How to Read Whiskey Labels

The demand for whiskey (or “whisky” without the the “e”) has grown at a tremendous pace over the past decade, especially American whiskey which grew at almost 7 percent in 2016 according the the Distilled Spirits Council. This growth has led to new brands being launched and existing brands to reinvent themselves to hold onto or capture more of the increasingly competitive shelf space. But with so many bottles to choose from how can consumers tell one from another?

Now if you want to read the technical definition of the Standards of Identity, you can read them in the federal regulations. But if reading legal jargon makes your stomach feel like it does when you get home at 7 a.m after partying all night in Tijuana with a bunch of Marines, then we’ll break down what you need to know when shopping for that precious brown liquid.

1. What makes “whiskey” legally whiskey?

Whiskey may be made from any type of grain (from anywhere in the world) and distilled up to 190 proof, but bottled at no less than 80 proof. It must be aged in oak barrels (except for corn whiskey) and you can add caramel color, sugars and other things to it to get it to look, smell and taste like whiskey.

2. How about “bourbon whiskey”?

Bourbon whiskey (which includes in the definition “rye whisky”, “wheat whisky”, “malt whisky” and “rye malt whisky”) is whisky produced at least 51% of the specified grain for type of whiskey, distilled at no more than 160 proof, and stored in a brand new charred oak barrel at less than 125 proof. No other ingredients are permitted to be added to the whiskey except water (or other bourbon). Oh and by the way, it doesn’t need to made in Kentucky…although Kentuckians will probably disagree!

3. …and “corn whiskey”?

To be able to call a whiskey “corn whiskey” it must be at least 80% corn, distilled at no more than 160 proof, and stored in a used charred oak barrel or a brand new uncharred oak barrel.

4. “Straight” whiskey

This means that the whiskey is aged at least 2 years in charred new oak barrels (straight corn whiskey in either used charred oak barrels or new uncharred oak barrels). It can be a blend of more than one straight whiskey type (i.e., bourbon, rye, wheat, corn), provided all the whiskey comes from the same state.

5. Bonded or Bottled-in-Bond

To be labeled “bonded” or “bottled-in-bond”, the whiskey must be the product of one distilling season (January to December) and one distiller at one distillery. The whiskey must be aged for a minimum of 4 years under U.S. government supervision and bottled at 50% ABV (100 proof). The bottled product’s label must identify the distillery where it was distilled and, if different, where it was bottled.

6. “Distilled”

This is a confusing term, but is key to understanding who is actually making the whiskey. TTB regulations require a statement disclosing where the whiskey was distilled, so you can look on the label for either “distilled by” or “distilled in“. If a distillery makes the product, then they can state on the label “distilled by” or “distilled and bottled by” followed by the name of the distillery. If the whiskey is the product of a rectifier (people who buy and bottle whiskey from distilleries), then the label may read “distilled in Kentucky”, or “distilled in Kentucky, bottled by” (followed by the name of the company). If the label list terms, such as made, bottled, produced, handcrafted, etc., this is done to make it appear they distilled it, when in fact they didn’t.

7. Small Batch

There is no legal definition for this term, so it could mean anything from 5 barrels to 5,000 barrels in a batch. The brand themselves determine what this means, so it really is only helpful to differentiate between the products the brand makes from each other.

8. Single Barrel

Single barrel is a batch from one barrel. The whiskey is then bottled it one barrel at a time, therefore each bottle is going to be a little bit different. This is unlike small batch where the whiskey would taste the same each and every time.

9. Barrel Proof

When the label states barrel proof this means the whiskey was bottled at the actual proof that an aged whiskey was barreled at with no added water. The whiskey is filtered to make sure to clean all of the char, but it is bottled at that proof. Since some of the whiskey is lost to evaporation as ages in barrels, the proof in the barrel can go up. So if you like high proof whiskey, look for those bottled at barrel proof.

The holidays are quickly approaching and there is no better time to pick out that special bottle of whiskey as a gift. After reading this article you are armed with the knowledge to make your shopping experience more meaningful and selection more informed.

Happy drinking from all of us here at Morsel Law!

 

Are Your Beer Ingredients Exempt from TTB Formula Approval?

Craft brewers continue to experiment with a wide variety of non-traditional ingredients to concoct new and exciting beers. For example, Fulton’s HefeWheaties (a Wheaties-themed Hefeweizen), Oxbow Brewing’s Sasion Dell’Aragosta (brewed with live Maine lobsters and sea salt), Porterhouse Brewing Company’s Oyster Stout (you guessed it…made with live oysters!), and Short’s Key Lime Pie (made with fresh limes, milk sugar, graham crackers and marshmallow fluff). From these limited examples you can only imagine where brewers will go from here.

