New Alcohol Labels Under Obama Administration?

Quick post, as I have an Antitrust final tomorrow. The TTB is getting increased pressure to add the alcoholic beverage equivalent of Nutrition Labels to all beer, wine and alcohol sold in the US. The Notice of Proposed Rulemaking can be found here, you can comment if you want to. Here's the proposal:

TTB proposes to amend its regulations to require a statement of alcohol content, expressed as a percentage of alcohol by volume, on all alcohol beverage products. This statement may appear on any label affixed to the container. TTB also proposes to require a Serving Facts panel on alcohol beverage labels, which would include a statement of calories, carbohydrates, fat, and protein. Industry members may also choose to disclose on the Serving Facts panel the number of U.S. fluid ounces of pure alcohol (ethyl alcohol) per serving as part of a statement that includes alcohol content expressed as a percentage of alcohol by volume. The proposed regulations would also specify new reference serving sizes for wine, distilled spirits, and malt beverages base on the amount of beverage customarily consumed as a single serving. However, TTB is not defining a standard drink in this document. We proposed to make these new requirements mandatory three years after the date of publication of a final rule on these matters. TTB proposes these amendments to ensure that alcohol beverage labels provide consumers with adequate information about the product.

The labels might look something like this:

(Image from this article at WSU.)

As you can see the alcohol %, serving size, and calories are displayed. This could cause trouble for some 'lite' beers, which typically still have around 100 calories and some carbs. Very interesting...

Also, though a cocktail might have more calories, it won't have a label when it's served to you. Could this hurt bottle sales? "OMiGod, did you know Miller Lite has 96 calories!?! I'm going to have a Cosmo..." (140 or so calories)

Finally, since the TTB is not defining a standard 'drink', could someone like Dogfish put a "Servings Per Container: 4" on one of their big beers, like World Wide Stout or 120 Minute IPA? After all, 120 Minute weighs in at 450 calories a bottle! (Not that we care...) Or could Miller Lite put that on and claim "Only 24 calories a (4oz) serving!"

More at Bevlog.

Alcopop stings throughout Florida

On December 5th the Division of Alcoholic Beverages and Tobacco conducted a statewide sting operation on the sale of so-called "Alcopops" to minors. Investigative Aides under 21 were sent in to attempt to purchase malt-beverages (think Smirnoff Ice, Sparkz, Mike's Hard Lemonade, etc.) Naturally Miami rang in at the lowest compliance rate, 58%, with 14 'arrests' (actually a Notice to Appear, coupled with a stern talking to) out of 33 businesses inspected. The statewide rate was 76% compliance.

Alcopops are complicated, because they walk the fine line between targeting underage drinkers and meeting the demands of an emerging niche market. Also their dubious status as 'malt beverages' can have certain tax and advertising benefits, which is why there isn't actually Smirnoff in your Smirnoff Ice. Often, they are nearly indistinguishable from other energy drinks or soft drinks, hence the emphasis on education for the retailers in these raids.

The Lehrman Bevlog has an interesting post about some recent labels for one of these products, where the label of Tilt has switched from listing caffeine and guarana as ingredients, to simply 'natural flavors'. It's obvious that is to avoid the scrutiny being given to these drinks by state AGs. See this earlier post. The question remains, does this still have caffeine in it? And what about people who are allergic to it?

Happy Repeal of Prohibition Day!

Seventy-five years ago today, December 5th, 1933, the 21st Amendment was ratified and the national experiment in Prohibition officially came to an end. Interestingly Utah was the final state needed to ratify the amendment, though Mississippi would be the last to do so, in 1966.

This didn't end prohibition for everyone of course. National prohibition was over, but around 2/3 of the states elected to exercise their "local option" to allow voters to choose to remain dry, and for a time around of 1/3 of the population of the U.S. chose to do so, either on a state, county or local level. Even today dozens of dry counties remain, including, famously, Moore County, Tennessee, home of the Jack Daniel's Distillery.

Here in Florida there are five dry counties, Lafayette, Liberty, Madison, Suwannee and Washington County. What's most interesting about the dry county phenomenon is the interaction between state and local governments. In many states it's actually illegal for a city or county to go dry, meaning control of alcohol policy is firmly within the state's hands. For example, Oregon's Liquor Control Act, is "designed to operate uniformly throughout the state," and replaces and supersedes "any and all municipal charter enactments or local ordinances inconsistent with it." Others are simply given the option, for example New York allows local municipalities to exercise the option via a public referendum. In others control is handled almost entirely on a local basis. North Carolina may have the most complicated system, setting up dozens of independent local boards to create and administer alcohol policy within their small jurisdictions.

Well, here's to the diamond aniversary of the 21st Amendment! Now back to studying for my Intellectual Property final...

Alcohol News

So it's Finals and Christmas time and I will likely be short on posts for the next few weeks. I'll be up in Seattle over Christmas for a sorely needed break from all this sunshine!

In the mean time, here are some interesting news articles:

1) Direct Shipping in Michigan: think again.

