Just when we least expected it, here is another version of powdered alcohol. It got approved a couple weeks ago, after grinding through the process for a good long while (six months or more). Many thanks to an astute reader for pointing this out to us. The label raises a boatload of legal issues. Before wading into those issues, I’d like to ask who has seen powdered alcohol out in the wild, at retail? Who has tried it? The product is Lieutenant Blender’s Cheat-A-Rita, from a distillery in Texas. Much more coverage, of powdered alcohol and Palcohol, is here.
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A few weeks ago, with little to no fanfare, we passed the 500 posts milestone. It has been a wild and fun ride since late 2008. This blog is now up to 512 posts as of yesterday. Google tells me Bevlog has had 555,404 visitors and 832,024 pageviews so far, with an average of 44 seconds per session.
The most popular posts are Tito, Blue Moon and Palcohol (with 37,587, 36,183 and 17,022 views respectively in the past two years). I am not sure whether the blog has led directly to any particular revenue, but it has put me on e.g., The Today Show and CBS News, and I don’t imagine any other (legal) way to accomplish that.
Some of the posts are fun and easy, and take no more than a few moments (examples). Others, somehow, take hours and hours — even if they seem so simple beforehand. I am pleased to report that we’ve heard of no substantial inaccuracies so far, and we’ve had very few complaints. One big company oh so smoothly asked for a clarification. One multi-billion dollar organization demanded a change but settled for something approximating a change in punctuation. Along the way I met Tito, the Hatfields (and McCoys), and E-40. And now we are pleased to report we have been selected (from more than 2,000 nominations and tens of thousands of law blogs) as one of the best law blogs for 2015, by The Expert Institute. Please vote if you have not already.
We don’t charge anything for this information. We don’t accept any advertising and we routinely turn it down. We do ask you to enjoy, comment, pass the word along — and if you think it’s really good, please consider voting for it here. We only have 27 scrawny votes as of this writing — and we are getting beat by “The Wedding Lawyer” of all people (at least we are beating the horse lawyer). My mom will be proud (if I don’t get beat by the Wedding Lawyer).
Finally, thanks for reading and please let us know any great topics or ideas to make the blog better in the coming years.
Here is an innovative new spirits product called Cocktail Caviar. It is “burst-able pearls of naturally flavored spirits.” You can toss them in some wine, or freeze them and add them to other drinks. The product is so new that there is not much about this product on the web so far.
If I understand correctly, these chickpea sized “pearls” are a giantized version of the tiny booze droplets that make up Palcohol. Here, the alcohol is encapsulated in a layer of kelp and so it not quite a liquid and not quite a solid. Maybe there is shock fatigue after the Palcohol surprise, or the size of the pearls makes an enormous difference, or it’s the upscale marketing — but it does not seem like this product is bound to raise hackles the way the powderized product has. Steven Hollenkamp, the man behind this product, explained that part of the appeal of the brand name is that “caviar” is not at all likely to appeal to minors.
I happened to meet Steven this week and he explained:
We worked diligently with TTB getting Cocktail Caviar approved. This included 240 emails, dozens of phone calls and several in-person meetings with TTB administrators, one of which was a lengthy sit down meeting with several high-ups at TTB Headquarters in DC. They were on top of it and met me half way. As a novel product, we felt being an open-book in terms of information and documents, as well as with the long term Cocktail Caviar vision, was the best way to cultivate a healthy long term relationship with TTB. I mean that, and while that may seem like a simple idea, you’d be surprised how many brands use a more guarded approach, trying to snake through the rules in a way that can only irritate TTB formula and COLA specialists.
TTB approved seven flavors of this product last month, and one of the approvals is here.
From the demise of Prohibition until about a year ago, you could fairly safely assume your label was right, if it was approved by TTB. Most people assumed they had a “safe harbor,” created upon approval, even if some of the claims were dubious.