The use of new and novel ingredients in beer is not prohibited by the Alcohol and Tobacco Tax and Trade Bureau (“TTB”). However, if a brewer intends to use an ingredient in a beer that is not on the TTB exemption list, then the brewer is required to obtain formula approval (or a pre-import approval for imported beer) from the TTB.

In December 2015, the TTB issued Ruling 2015-1, which re-states and supersedes Ruling 2014-4, by adding more than 50 new ingredients exempt from the formula requirements, including ingredients such as tea, jasmine, rosemary, grapes and figs (a complete list of exempt ingredients is listed here). Although this new ruling has exempted many flavoring materials added to beer, including several fruits and spices, sugars, chocolate, tea and coffee, it does not (and cannot due to existing regulations) exempt flavorings and extracts, which continue to require formula approval prior to use. For example, while a brewer can add watermelon, strawberry juice, strawberry puree or strawberry concentrate to a beer without obtaining formula approval, adding a strawberry flavor still requires formula approval.

Ruling 2015-1 was issued by the TTB in response to a petition filed by the Brewers Association requesting to expand the list of exempt ingredients. Although the TTB did not exempt all the ingredients requested by the Brewers Association, the TTB remains open to future petitions regarding additional ingredients. A procedure for such a petition is located at 27 C.F.R. § 25.55(f).

If you have any questions about beer regulations or formula requirements please contact our attorneys at Morsel Law.

Alcohol Beverage Labels: The Importance of Each Word

Let’s be honest, most of us as consumers don’t read each and every word on a food and beverage labels, especially that fine print way down at the bottom. Sure, we check the ingredients, maybe even the calorie count, but for the most part that’s about it. But when it comes down to it, everything on the label matters. Not necessarily to the majority of consumers, only those trying to squeeze money out of the pockets of businesses. And, as demonstrated below, it only takes one person to notice something questionable to cause major headaches.

Just ask Diageo PLC. They were recently sued over the labeling of their Red Stripe beer. Although marketed as a “Jamaican-style lager” and the logo of a Jamaican brewery is displayed on the bottle, the beer is brewed and bottled in Latrobe, PA. This isn’t something Diageo is trying to hide, they disclose it directly on the label. However, the complaint claims that the label falsely misrepresented the country of origin of the beer which resulted in consumers paying higher costs for an imported beer. I guess the plaintiffs haven’t purchased domestic craft beers lately, which can be some of the most expensive items in the beer cooler.

Another recent proposed settlement with “mislead” consumers came from the owners of Templeton Rye, an Iowa-based whiskey maker. According to the complaint, the whiskey company conducted deceptive marketing practices for failing to disclose its product’s origins, and further suggesting that it was made in small batches of a “Prohibition-era recipe.” In fact Templeton Rye doesn’t even distill their own product. Instead, it buys the rye from MPG Ingredients in Lawrenceburg, IN, and passes it off as their own distillate. The rye whiskey that Templeton Rye purchases isn’t even made in small batches, but in large quantities which Templeton Rye purchases in small amounts, the remaining whiskey is sold to other distillers which is then bottled under different brand names.

Although Templeton Rye does blend the whiskey at their facilities with an alcohol flavoring formulation which they purchase from yet another vendor to achieve their own flavor profile. Of course, all of this is disclosed on the company website, but that didn’t matter to the plaintiffs. Templeton Rye’s co-founder, Keith Kerkhoff, is livid, stating: “It’s all about greedy people…if people didn’t like our product, they wouldn’t have bought a second bottle.” The parties have reached a settlement where the company has agreed to reimburse consumers who purchased their product in the amount of $3-6 per bottle, up to 6 bottles.

Last year, Fifth Generation Inc., the marker of Tito’s Homemade Vodka, was sued in California for false and deceptive marketing, and in Florida for unfair and deceptive practices. The vodka maker touts that its product is “handmade”, however, this apparently isn’t the case anymore. Originally, the vodka was made by its founder, Tito Beveridge, in pot stills just outside of Austin, TX. But now, the company produces over 850,000 case per year out of an industrial facility. The company has stated in its own defense that their labels were signed off by the Alcohol and Tobacco Tax and Trade Bureau (TTB), so if putting “handmade” on their label is “false advertising” then the TTB wouldn’t have approved the labels in the first place. Apparently, this logic wasn’t enough for the courts to dismiss the lawsuit.