Article in the Detroit Free Press. Two months ago a federal judge ruled that the state had to allow direct shipping to consumers in what sounds like a Granholm decision (I haven't had a chance to read the opinion yet). In response, state lawmakers have introduced a bill to ban all direct shipping, instate and out. Michigan is a monopoly state, with the Michigan Liquor Control Commission acting as the wholesaler in their three-tier system. It's interesting to see what monopoly states do in situations like this, because the state itself has an economic interest in preserving the status quo. For example. comparing it to Washington could be interesting, as Washington's beer and wine industries are thriving while Michigan's are near non-existent. Is Michigan protecting fledgling domestic wineries? Or just making sure they get the markup and taxes paid on all alcohol entering the state? I'll try to look more into this when I get some time after finals.

2) Superjuice

Apparently things are getting bad in Manitoba, where members of the local reservation are abusing a new type of alcohol called "Superjuice". It sounds like they're just drinking some kind of mash swill made with distiller's or "Turbo" yeast. The best part is the idea that the yeast keeps acting in people's stomachs, which sounds ridiculous to me. A consult with my resident science adviser (my wife) has let to the same conclusion. Tough as that yeast is, and I've tried some horrific rocket-fuel barleywines made with it, it's not going to keep going in your gut.

3) Radio Bordeaux Dating

No it's not a new Studio Canal show. Article on the BBC about using gamma rays and ion beams to authenticate very old bottles of wine. Should result in some interesting fraud suits in the future. Now if they can only find a way to tell if the bottle's become corked...

4) Prices are falling. So is the sky.

In the current economic climate it appears that people are less interested in paying $1,000 for a bottle of Chateau Lafite Rothschild. Champagne is down as well. Apparently now's the time to buy... (cough cough). The same is happening with Vodka in Russia. Sales are down 70% and people are turning to poisonous moonshine. Yikes. Times are bad when you can't afford $1 a liter vodka...

5) AB Merger News

Two weeks ago the Justice Department approved the Anheuser-Busch / InBev merger on the condition that they divest themselves of the Labatt brand and facilities. No word on a buyer. (Heineken?) Tuesday the companies completed their stock sale. The new share price of Anheuser-Busch InBev immediately went up 16%, the highest increase in company history.

6) Sam Caglione, of Dogfish Head, in the New Yorker

Great article on Sam Caglione, owner/brewer at Delaware's Dogfish Head Brewery in the New Yorker. I've now got a half-crazed plan to try and brew a steinbier/sahti based on his in the article. There will be extensive posting about it, if I can get ahold of some river rocks...

Geographical Indication of Beer?

Here's a post I've been meaning to write for a while. In mid-October Stan Heironymus' Appellation Beer reported that the Hallertau hop growing region was denied an Appellation of Control (AOC) by the EU. Notably, the EU has already granted AOC status to a different hop growing region, the Saaz area in the Czech Republic. I'll look for more details on the Hallertau situation, but a quick search hasn't brought up anything particularly useful. If it is true, however, it brings up a question I often think about:

Should beer be granted geographic designation like wine?

For wines geographic indication seems to be obvious enough, but in many ways beer appellation and, dare I say terroir, is much more complicated. What follows is a piece I wrote on the subject a couple months back.

There are certain regions that are well known for their beer. Some examples include Bavaria for German lagers and weisbiers, Belgium for abbey and wit biers, the Czech Republic for pilseners, and Burton-on-Trent for British bitters. These regions are famous due to a combination of location and history. Traditionally, the grains and hops would have to be produced locally, and water for the brewery came directly from the area. Styles developed around what sorts of recipes worked best with the particular combination of climate, ingredients and water. In this sense, these areas are very similar to famous wine growing regions. The locale impacts everything about the wine, and the most famous wines come from regions where the ingredients and climate come together perfectly. For this reason, many famous wine growing regions have been granted protected geographic indications to ensure that wines claiming that superior name actually come from that region. In the United States, a system of American Viticultural Areas (AVA) was established to protect the name of America’s best wine regions. So the question becomes, should beer be protected the same way?

Part of what makes a successful geographic indication is a good story about the history of the industry in the region. If a beer has been produced in the location for hundreds of years, it is more likely to be given a protected indication. However, America’s brewing history is very different from European brewing history. Many European styles were developed to suit their locale over several centuries. When European brewers immigrated to the United States, they did their best to adapt to local conditions, and regional American styles did develop.

However, with an influx of German immigrants in the later half of the 1800s, Pilsener became king. America’s most famous brewing regions were originally located in areas that had clean water and access to caves in order to lager the beer. Consequently, many of the mega breweries began in regions conducive to brewing this popular style: Coors in Golden, Colorado, Miller in Milwaukee, Wisconsin, and Anheuser-Busch in St. Louis, Missouri. Other regional brewers such as Pabst and Yuengling & Sons have much the same origin. In the late 1800’s the advent of refrigerated railcars and industrial scale brewing equipment made these beers available all across the country. No longer were beer consumers dependent on local ingredients and climate for their beer. Beer became an industrial product, available anywhere for the same price and with the same taste. However, there are signs that certain regions are once again becoming known for their craft brews. Does it make sense to grant these regions, some only a few decades old, a protected status? And is American beer an agricultural product, heavily dependant on location for its quality, or is it an industrial product, easily reproducible anywhere?

