 70% of annual business. Many holiday-themed seasonal products are beginning to make their way to market, and it is important to remember that these products may have additional regulatory considerations and hurdles.

The Alcohol and Tobacco Tax and Trade Bureau (TTB) publishes a list of allowable revisions to approved labels – that is, the changes that can be made to a product with an existing certificate of label approval (COLA) without necessitating a new label approval. Notably, however, seasonal products have special allowances. Generally, any nonmandatory label information, such as a graphic, would require a new COLA to be added to a label. Yet, in accordance with Allowable Revision #28, so long as that graphic is holiday and/or seasonally themed, it can be added, deleted, or changed without a new COLA. For example, adding a smiley face to a label would require a new COLA, but adding a candy cane would not.

Even though the candy cane would not require a new COLA, it is important to remember that any additions must not conflict with or qualify the mandatory information, and they must comply with all existing regulations and avoid all prohibited practices. For example, “Happy Valentine’s Day!” can be added to a label, but “Dizzy with love on Valentine’s Day” could not be added – with the acquisition of a COLA or without. “Dizzy” or other statements that describe how the contents of the bottle may affect someone would, if added to a distilled spirits label, run afoul of 27 CFR § 5.129 (a)(1), as the term implies a physical or psychological sensation resulting from consuming the distilled spirits. For wines, a similar qualification can be found in 27 CFR § 4.39(h), and for beers, it can be found in 27 CFR § 7.129(a)(1).

After the new seasonal labels have been printed, there are several additional considerations. These include:

  • Packaging: There are limitations on whether the alcoholic beverage can be packaged together with a food or point of sale (POS) item.
  • Pricing: It is important to consider the price and whether the market will allow a pricing variance from the same alcoholic beverage when not accompanied by POS.
  • Separate brand registrations and price postings where required.
  • Special price posting designations, such as a limited availability designation for New York.

Label and packaging compliance is an area that is routinely investigated by the TTB and state regulators. Regulators conduct these compliance checks by visiting retail locations and verifying that the labels on the products conform to state and federal labeling requirements. When a label is not in compliance, the industry member may face penalties and will need to address the regulators’ concerns and correct the label(s). Maintaining compliance with TTB and state regulations helps safeguard existing licenses and helps avoid disruptions within supply chains.

For questions or assistance with seasonal items or their packaging, please contact Alva Mather [...]

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Pennsylvania Expands Access to Ready-to-Drink Cocktails

by and | Jul 26, 2024 | , , , , ,

On July 17, 2024, Pennsylvania Governor Josh Shapiro signed SB 688 into law, expanding the number of available outlets that can sell ready-to-drink cocktails (RTDs) across the state.

The new law defines “Ready-to-drink cocktails” as “beverage[s], composed in part of distilled liquor … premixed and packaged in original containers by the manufacturer, containing not more than sixteen ounces … The term shall include any beverage consisting of at least one-half of one per centum, but not greater than twelve and one-half per centum, alcohol by volume.” Notably, this term does not encompass beer, malt or wine-based RTD beverages.

Explaining the intent behind the bill, sponsor Senator Mike Regan, in a February 17, 2023, memo, cited the recent growth and overall popularity of the RTD category as the reason why RTD beverages deserve to be treated differently from other liquor-based products.

Prior to the new law, liquor-based RTDs could only be sold through state-run stores, where they compete for limited shelf and cooler space that is not commensurate with their market share. Spirits and all products containing spirits had to be sold by in-state manufacturers and out-of-state vendors to the Pennsylvania Liquor Control Board. The board would then sell to liquor-licensed retailers, such as restaurants and bars, and to its state liquor stores. As a result, consumers would have to purchase RTDs in the same manner they would purchase higher ABV spirit products at a state-run store.

With SB 688’s enactment, Pennsylvania now allows for these spirits-based RTDs to be sold either through the board state-store system or through the state’s independently licensed beer network with the acquisition of an additional permit. Notably for manufacturers – both in-state and out-of-state – Pennsylvania’s franchise laws that cover Pennsylvania beer distribution do not extend to RTDs.

Before buying RTDs for resale, retailers and distributors will need to acquire a new type of permit called a “Ready-to-Drink Cocktail Permit.” Retailers will be able to purchase RTDs from state-run stores (as they do currently) and also from in-state limited distilleries. Consumers will be able to purchase RTDs from the retailers who have acquired the “Ready-to-Drink Cocktail Permit,” from state stores, from in-state distilleries, and from distributors and importing distributors.



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Growing Regulatory Focus on ‘Crossover Alcohol Products’

by | Jul 10, 2024 | , , , , ,

As more companies – including businesses with and without experience producing alcoholic beverages – move to leverage their brands and brand equity across the beverage spectrum, regulators, trade associations and the companies themselves are focusing on ways to responsibly label, advertise, market and display these products to avoid consumer confusion and potential sales to minors.