As you can see above, each word really does matter. Similar lawsuits against alcohol beverage makers are being filed more and more frequently. Whether on a beverage label or marketing campaign or website, it is important to review and analyze all materials prior to releasing them into the marketplace. If a company doesn’t have internal staff qualified to complete this type of regulatory review, they should locate and hire a specialist. Think of this as buying an insurance policy. You spend a small amount of money to get it right the first time to mitigate risk, instead of going without and hoping for the best. But if something is incorrect, one of two scenarios happen: regulators come knocking on your door or you’re served with a civil complaint by affected “consumers.” Either way, the company is faced with the high cost of defending themselves and possible damage to their reputation, which will most likely result in loss of customers.

If your business is unsure whether a label or marketing materials are in compliance with, or need assistance in adapting your label or materials to meet, TTB or FTC regulations please contact our attorneys at Morsel Law.

So You Want to Start a Brewery in Michigan?

How many times have you spent sipping on a cold pint of the dark stuff with your friends when one of them, after finishing his third beer, has an epiphany: “Dude, we should totally start our own brewery…I mean how hard can it be?” Although your kind-hearted friend’s idea sounds good at the time, what he doesn’t know is that starting a brewery is no easy task. Navigating the laws and regulations alone would send most people running for the hills. However, there are some of you out there with the drive and passion for good beer and a determination to bring these tasty suds to the masses. So for those who’ve made it this far into my article, below I’ll outline the different types of licenses need to start a brewery in Michigan.

While breweries are regulated under both state and federal laws, for the purposes of this article I’ll just touch in the Michigan specific requirements. Michigan law allows a brewer to operate under either a brewer’s, brewpub or micro-brewery license.

Brewery License

A brewery license permits manufacturing an unlimited quantity of beer. Brewers may sell the beer they produce to licensed wholesalers, but many not sell directly to retailers. A brewer may also sell the beer it produces to consumers for on-premise consumption at only one brewing facility in Michigan, but it may sell beer that it produces at all of its facilities for off-premises consumption. Sampling of beer in a hospitality room located on the brewery premises is also permitted.

Micro-Brewery License

A micro-brewery license permits manufacturing of up to 60,000 barrels of beer annually (which includes any out-of-state production). Micro-brewers may sell beer to licensed wholesalers, but not directly to retailers. Micro-breweries that produce 30,000 barrels or less per year may sell directly to consumers for on and off-premise consumption without an additional license. Sampling of beer on the brewery premises is permitted.

Brewpub License

A brewpub license permits manufacturing up to 18,000 barrels of beer annually. In addition to a brewpub license, a brewpub must also hold an on-premise license (Class C, Tavern, A-Hotel, B-Hotel or Resort). The brewpub must operate a full service restaurant with at least 25% of gross sales coming from non-alcoholic items. Brewpubs may not sell their beer to wholesalers or retailers, but may sell their beer to consumers for on or off-premises consumption.

Key Differences between Licenses

The key differences between a brewer’s, micro-brewery and brewpub license are the amount of beer the establishment can produce, restaurant requirements and restrictions, and limitations on to whom you can sell.

Specifically, whereas a brewer’s license authorizes the production of an infinite amount of beer, a micro-brewery license restricts production to 60,000 barrels per year and a brewpub license restricts production to 18,000 barrels per year. While a brewery or micro-brewery may be allowed to have a restaurant on its premises, a brewpub license requires the brewer to operate a restaurant on its premises. No license permits the sale of beer directly to retailers and only breweries and micro-breweries may sell to wholesalers.

It is important to note that local regulations may further restrict your operations, such as stricter closing hours than state requirements. Thus, it is critical to research and understand the local ordinances prior to choosing a location. If you need assistance in establishing or navigating the laws and regulations that effect your brewery, please contact us at Morsel Law.

Michigan Craft Brewers Beware: FDA Labeling Rule May Impact Your Business

Over the past two years Michigan business owners spent considerable time implementing procedures to comply with the health care requirements under the Affordable Care Act (the Act). Just when business owners thought they could turn their attention back to doing what they do best (i.e., running their business), regulators issue new requirements, this time targeting the food and beverage industry.

The FDA’s final rule on food labeling (the Rule), as required under the Act, provides for nutrition labeling of “standard” menu items for chain restaurants with 20 or more locations and “similar retail food establishments.” Unlike earlier drafts, the final Rule requires chains to also issue caloric information for alcoholic beverages. While the Rule does not specifically apply to breweries, there may be unintended consequences that impact craft brewers, especially those brewers that sell to chain restaurants. Michigan craft breweries should take notice.

Michigan, ranked fifth in the nation, is home to more than 150 craft breweries. Consumer demand for craft brews continues to grow and many national chain restaurants operating in Michigan already carry local craft beers on their menus. Many restaurants rotate their offerings regularly and list the current beer selection on menu boards. While restaurants are ultimately responsible to collect nutritional information on the items they serve, it is unclear whether restaurants would instead place this burden on brewers.