There are no equivalent protected geographic indications (PGI) or designations of origin (PDO) for beer in America. However, there are several in Europe, and a review of three important indications may shine some light on the potential pros and cons of a PGI for beer.¹

First, many beer styles are named after the place they originated from. No beer exemplifies this better than Pilsener. The yellow lager that is now the most popular style in the world originated in the mid-1800s in the region of Plzeň and České Budějovice in the Czech Republic, thanks to new malting techniques and particularly soft water. The beers quickly gained popularity in Germany, under the German name Pilsener, and from there made their way to the United States. Budějovice is ‘Budweis’ in German, and from that came Anheuser-Busch’s iconic Budweiser, a name they have held a trademark in since at least 1876. In the 1890’s, Budějovický Budvar began selling Budweiser Budvar in Bohemia and the companies have been in litigation practically ever since. In 2005, Budweiser Budvar was granted a PGI by the European Union, further solidifying its position as “the” Budweiser.

This illustrates the potential trouble of PGIs in relationship to trademarks. The Czech Republic claims that the terms Budweiser and Bud are geographical indications and has successfully canceled Anheuser-Busch’s trademark registrations in several E.U. member states. Since most of the styles brewed in the U.S. either have a generic name, or source their semi-generic name to a European city, it is unlikely that conflict will arise within the U.S. The main problem breweries will face regards semi-generic trade names used for beers being exported to the E.U. and under TRIPS. However, in the future there could be domestic trouble as the styles develop. A brewer in New England might face litigation for brewing a “Northwest Pale Ale” or a brewer outside Alaska might brew an “Alaskan Amber”. Only time will tell if and where geographic indications crop up within the U.S.

Second, sometimes the specific requirements of a geographical indication backfire on a brewery. Newcastle Brown Ale was one of a small number of beers in Europe to hold a Protected Designation of Origin (PDO), which was dependant on the product being brewed in “the city of Newcastle upon Tyne”. The 1996 award was also granted on the basis that the brewing process used water “taken exclusively from the area” and included a yeast and salt/water blend “unique to the Tyne Brewery”. However, in August, 2005, Scottish and Newcastle, PLC, the ale’s owner, closed the Tyne Brewery and relocated two miles away to a larger facility on the other side of the river. However, the new location was technically outside the city of Newcastle and Newcastle Brown Ale became the first product in European Union history to apply for the revocation of its PDO status.²

Newcastle is important in two respects. First, it illustrates the problem of associating the brewery with a single geographic location. Breweries are buildings, not fields, and they are much easier to move. But even a move of only two miles could take the brewery outside of its PDO.

Second, Newcastle illustrates some of the considerations that might be taken into account in establishing a geographic indication. Note that the specific brewery yeast is mentioned. Many breweries use proprietary yeast, for example the British ale Boddingtons claims that it has used the same yeast for 200 years.³ The Danish brewery Carlsberg was the first to isolate lager yeast in 1883, naming it saccharomyces carlsbergensis, a strain from which most modern lager yeasts may well derive. More recently Rogue Brewing of Newport, Oregon, has bred and uses proprietary “Pacman yeast” and Samuel Adams has bred a “Ninja yeast” for their high-gravity beers. Similarly, the archetypical “American Ale” strain of the ale yeast saccharomyces cerevisiae is alternately called the “Chico Ale” strain, after the location of the Sierra Nevada brewery, which is credited with breeding it.

Similarly, the PDO for Newcastle mentioned the particular water/salt blend. Importantly, Newcastle was not being held to the water of the river Tyne, they were allowed to blend in salts to adjust the water to their needs. This effectively eliminates water as a geographically specific ingredient. Historically, brewers were dependant on their water supply. Hop acids react with particular salts in the brewing water, and harder water is more effective at extracting hop bitterness and flavor. This made the incredibly hard water of Burton-on-Trent famous for its British Bitters. Now however, a brewery may claim a PDO and yet “Burtonize” its water by adding gypsum, chalk and Epsom salts.

A final example of a known PGI for beer is Kölsch. These beers were originally brewed in and around the German city of Cologne, “Köln” in German, and currently carry a PGI in the E.U. However, the style is very popular among U.S. craft brewers as it is a lager-like beer brewed with an ale yeast, which allows smaller breweries to produce a light tasting beer without the extra expense and hassle of lagering. None of the beers could be called Kölsch in Germany, however, and the German brewers have been anxious for the U.S. to enforce their PGI. Geographical names are covered in the TTB class and type designations under 27 CFR § 7.24, provided in relevant part:

(f) Geographical names for distinctive types of malt beverages (other than names found under paragraph (g) of this section to have become generic) shall not be applied to malt beverages produced in any place other than the particular region indicated by the name unless (1) in direct conjunction with the name there appears the word "type" or the word "American", or some other statement indicating the true place of production in lettering substantially as conspicuous as such name, and (2) the malt beverages to which the name is applied conform to the type so designated. The following are examples of distinctive types of beer with geographical names that have not become generic; Dortmund, Dortmunder, Vienna, Wein, Weiner, Bavarian, Munich, Munchner, Salvator, Kulmbacher, Wurtzburger, Pilsen (Pilsener and Pilsner): Provided, That notwithstanding the foregoing provisions of this section, beer which is produced in the United States may be designated as "Pilsen," "Pilsener," or "Pilsner" without further modification, if it conforms to such type.