Crossover alcohol products are generally categorized as alcohol beverages that use the products and intellectual property (e.g., brand names, logos) of a preexisting non-alcohol brand. While not legally defined (yet), such products include Dunkin’ Spiked Original Iced Coffee, Eggo Brunch in a Jar, Lipton Hard Iced Tea and SunnyD Vodka Seltzer, among others. As illustrated by these examples, products such as Lipton Hard Iced Tea leverage the non-alcoholic Lipton Iced Tea branding for a new product in the alcohol space.

As crossover alcohol products have become more prevalent across the market, state regulators have started taking notice and providing guidance to alcohol producers as to how to assure these products are not “false or misleading,” as defined by alcohol regulations, or tend to induce minors to drink the alcoholic product either through the products’ labels, packaging or store-display locations. The Commonwealth of Virginia, in particular, has taken the lead through the issuance of Circular Letter 23-01, which provides guidelines for alcohol producers as they develop these products. These guidelines focus on the following, among other issues:

  • Ensuring that the crossover product clearly indicates the type of alcohol it contains, with such information visible in at least three to six different locations.
  • Ensuring that the sizes of the alcohol references and warnings are sufficiently large and noticeable in comparison to other writings on the product label.
  • Ensuring that any and all changes to product labels, containers and secondary packaging clearly distinguish the crossover products from the original non-alcoholic products so as to prevent consumer confusion; such changes may involve the color palette, font type, imagery, placement of words, images and descriptions, or background elements.
  • Ensuring that secondary closures, such as foil lids, plastic wrapping, lip guards, stickers or other “child-proof” packaging, are present, to prevent accidental consumption by a minor.

Recently, a coalition including the Distilled Spirits Council of the United States (DISCUS), Wine & Spirits Wholesalers of America (WSWA), FMI – The Food Industry Association, and the National Association of Convenience Stores (NACS) (representing the three tiers of the industry: suppliers, wholesalers and retailers), issued a joint commitment related to the responsible marketing and merchandising of crossover alcohol products. Similar to Virginia’s guidance, the coalition is focused on assuring that these products are not confused for their non-alcohol counterparts and do not appeal to those under the legal purchase age, based on the appeal of the underlying brand. Accordingly, the coalition looks to alcohol producers to commit to responsible production, packaging and marketing of crossover alcohol products by:



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So, You’ve Been Sued in a Labeling Class Action. Now What?

by and | Apr 1, 2024 | , , , , , , , ,

Many alcohol beverage industry clients are faced with lawsuits attacking product labels. These lawsuits can be frustrating for clients, particularly when the labels at issue were previously approved by the Alcohol and Tobacco Tax and Trade Bureau (TTB). But approval by the TTB does not insulate a company from a lawsuit under various state consumer protection and unfair trade practices statutes.

Try as companies may, even products that purport to conform with US regulations can still be characterized as “misleading” and “deceptive” by crafty and ambitious plaintiffs’ lawyers across the United States. Making matters worse, these lawsuits are typically styled as putative class actions, meaning the cases are brought by one or two alleged purchasers of the product, suing the company on behalf of all US purchasers of any allegedly deceptive product produced by the company, which makes both the defense of these suits as well as the potential damages quite costly.

An entire cottage industry of plaintiffs’ lawyers in the US focuses on just these types of putative class actions targeting the food, alcohol, beverage and packaged goods industries. Indeed, they file hundreds to thousands of new cases each year. So, what should a company do when facing allegations that a product label is deceptive or misleading?

In this post, we answer that question and provide an overview of the typical process in one of these cases. We also offer some practical tips to best protect your company if you are facing a threat of a lawsuit or if a class action lawsuit is filed against you.

BEFORE THE LAWSUIT IS FILED: PRE-SUIT DEMANDS

Many plaintiffs’ lawyers focused on suing alcohol industry clients send pre-suit demand letters, or letters asking for label changes and lofty payments in exchange for the plaintiff’s lawyer not filing a lawsuit. While one primary purpose of the pre-suit demand letters is to attempt to extort or extract a settlement from a company, there is another common purpose to these pre-suit demands. Many state statutes either require pre-suit notice or otherwise increase the types of recovery a plaintiff can pursue in a lawsuit if the pre-suit notice is served, such as in California.

If you receive a pre-suit notice demanding changes to your product label and/or payment of money, you should immediately engage a lawyer to step in and represent you. Additionally, a pre-suit notice often includes a demand to preserve documentation and evidence related to the allegations in the demand letter. If such documentation is not preserved, that can create significant issues for companies in a lawsuit.

The pre-suit notice period also offers an opportunity to persuade the plaintiff’s lawyer that there is no good faith or valid cause of action based on the allegations in their letter. To the extent those efforts are successful, you may avoid a lawsuit altogether. To the extent there is disagreement about the validity of the allegations, the notice period allows time to negotiate a pre-suit resolution on an individual basis which can be much cheaper than defending [...]

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