The FDA has noted that restaurants can utilize nutritional databases in order to determine calorie content on the beers they offer, such as the USDA National Nutrient Database for Standard Reference.  According to the database, the calorie count for a “typical beer” is 153 calories per 12 oz. serving. But the problem is craft beers are not “typical”.  They are full-flavored concoctions which ingredients vary greatly from one brewery to another. Thus, labeling all craft beers 153-calories would clearly be inaccurate.

Under the Rule, businesses must provide an inspector with information substantiating nutrient values, including the method and data used to derive these nutrient levels. A “responsible individual” for the business must certify that the information contained in the nutrient analysis is complete and accurate.  So if a restaurant lists a 350 calorie beer as having that 153-calorie count, they run the risk of violating the Rule, especially if they cannot demonstrate they took reasonable steps to ensure the brewery adhered to the 153-calorie count. Failure to comply with the Rule, or if you don’t get it right, the menu item will be deemed “misbranded” which is a misdemeanor under the Food Drug and Cosmetic Act. The FDA retains the discretion to hold those “responsible individuals” who certify the menu labeling, criminally liable for a misbranding violation.

Knowing the risk of a potential misbranding violation could lead to restaurants not accepting the standard reference calorie count, forcing brewers to supply nutritional information. Thus, craft brewers may be faced with a choice: either supply calorie counts or take their products elsewhere. But with rumors circulating that the Alcohol Tax & Trade Bureau (the TTB) — which is responsible for approving alcohol labels — could look at its own labeling policies and enforce stricter regulations in the near future, even possibly requiring nutritional information on beer labels, craft brewers may need to consider analyzing their beers now. So in the event the TTB follows the FDA’s lead and implements new labeling requirements, brewers will be prepared and know the caloric content of their products.

Craft brewers have long stressed a “drink better, not more” philosophy, unlike the mass-produced beers who have offered low-calorie light brews for decades, so hopefully consumers won’t be deterred by the calorie counts. It may slow cross-over growth, but it won’t stop the momentum. My prediction: calories or not, craft beers are here to stay.

When Does the Court of Public Opinion Count More Than A Court of Law?

Recently, Bell’s Brewery of Kalamazoo, Michigan filed a complaint in federal court against tiny upstart brewer Innovation Brewing of Sylva, North Carolina. Innovation Brewing filed a trademark application for their name and Bell’s claims that if such a trademark was granted it would create confusion in the marketplace since they use two phrases in their advertising: “Inspired Brewing” and “Bottling Innovation Since 1985”. Whether Bell’s is successful or not in this dispute it may not matter as much as how their customers perceive their actions.

The complaint has created a negative social media storm where many fans and customers of both breweries view these actions as contradictory to what makes the craft beer industry so special. The craft brewery revolution is about collaboration not competition. The people who truly care about beer and bring passion to the craft band together to share ideas and their love of quality ales and lagers. But when breweries instead choose to duke it out, who are the real winners and losers? Bell’s, which made more than 310,000 barrels last year in contrast to Innovation which makes only about 500 barrels a year and sells exclusively in North Carolina, is being perceived as a “bully”.

Although Bell’s is one of craft beer’s greatest independent success stories, this isn’t the first time they’ve used courts to settle their affairs. In 2011, Bell’s filed a challenge against a California-based brewer for its Copper Bell beer, but the matter was settled and the brand later withdrawn.

But Bell’s isn’t the only one using legal means to protect their brand. Recently, Lagunitas Brewing sued rival Sierra Nevada Brewing over its Hop Hunter IPA label. However, within a few days after filing the complaint, amid the firestorm reaction from angry customers using social media to voice their disappointment, Lagunitas founder Tony Magee quickly dropped the suit. Currently, New Belgium Brewing Co., the third largest craft brewer in the country, and Oasis Texas Brewing Co., a relatively new upstart, are slugging it out in court over the use of the name “Slow Ride” IPA. Just as in the other disputes above, fans are turning to social media to voice their concerns, but time will only tell the effect it will have on the outcome of this dispute.

Regardless of which brewery is right in the eyes of the law in these types of disputes, it only brings temporary relief. What matters most in the long run is how customers view their actions. In the case of Bell’s, several bar owners have pulled Bell’s from their menus until further notice and several brewing associations have signed petitions voicing their support of Innovation. In the spirit of the industry, it would be nice to see them resolve it amicably. Considering the cost of litigation, which in the case of a trademark defense can be between $40,000-50,000, wouldn’t the money be better spent on expanding their businesses? I hope other craft brewers will learn from these lessons and consider collaboration before litigation.