(g) Only such geographical names for distinctive types of malt beverages as the appropriate TTB officer finds have by usage and common knowledge lost their geographical significance to such an extent that they have become generic shall be deemed to have become generic, e.g., India Pale Ale.

(h) Except as provided in § 7.23(b), geographical names that are not names for distinctive types of malt beverages shall not be applied to malt beverages produced in any place other than the particular place or region indicated in the name.

Under these regulations it appears that the TTB is either considering Kölsch to be a generic, like India Pale Ale under 27 CFR § 7.24(g), or more likely it is allowing the use so long as the brewery specifies that it is an American product under 27 CFR § 7.24(f)(1).

Interestingly the U.S. does appear to have some protection of geographic origin in 27 CFR § 7.25, which reads:

(a) Domestic malt beverages.

(1) On labels of containers of domestic malt beverages there shall be stated the name of the bottler or packer and the place where bottled or packed. The bottler's or packer's principal place of business may be shown in lieu of the actual place where bottled or packed if the address shown is a location where bottling or packing operation takes place. The appropriate TTB officer may disapprove the listing of a principal place of business if its use would create a false or misleading impression as to the geographic origin of the beer. (emphasis added)

One has to wonder how Sam Adams Boston Lager, brewed all over the country, is not giving a false impression of its geographic origin. Nevertheless, there appears to be the rudiments of a geographic indication system already embedded in the TTB regulations. The question becomes, could the AVA system accommodate beer?

Beer is not wine, and the current AVA system may simply not work for beer. Interestingly, existing AVAs do overlap with some of the areas best known for their craft beer, including the Sonoma and Mendocino counties of California, various parts of Oregon, and the Puget Sound region of Washington State. However, these regions are more of a reflection of an intellectual terroir, a symbiosis of passionate brewers and dedicated consumers who make the atmosphere possible.

Drawing geographic boundaries around such an area would be pointless. Famous beer regions in the U.S. are famous because their beer is currently superior, not because it was made there since the Middle Ages. Also, a specific beer is not a product of the climate in the sense that grapes are. Certainly, these brewing areas may be close to hop growing regions, but it is the hops that are dependent on the sun and the soil, not the brewery.⁴ Perhaps hops should have an AVA?

In Europe, hops already have a protected designation of origin. Based on Regulation No. 503/2007 of the 8th May, 2007, the designation Žatecký Chmel (PDO) was registered in the List of Protected Designations of Origin and Protected Geographical Designations.⁵ The designation specifies certain areas known for hop production within the Czech Republic, and specifically applies to the famous Saaz variety of hop. Žatecký Chmel is the Czech name for the hop, which has been known since the early part of the last century by its German name “Saazer hopfen.” Saaz hops are considered to be some of the finest aroma hops in the world and are indispensable in many lagers, especially Bohemian Pilsners. Similar hop growing regions could likely apply for designation in the future, such as the areas around Hallertau and Tettenang in Germany, known for Hallertauer and Tettenanger hops respectively, and Kent in the U.K., known for the iconic East Kent Golding variety. All of these varieties are grown in other parts of Europe and the United States, but it is likely that use of a geographic designation will increase the price for producers of the real thing. Would this system work in the U.S.?

The Yakima Valley of Washington State grows 75 percent of America's hops and about 30 percent of the world supply.⁶ The Valley is also known for its wines, and was recognized in 1983 as the first AVA in Washington State. The appellation covers 600,000 acres of land that is bordered by the Rattlesnake Hills AVA to the north, the Horse Heaven Hills AVA to the south and the Red Mountain AVA, which forms part of its eastern boundary.⁷ Within the AVA two sub-appellations have been recognized, the Red Mountain AVA in 2001, and the Rattlesnake Hills AVA in 2006. The Yakima AVA is also entirely within the 11 million acre Columbia AVA.

The Yakima Valley seems to be perfect for a hop AVA. Hop growers recognize three distinct growing regions within the valley, the Moxee Valley, the Yakama Indian Reservation, and the Lower Yakima Valley.⁸ Each microclimate is conducive to particular kinds of hops, and could even be considered a sub-appellation. It is trade practice in the industry to specify certain hop varietals as “Yakima Magnum” or “Yakima Goldings”.

Everything is in place to specify the valley as a geographical indication except for one thing. If 75% of the hop crop is produced there, how special can Yakima hops be? And if the product is not special, why bother protecting it? Some craft brews specify the type of hops used, and some specify the area. Some consumers will place special value on certain varieties grown in certain regions, such as Saaz hops from the Czech Republic, but will consumers pay more for hops grown in the Moxee Valley sub-appellation than in the overall Yakima appellation? Hops are not grapes, and the bragging rights gained from an AVA will only carry the crop so far…

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¹ A list of current beer PGIs in the E.U. may be found at http://ec.europa.eu/agriculture/qual/en/pgi_08en.htm (accessed 5/2/08)

² Publication, pursuant to Article 12 (2) of Council Regulation (EC) No 510/2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, concerning a cancellation application. 2006 O.J. (C 280)

³ Family owned until 1989, Boddingtons was acquired by the British brewer Whitbread, which in turn was acquired by InBev in 2000.

