Guinness is Good for You & Other Advertising Claims

Many pints of Guinness will be raised today in honor of St. Patrick, or simply in honor of a reason to celebrate. Guinness may not be the best stout, but it is usually what people think of when they hear “stout.” It is a brand that has thrived over the years, in part due to its award winning innovative advertising.

The “Guinness is good for you” slogan originated in the 1920s when people told market researchers that they felt better after their pint of Guinness. This may have been a self-fulfilling prophecy on the company’s part, but the health benefits of moderate consumption of beer and wine are still being proven. Antioxidants and iron are the often mentioned healthful properties of Ireland’s famous bitter stout.

Whether this is a health claim or not, Guinness was barred from using the slogan decades ago. This is the kind of ad that alcoholic beverage advertisers would not even consider today. The TTB, the FTC, and possibly the FDA would be all over it in a game of let’s see how many government agencies get involved. It is illegal to make any kind of health claim in alcoholic beverage labeling or advertising, even if it is true and scientifically proven.

Most legislation on alcoholic beverage advertising is focused on decreasing drinking, or at least not encouraging it. The fear is that any health claim associated with alcohol (high antioxidant levels, for example) will cause consumers to go wild and binge drink. If, however, alcohol was viewed as a part of a healthy lifestyle, would there be much binge drinking?

Added Costs of Distribution

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It costs money to sell. This is even more true in the alcoholic beverage industry. In addition to license fees, bonds, and taxes, there are even more “hidden” fees alcohol manufacturers must take into account. One of these additional fees is the cost of state label registrations.

State Label Registration

In many states, it’s not enough to just have your label approved by the TTB, you must also register the label with the state alcohol control division. Some states (Georgia, Michigan, and New York, among others) do not charge for registration. Other states are not so generous.

Fees

Ohio requires a registration fee of $50 per label, Florida $30. Connecticut charges $200 per label, and requires renewal of the registration every three years if the product is still being sold in the state.

These are per label fees. If you sell five different wines, beers, or spirits, you must pay the fee five times. If you want to sell a seasonal product, you must pay the label registration fee.

State Approval

While most states rely on the TTB label approval, some states (like Alabama and North Carolina) require that any label for an alcoholic beverage product sold in that state be approved by the state alcoholic beverage division.

Just because the TTB has approved a label, does not guarantee that the state will. The Alabama ABC Board recently pulled bottles of wine off of shelves because it did not approve a label it deemed pornographic (even though the TTB had approved the label and the wine is sold in other states).

Crossing State Lines

If you operate in a state that does not charge for label registration, you are still not free of these fees. Brand and label registration is required for every alcoholic beverage sold in label registration states, whether it was made in that state or not.

So, unless you never plan to distribute your product to a state that requires registration, you will need to figure out what the requirements are, and what the fees are, if any. A alcoholic beverage label for national distribution, like a national ad campaign, cannot be implemented until the laws of each state are reviewed.

The Session - The Good Stuff

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Today’s post is brought to you by The Session. It’s a group writing project where beer (or in my case beer-related) bloggers from around the world write on a single beer-related topic on the same day (the first Friday of the month). This month’s topic is The Display Shelf: When to Drink the Good Stuff, and the Session is being hosted by The Ferm.

I admit that I am almost always ready for a celebration. I can rationalize opening the “good stuff” on any day of the week. I was exceptionally productive today, let’s open the good stuff. It’s sunny, let’s get the good stuff and have a barbecue.

As far as I am concerned, every occasion can be special. I do, however, tend to center the (real or rationalized) special occasion around the good stuff. I do not open a bottle I have been saving for after we’ve already dipped into the everyday stuff. The point is to enjoy the good stuff, not be blind to the taste because we got carried away with our celebration. Which is why on holidays I either start with the good stuff or skip it all together.

I am also not a collector. This may or may not be a product of my ability to find any reason to celebrate something. I can keep good beer and wine cellared, but rarely longer than needed. I do wonder what it would be like after several more years. But, in the end, I know I will succumb, and find some reason to celebrate and open the good stuff. I never regret it.

So, when do I drink the good stuff? Right now!

The Slow Rise of Craft Distilling

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The craft beer and wine industries have seen exponential growth. There is an undeniable trend towards local artisan foods and beverages. Craft distilleries should be able to capitalize on the same growth.

But, the distilling market is not growing as quickly as the beer and wine markets. The TTB approved more than 600 new wineries and 200 new breweries in 2008, but less than 20 new distilleries. Most of those new distilleries are concentrated in California, Oregon, and New York.

There are several factors crippling the creation of new distilleries. Home distilling is illegal, unlike home brewing and winemaking, and there are far less people who know how to distill. The cost of the manufacturing license itself is another hindrance to new distilleries. Then there are the overwhelming issues of distribution and customer education. On top of those issues are the additional taxes distillers pay that beer and wine producers do not.

License Fees

New York is one of the states that has seen the most growth in distilleries. Why? Because In 2002, New York introduced a small producer license for spirits; the cost of the new license was one fifth of previous cost. There is no federal category for a small distilled spirits producer, and, neither is there one in most states. The license fee for a distilled spirits manufacturer, in most states, is at least double, if not more, than the cost of a brewery or winery license.