This has been changing, and fast. The causes are numerous. One big one is the Pom case, decided in mid-2014. Another is an onslaught of class action lawsuits (such as Tito’s, Makers Mark, Beam, Angel’s Envy, Templeton). I am not discussing these factors in detail in this post because we have covered them a lot in many other blog posts, readily findable. A third factor is the rise of whiskey. The whiskey rules are quite a bit more complicated than those for other leading categories such as vodka.
Some people don’t like hearing this message and think it sounds a tad alarmist. But for every one of those people, there are experts who understand this confluence of circumstances can take your company down (and perhaps some who are eager to do so). On a less somber note, the article explains some easy ways to tamp down the threats presented.
And here is something else you can do to push these threats away from your business. Get your labels audited. In response to the markedly changed situation, we are pleased to announce our 2015 label audit program. The details are here.
The list of labels deemed ok and approved, and then not ok, grows longer every day (Skinnygirl, Black Death Vodka, Palcohol, etc.). Wouldn’t it be nice to stay off that list? You should think about having a knowledgeable person review your labels, before this chap (Thomas Zimmerman, the man behind many of the lawsuits) does it for you.
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…
Tito’s vodka was doing great for the past 15 years, then hit a gigantic speedbump this week in the form of a class action lawsuit.
Tito’s therefore provides a good example of when an approval is not really an approval. Tito Beveridge has more than 30 TTB label approvals for his vodka from 1997 to 2013 (as in the above image, from LabelVision). They may not do him much good in this lawsuit, even though, in years past, most would assume the federal approval would be dispositive. It’s a good thing most TTB approvals are not paper anymore because these would “not be worth the paper they are printed on.”
Summary: in Hofmann v. Fifth Dimension, Inc., Gary Hofmann (a consumer) sued Tito’s vodka on behalf of all Tito’s customers in California, claiming that the company misleads people about whether the product is “handmade.” The lawsuit was filed September 15, 2014 in San Diego county court. The federal government reviewed and approved the Tito’s labels, but has no definition for the term at issue.
The classic case of an approval that is not really an approval would be your garden variety Napa Valley Chardonnay, Vintage 2010. TTB will take almost every one of those italicized words at face value. To the extent any one of those words is not true, your approval is not going to help you too much, in the event of an inquiry. Like an IRS tax return, the COLA (and any formula approval) is, to a surprisingly large degree, something of an honor system, stapled together with the penalty of perjury on every such document.
9/16/2014: Judge Eddie C. Sturgeon is assigned to handle the case.
9/23/2014: Tito’s apparently put out a press release, sketching out a defense. I sure hope they have more. They took a jab at the plaintiff for botching the defendant’s proper name, Fifth Generation, Inc. Shanken points out that the brand is at 1.3 million cases per year (that’s a lot of hands!). Tito says “he will vigorously contest the lawsuit.” Tito largely hangs his hat on the fact that TTB approved the labels.
9/25/2014: the plaintiff amended the defendant’s name, from Fifth Dimension, Inc. to Fifth Generation, Inc. In so doing the plaintiff declared being ignorant of the company’s true name, when filing the complaint on 9/15/2024. This is odd because the plaintiff used the correct name on the Affidavit of Venue filed the same day. Plaintiff did a good job covering this point, though, in the original complaint, by saying: “Plaintiff is ignorant of the true names and capacities of the defendants sued herein as DOES 1-100, inclusive; therefore, Plaintiff sues these defendants by such fictitious names. … Plaintiff will amend the complaint to allege their true names and capacities when ascertained.”
9/30/2014: things just got much more serious for Tito, as the case ballooned into a nationwide class action suit. The amended complaint states: “This is a nationwide class action case brought on behalf of all purchasers of vodka (“Vodka”) manufactured, distributed, marketed, and/or sold by FIFTH GENERATION, INC. dba Tito’s Handmade Vodka (hereinafter “TITO’S”).” Also boding ill, the original and amended complaints refer to Sidley Austin (suggesting that the small San Diego firm on the plaintiff side, may be working with a much bigger firm.) The same small law firm, in San Diego, just recently won hundreds of thousands of dollars in another labeling suit as described here in The Wall Street Journal.