⁴ Of course, grains are also dependant on the sun but due to the centralized and industrial nature of the malting business it is often impossible to tell where the barley came from. Similarly, patent and trademark law already protects proprietary malting methods. A question does however remain about possible indication of traditional floor kilned malts such as Maris Otter malt, the basis for traditional British ales.

⁵ 2006 O.J. C 204 (26.8.30)

⁶ Hop Growers of America, 2007 Preliminary Statistical Report, (2008), available at http://www.usahops.org/graphics/File/2007_Stat_Pack-wrking_file.pdf

⁷ 27 CFR § 9.69

⁸ Hop Growers of America, Yakima Growing Region. http://www.usahops.org/index.cfm?fuseaction=page&pageID=3, accessed (May 1, 2008).

Stone in FL / Bottle TM controversy

Right, so it's been a while since I've had an update. Chalk it up to school and preparations for our biannual Election Day party. So first a couple small things.

1. Stone is coming to South Florida in mid-November! Rumor has it down the vine that a local distributor will be carrying the brewery's normal lineup of beers, Arrogant Bastard, Ruination IPA, etc. No word yet on whether we'll see their seasonals or the Vertical Epic series. This was a big topic of discussion at the 2006 AHA Conference in Orlando, where Stone CEO Greg Koch dashed all of our hopes by telling us that it would be years (2009 as I remember) before we'd see Stone in Florida. Well, it's almost 2009 and apparently patience pays. With any luck we'll get it on tap at the Titanic first!

2. The New York Times City Room blog has an interesting blog article about a trademark dispute between Garret Oliver's Brooklyn Brewery and New Belgium/Westmalle Abbey. Apparently the bottle design for Brooklyn's "Local 1" ale is too close for comfort to New Belgium and Westmalle's bottles. At the heart of the dispute is the raised ring around the neck of the bottle. Westmalle has traditionally used a single raised ring with the brewery's name on it, as has Colorado's New Belgium Brewing, and the double raised rings on Brooklyn's bottles raised some eyebrows. See below:

Brooklyn agreed to back down and redesign their bottles, at a cost of $60,000.

I actually wonder if they should have given up so easily. Certainly this is a perfect example of what the mere spectre of an Intellectual Property suit can do to a company, but they might have had some defenses. For example, one could argue that Westmalle and New Belgium's trade dress in their bottle shape hasn't acquired secondary meaning, at least within the US market. (How many average beer drinkers know Westmalle exists, let alone what its "distinctive" bottle looks like?) Yes the bottle shape is part of the the overall presentation package, but I doubt the popularity of these brands (delicious as they are!) is such that they have a credible secondary meaning in the mere raised ring.

And there's no chance of confusion to the consumer, as 1) the consumer is probably looking at the label anyway, and 2) though Westmalle does come in a 75cl corked bottle, that bottle doesn't have the raised ring! Nor do New Belgium's large corked bottles (La Folie, for example) come with the raised ring.

However, it is possible that the monks might have some sort of protection under treaty or international convention, TRIPS for example.

Just goes to show how murky IP issues can be, and, in Brooklyn's case, how sometimes they're just not worth fighting over.

Is it illegal to drink and vote?

Came across this article. Apparently an Albuquerque woman was so intoxicated that she passed out at a polling station, causing confusion to the police over whether that was illegal or not. Normal citations aside (Drunk and Disorderly, Creating a Nuisance, etc.), is it illegal to vote while drunk? I poked around quickly, didn't come across much. Apparently in Illinois, intoxication doesn't qualify you for voting assistance at the polling booth, so you're on your drunken own when it comes to checking those ballot boxes. I would assume there's general requirements of mental capacity to vote in most states, but usually those are tacked on to some kind of court ordered guardianship.

So it's probably not illegal to vote drunk, just stupid. And traditional. Looking to history, back in the day elections were a time for everyone to come out of the countryside to the towns. There they'd have a big party, usually put on by one local party or politician, and everyone would eat and discuss and drink, and then go vote for their swell host. It's in this tradition that we host our own Election Day party every two years, I just hope most of my guests drink after they vote... :)

No word yet whether New Mexico counted the Albuquerque woman's vote for: "Thhhe one wiffth tha thiiings. 'You knowwwww, the thinngsss onnnn. I likes himmm. *hiccup* *THUD*"

Does it Matter? (2)

Looks like the results of Papazian's online poll are up.
Summary of the results (as of Oct 3):

• 5, 264 votes were cast.
• 51% of voters replied that it did not matter who made the beer they bought.
• 49% of voters replied that it did matter to a significant extent who made the beer they bought.
• 150+ comments were submitted to Fark.com.
  

Oh Fark... it's like the Argument Clinic sketch from Monty Python. Twentyfour-seven.

But Charlie puts the problem well:

Americans enjoy the best choice of beers available anywhere in the world. It’s my opinion that in this day and age of company consolidation, big box retailers, large grocers and ever growing large brewing companies, the diversity and choice beer drinkers enjoy today – is a becoming a very very fragile situation.

It’s hard to explain this to the average beer drinker. Here’s one point that’s worth making: Access to market remains a difficult proposition for small and independent brewers. Large brewers through their distributors dominate the decisions determining which beer brands get shelf space and how much shelf space they get. Distributors also significantly influence restaurateurs and the choices they make about what beer is served on the limited number of draft beer tap handles.