Distribution

Washington State saw an increase in new distilleries after a 2008 change in the state laws allowing spirits manufacturers to serve samples to customers directly, and to sell directly to customers for off premises consumption 2 liters per day. Before that change, all sales had to occur in liquor stores. In most states, all spirits must be sold in liquor stores. Producers must sell to a wholesaler, which then sells to the liquor store. Eighteen states operate state run liquor stores, making it even harder for small producers to sell their products.

Customer Education

Customer education is a problem arising from spirits manufacturers’ limited distribution options. Since spirits must be sold only at liquor stores in most states, small producers are unable to offer samples and tastings. It’s much harder to sell a $30 bottle of brandy to someone that has not tasted the product than to someone who has.

Taxes

Sales and excise taxes on distilled spirits are far higher than on beer and wine. The IRS alone collects $13.50 per gallon on distilled spirits. Compare this to the federal excise tax on beer and wine: $0.23 per gallon for cider; between $1.07 and $3.40 per gallon for wine (depending on the alcohol content); and $0.23 or $0.58 per gallon for beer (depending on how much beer the brewery makes). The states also each collect much higher excise and taxes on distilled spirits.

The states that have changed their archaic laws to allow more options for distilleries, have seen growth. As laws do change, however slowly, we may one day see the same exponential growth in craft distilleries.

Legal Hooch in AL and OK? Almost

image courtesy of pusgums

Alabama and Oklahoma may be joining the rest of the states (with one exception - Mississippi) in allowing home brewing and wine making. Currently, in Alabama, homemade beer and wine is illegal. There is a small exception for farmers in Alabama: they can grown their own grapes, and make five gallons of grape wine per year for personal use (for the entire household). Oklahoma currently allows home made wine, but not beer. Home distilling is still illegal in every state.

Changing laws is often a long process; it is not as simple as finding a sponsor for the bill. The Alabama organization, Free the Hops, has made large strides in the last couple of years in changing archaic alcohol laws (such as low ABV limits, and, hopefully the home brewing law). Organizations like this, with the support of local businesses and citizens, are the ones that push changes through.

The states still outlawing home made beer and wine are often worried about excessive drinking, loss of tax revenue, and increases in under aged drinking if home made beer and wine were allowed. Homemade spirits are another story all together. Meanwhile, allowing hobbyists to make beer and wine at home has not caused problems in other states, and most home brewers and vintners are responsible drinkers more interested in creating something. To be honest, there are already many people making beer and wine at home where it is still illegal. The state Alcohol Control Boards generally do not have enough man power to police every household.

The bills in Alabama and Oklahoma have recently passed the Senate votes, and now await the House votes in each state. Let’s hope the legislators stop making criminals out of home brewers and vintners!

Nutrition in a Bottle: New TTB regulations to look out for.

The TTB has stated that it will pursue an action in 2010 to require serving facts statements on alcoholic beverage labels.

The proposed statement would include information about the serving size, the number of servings per container, and per-serving information on calories, grams of carbohydrates, fat, and protein. It would also require information about alcohol content per-serving.

Earlier discussions of the proposed rule changes were to make the serving panel optional. It would, however, be required for any beverage (or advertisement) that makes a calorie or carbohydrate representation.

Hopefully the serving panel does not become a mandatory requirement. It could have an incredible negative impact on small producers. They would have to spend additional amounts on lab fees, as well as on new labeling equipment. A mandatory serving panel could also reduce the amount of seasonal beers, wines, and spirits that many small producers offer. It would also increase the dichotomy between manufacturers that make and sell their product for on premises consumption (brewpubs), and package manufacturers, raising the barriers to entry for small package breweries and wineries.

Finding the Watering Hole in Dry Counties

photo courtesy of Josh Sommers

While dry counties in the US still exist, one is not limited to racing an orange Dodge Charger across the county line to imbibe. Most states have exclusions to their dry county restrictions.

Florida, for example, doesn’t have dry counties. It has “moist” counties. Establishments in the “dry” counties can still sell beer, wine, and liquor that is 6.243% or less ABV.

The main category of exclusions in America’s dry counties are for private clubs and golf courses. These exceptions bring to mind so-called fat-cats smoking cigars in their mahogany surroundings after a round or two of golf. In some states, the exception does seem to favor wealthy areas, while in others, the multitude of exceptions make the “dry county” designation nearly futile.

Texas, for example, allows private clubs to sell alcohol in dry counties, but not if the operation is a “sexually oriented business.” Texas is quite liberal with what is and is not a private club - almost any bar can qualify. Texas even allows wineries to ship their wine to consumers in dry counties. Texas dry counties, it seems, are similar to Florida’s moist counties, with slightly more complicated regulations.

Alabama, on the other hand, is more strict with what it will and will not allow in a dry county. It is a state in which you might actually need to cross the county line to get your hooch. Community Development Districts ("CDD"), however, are allowed to serve alcoholic beverages even within dry counties. A CDD is a private residential development, which contains at least 100 home sites, on at least 250 acres of land, with a social club and a golf course, that meets certain other criteria, including a minimum $2,000 membership fee and 600 paid-up members. This is an example of a law that was pushed through by an interest group, and fought hard by the dry counties of Alabama.

Any state with dry counties also has a strange web of exceptions to what is and is not allowed in the dry county. “Where there is a will, there is a way.”