10/3/2014: a copycat lawsuit filed in Florida on 10/25/2014, in federal court this time, under Florida law.
10/14/2014: and now another lawsuit, this time in Illinois.
10/21/2014: finally I was able to find a copy of Tito’s response. I looked around but was not able to find the press release earlier.
10/27/2014: Tito has a full-throated defense of his vodka today. I think he is saying it is in fact substantially made in a pot still in Austin. In Wine & Spirits Daily he says, “I, Tito Beveridge, believe the pot still distillation process, like that of single malt scotches and French cognacs, is the cornerstone of craft spirits production, period.” There are lots of other words in Tito’s statement but I can’t find much in it to suggest the degree or extent of this much-vaunted pot-/hand-/craft-production. Is it a fig-leaf kind of thing, or the main way the product is made? I see lots of other jazz about foreign companies, etc. but precious little new information about how this product is made, or anything important that makes it any more “handmade” than the next 500 vodkas.
11/10/2014: another lawsuit, this time New Jersey.
The Forbes article explains: “Tito’s has exploded from a 16-gallon pot still in 1997 to a 26-acre operation that produced 850,000 cases last year, up 46% from 2011, pulling in an estimated $85 million in revenue.” The article strongly suggests Tito is about to be a victim of his own success. You can say this post is a prime example of a lawyer taking something clear, like an affirmative, direct approval, and blurring it up to say it’s not really an approval. That would not change the messy, complicated reality, that TTB is not the only sheriff in town. We have a “system” and though it may be cumbersome, it actually does work pretty well. TTB approves Palcohol. Fine. That’s only one level. Then the private sector jumps in (i.e., us). This triggers the states, legislators, media, trade associations, on and on, to take action. TTB can’t and probably does not need to “do it all.” Customs jumps in on imports, states jump in on Santa and bitch issues, and now there is a clear right of private action in all such disputes. The floodgates are well open. A few weeks ago, in light of the Pom v. Coke decision, we predicted a flood of lawsuits around label claims. Some said “the sky is not falling.” Well, the water is starting to rise pretty high. Tito is up to his waist. Templeton is up to its knees. Bass and Becks are up to their ankles. All from private action with no trace of governmental intervention. Skinny Girl got dunked a few years back and we will need to go back and look to see how much water she swallowed.
This is a class action case brought on behalf of all purchasers of all vodka (“Vodka”) manufactured, distributed, marketed, and/or sold by FIFTH DIMENSION, INC. dba Tito’s Handmade Vodka (hereinafter “TITO’S”). Through a fraudulent, unlawful, deceptive and unfair course of conduct, TITO’S, and DOES 1 through 100 (collectively “Defendants”), manufactured, marketed, and/or sold their “TITO’S HANDMADE” Vodka to the California general public with the false representation that the Vodka was “handmade” when, in actuality, the Vodka is made via a highly-mechanized process that is devoid of human hands. There is simply nothing “handmade” about the Vodka, under any definition of the term,1 because the Vodka is: (1) made from commercially manufactured “neutral grain spirit” (“NGS”) that is trucked and pumped into TITO’s industrial facility; (2) distilled in a large industrial complex with modern, technologically advanced stills; and (3) produced and bottled in extremely large quantities (i.e., it is “mass produced”).
The plaintiffs are asking for all the money, plus attorney fees, punitive damages, interest, costs, and taxes: “all monies acquired by means of Defendants’ unfair competition.”
Right about now, every beer, wine and spirits company should be re-examining their labels, new and old, approved and prospective, and making sure every part is on firm ground. If you lack TTB approval it may hurt you a lot, but if you have it, it may not be sufficient to save you.
* A small disclaimer is, I have no idea about the underlying facts here. I am evaluating this from my couch, based on TTB approvals, public records, the plaintiff’s allegations, and the press. We look forward to presenting Tito’s side of the story, when it comes out.