To the beer drinker it may seem logical that availability of a particular beer brand is based on consumer demand or profitability. But this is often not the case. Many beers receive shelf space or are delegated a tap handle because of the financial muscle a company can apply to force a decision upon the seller. Small and independent American brewers are often denied access to market due to these dynamics; regardless of consumer demand.

Could he be laying the groundwork for a push for increased specificity in labeling? If so, with Pete's Brewing v. Whitehead to contend with he is definitely moving in the right direction.

Monday Morning Roundup

1) Playboy Wine

First up, Playboy has entered the wine game. Looks like they're paired with the wine.com guys and offering a wine a month. Soon everyone will have their own label wine... The first four are Cab Sav, from reputable vineyards as well. They range from $90 to $380, and apparently you will be able to buy all 12 for $1500 in September.

What's interesting about this is how hard they must have worked to get their labels approved. You can just see the label approval agent, "Playboy wine? Where'd I put my 'DENIED' stamp?" Pretty much every liquor board and the TTB have restrictions on lewd labeling, either by statute or practice. Obviously none of these labels are particularly scandalous, looks like they used 1960's centerfolds.

Just like Friday the 13th Part 1: pretty tame by today's standards...

2) News from England

Interesting articles on the BBC. First is about the relative plight of teetotalling college students at British universities. Interesting considering the U.K.'s growing problem with underage drinking and youth alcoholism. Second is that the UK has rejected calls to lower the drink-drive limit from 80 mg/100 ml to 50mg. That limit would have been about half a pint of beer.

3) Wine Spectator: Mobile

Wine Spectator has announced a new service specifically designed for use in PDAs, allowing you to look up wines and check ratings on the go. You know, so you can be that guy.

4) French fear worst wine sales since 9/11

Wine seems to be taking a hit, at least imports, but what about beer? I've been wondering: is beer recession-proof? Maybe I'll write more about it later, but for now here' s an article from the Washington Post.

5) How can it be the original source Pilsner if it's from Russia?

Article from the Prague Monitor about Pilsner Urquell being brewed in Poland and Russia. The author, Evan Rail, takes issue with a beer that literally translates as Pilsner Original Source being brewed in Russia and Poland. It gets to the heart of a problem faced by traditional beers: are they a style, or are they a place? Guinness, for example, is associated with Dublin. It's brewed there as well. But it's also brewed in regional breweries all over the world. So it's more of a brand. But take Newcastle Brown Ale. It had to relinquish it's PDO (Protected Designation of Origin) status in the E.U. after moving its brewery across the river Tyne, just outside the boundaries of the city of Newcastle. So you've got place.

Where does Pilsner Urquell stand? I lean toward brand, because it's associated the world over with being the "original" pilsner. It's the original source alright. But then, I'm not Czech, and the Czechs are very attached to their national pivo. After all, they staked out the first PDO for hops, Zatecky Chmel (Saaz hops) and several of their beers (Budweis) carry PDO status. So maybe pride has something to do with it too.

Of course, to be have the type/class designation of Pilsner in the U.S. it has to be be brewed in either the U.S. or the Czech Republic. Everything else 'must include the word “type” or “French” or other adjective or statement, e.g., “Brewed in France,” indicating the true place of production'. I don't think the Russian and Polish Pilsner Urquells are destined for the United States, but it would be interesting if they had to be labelled Pilsner Urquell - Brewed in Russia.

Japan!

I am thoroughly convinced that Japan produces 95% of the strangest things in the world.

It's weird, it's wonderful, and it's all so very... Japanese. I've never been there, sadly, but perhaps when a former housemate gets married. He's currently in an omiai (speaking of uniquely Japanese). His boss is basically forcing him into an arranged marriage.

When it comes to alcohol, Japan has many social norms that are wildly out of sync with the U.S. And it's perhaps illustrative to view a few examples, if only to think about just how unlawful/impractical/unimaginable such things might be in the U.S. Here's just a couple examples.

Example 1: Bottle Keep. From Lisa Katayama's blog Tokyo Mango. Apparently there is a tradition of regulars in Japanese bars purchasing bottles of sake and just store them at the bar, taking a glass whenever they come in. Each person gets a little tag that stays on the bottle and identifies it as theirs. Would this work in America? Mmmm, no I'm thinking... I've got a personal mug that hangs at the Titanic, but I don't think 1) they'd be willing to put up with the storage space requirements if I wanted to store bottles, 2) they make more money selling glasses of wine that bottles of it, and 3) I have no faith that the collective sense of social propriety in the US would in any way prevent moochers from drinking my bottle while I was gone. At least if anyone "borrows" my mug it'll get washed before it's put back on its hook...probably.

Example 2: Kids Beer. Via Fermentarium. Beer for kids! No it's not actually beer, per se, it's a brown, foamy tea-based drink aimed at kids. The commercials are great, and can be viewed here on the company's website. Alcohol advertising to kids? Candy cigarette anyone?


Example 3: Micros! It used to be that if you wanted a Japanese beer you had a choice between Asahi, Kirin, or Sapporo. (Ok, so there are a few other smaller ones as well.) Reason being, in order to get a license to brew in Japan you had to produce over 2 million barrels a year, meaning only big industrial conglomerates could brew.

In 1994, the rules were relaxed and micros began to appear. On a return from a recent trip home, my housemate brought a horizontal flight from Baird Brewing, an American style micro started in Numazu by American Bryan Baird and his wife Sayuri. The beers were good. There was a wheat, a pale, an IPA, a brown, a stout, and a porter, and if I had one observation it was that the hops tasted a little strange, perhaps they use New Zealand varieties? My wife is also fond of the Hitachino Nest beers, although the adorable owl on the label probably has something to do with it. But beers like this bode well for the micro movement in Japan.

Not that American Micros don't make it over. I managed to snag a bottle each of Rogue's White Swan and Red Fox beers, brewed for Newport's sister city in Japan. Not to mention Rogue's Morimoto beers: the Imperial Pilsner, Black Obi, and Soba Ale.

Image from http://hoosierbeergeek.blogspot.com. (I'm not at home to take a photo of my bottles!)

Example 4: Suntory. I can't think of Japanese whiskey without thinking of Bill Murray in Lost in Translation. They make a fine whiskey, and are one of the oldest alcoholic beverage companies in Japan.

"Santori Time"

Example 5: Bartenders. This article from last month's Bon Appetit says it all, though there's also a great segment in the Tokyo episode of Anthony Bourdain's No Reservations. Cocktail-do is taken very, very seriously. The thought of a bartender on South Beach putting even a fraction of that effort into a drink is hilarious.

Finally, for good Japanese food in Miami go to Matsuri or Maido. An unsolicited plug because both these restaurants are amazing.

Does Ownership Matter? Pete’s Brewing, Beer Labelling and Trade Names

Does ownership matter?

Charlie Papazian, President of the Brewer's Association, asked that question in last Thursday's AHA TechTalk newsgroup. It gets to the heart of a problem I've been thinking about, one that gets to the heart about how people feel about beer, and the responses from the homebrewers have been varied and interesting.

The email is below:

----------------
From: Charlie Papazian
Sent: Thursday, September 25, 2008 12:03 PM
Subject: Does It Matter?

I think there is an ongoing debate about whether beer drinkers really care about where their beer comes from. Does it really matter that Blue Moon is made by MillerCoors? Does it matter that Pilsner Urquell is made by SABMiller? Does it matter that German brewed Becks and Diebels Altbier, Belgian brewed Hoegarden and Leffe, English brewed Bass and Boddington, Australian brewed Castlemaine XXXX, Irish Murphy's and Canadian Labatt, and likely soon Budweiser are all under the ownership of the Belgian/Brazilian world brewing corporation Inbev?

We are all beer drinkers. That said, we all have our reasons for choosing the beer we love to enjoy. Whether we realize it or not, we all think about it in one way or another. At the very least we owe it to ourselves to be knowledgeable about the beer we spend good money for. I’m wondering whether these things matter to American Homebrewers Association membership.

What's Next? The Great American Beer Festival - October 9-11, Denver, Colorado

See my page at www.Examiner.com

Charlie Papazian

President
------------

My response is that it obviously is going to matter to some, so the real question is how much does that count for? People buy a beer or wine for a variety of reasons: price, style, year, geography, location on the shelf, nostalgia, habit, image, or simply that they like the yellow kangaroo on the bottle. Some people harbor grudges against large breweries, either because of taste, or image, a preference for local over global, or simply because it's hip to fight The Man. Some people take issue with the advertising, practices, or politics of certain companies and will not purchase from them for ethical reasons. Point is, people will buy or not based on many factors and I believe they should be given enough information to make an informed decision should they wish to.

If they want to buy the one with the kitty on it then they are free to do that too.

I personally want as much information as possible about any beer I am considering buying. However, the brewing industry makes extensive use of trade names so it is often difficult or impossible to tell who owns a particlular beer simply from the label. Case in point, and I admit a personal peeve of mine, AB's Stone Mill Organic Pale Ale. The labels don't show Anheuser's name anywhere. The brewery is identified as Green Valley Brewing, Merrimack, NH. Of course, Merrimack, NH is home to one of AB's regional breweries and is indeed where Stone Mill is brewed.

Part of the problem here is that craft brews have built a reputation for quality and creativity, based on small production runs and more expensive ingredients and practices. To a first time purchaser however, the only indication of future quality comes from the bottle's label. If the label has a 'micro' look to it, it will be assumed that the all the expectations one has about what goes into making a craft brew will be in the final product. Not that it was made in a 100,000 barrel system, with non-organic hops, and is loaded with rice. The craft brew industry gets by on the quality of its product, and the image of small brewers, working in small batches, making what they like to make. If that image is appropriated through misleading labels and marketing, consumers are suckered and the small brewers lose their competitive advantages.

Note that the taste or quality of the faux-micro is irrelevant to this. It could be a great beer, but it's still using an image it didn't earn and doesn't deserve. Look at the Stone Mill label again, and think about what that label implies. There's a quaint stone mill, a running fresh stream, lots of foliage. The real Merrimack plant is an enormous industrial park. This is not to say it should be required to have the plant pictured on it, but only that when a company makes a claim about small batches or traditional preparation, it back it up. For example, on French wine labels you cannot use the picture of a chateau that isn't actually on the land where the vineyard is.

Speaking of wine, this problem exists in the wine industry as well. Every winery wants to sell its "story". Typically it runs something like this: a family winery that makes wine because they love it, and want to make the best small batches of wine they can, in the best traditions of the Old World. It could be argued that by purchasing a wine you are "buying into" this "wine story", so that when you drink the bottle you imagine that pastoral setting and appreciate the individual care given to that wine over its lifetime. This is all part of the experience, and probably makes drinking the wine that much more pleasurable. The fact is there are actually wineries like this, and they are understandably perturbed when a producer markets its 500,000 case wine as 'So-and-So Family Winery', with a label that typically has a quaint old farmhouse or chateau of some sort.

One possible solution would be to require that the name of the brewer who bottles and packages the beer be on the label and in advertising, and to provide that a trade name or fictitious name may not be used to replace the name of the brewer on labels and in advertising. So for example So-and-So Family Winery would be required to have its owner, Omni-Corp Int'l., on the back label.

This was tried a decade ago on the state and federal levels and was ultimately unsuccessful. However, the failure is itself instructive and lends some perspective on how labeling might work.

PETE'S BREWING

In early 1996 Anheuser-Busch lobbied the Missouri state legislature to pass a bill requiring labels to state the true owners of the facility where beer was produced. The Missouri Legislature subsequently passed Senate Bill 933 which was codified as Missouri Revised Statute § 311.360.2. (Supp.1998). Section 311.360.2 provided:

Any malt liquor which is offered for sale in this state and manufactured at other than a facility owned by the person whose name appears on the label of the container shall include on the label the name and location of the owner of the facility which produced and packaged the malt liquor. This subsection shall become effective January 1, 1997.

In order to further clarify the terms “owner” and “facility” the Supervisor of the Missouri Department of Liquor Control filed an emergency amendment and permanent amendment to 11 CSR 70-2.060, which stated:

[I]f the name of the brewer or manufacturer of malt liquor which appears on the label is not the owner of the facility where the malt liquor was brewed or manufactured, then the name, owner and address of the facility shall also be set forth on the label.

“Owner” was defined for purposes of the regulation as:

(7)(B) An “owner” of a facility which brews or manufactures malt liquor is defined as a person, corporation, limited liability corporation, partnership or other legal business entity, who holds the entire facility in fee simple, or has a leasehold interest for a term of years in that entire facility, and is the person or business entity licensed for that entire facility by either or both, the state within which the facility is located and/or the United States Federal Alcohol Administration.

These regulations specifically addressed contract brewing and trade name usage in the brewing industry. Any beer brewed for another brewing company under contract would be forced to disclose the facility where the beer was brewed, while breweries using trade names would be forced to disclose the parent company that owned the brand. For example, Pete's Wicked Ale which was made by Pete's Brewing Co., but was brewed at a facility owned by Stroh's, would have to place Stroh's name on its label. Regarding trade names, Miller (not yet Miller Coors) would have had to place the name Miller on its Plank Road products Red Dog and Icehouse.

At the same time, Anheuser-Busch and a consortium of regional microbrewers petitioned the Bureau of Alcohol, Tobacco and Firearms (BATF) to initiate a rulemaking proceeding seeking a similar change on a federal level.2 Signing onto the petition along with Anheuser were Widmer Brothers Brewing Company, of Portland, OR; Hart Brewing Inc., of Seattle; Full Sail Brewing Company of Hood River, OR; Redhook Ale Brewing Co., of Seattle, and the Oregon Brewers Guild, of Portland. Interestingly, each of these breweries was at the time a regional microbrewery, similar in scale to Pete’s Brewing and Sam Adams, though each of these breweries actually owned their own facilities. The Oregon Brewer’s Guild represented the interests of many smaller Oregon Breweries, which often did not distribute outside of the state.

The reasons cited for this rulemaking were, outwardly, well-intentioned. "This is a dollar and cents issue for American beer drinkers," said Paul S. Shipman, president of Redhook. "Consumers are being misled. They are literally buying into an image ... paying higher prices for some brands without really knowing who actually brews their beer. Beer drinkers should get all the information they need to make informed choices."4 The request cited claims by Sam Adams and Pete’s that their beers were "brewed in small batches with only honest ingredients" and Sam Adam’s invitation "to visit us at our small traditional brewery ..." Regardless of whether or not these claims amounted to mere puffery, at least a prima facie argument could be made that consumers were being misled.

Meanwhile, in Missouri the Department of Liquor Control began trying to enforce Section 311.360.2. Trouble began in November, 1996, when the state notified Pete’s and Miller that some of their labels might not be in compliance. This was the first notice these companies received, even though enforcement of this statute was scheduled to begin in twenty-one days. Rather than submit new labels they filed a federal lawsuit seeking an injunction from enforcement of Section 311.360.2.5

While the lawsuit in Missouri was progressing, the attempt at the federal level was failing as well. Though outwardly calling itself a consumer protection measure, the petition was beginning to look more like an attempt by Anheuser-Busch to stifle competition. Consequently, in May, 1997, the Oregon Brewers Guild (OBG) sent a letter to the BATF withdrawing their support for the petition. Mike Sherwood, Executive Director of the OBG stated that "The Guild's primary function is to promote craft brewing in Oregon. It appears that our goals of promoting truth in labeling may be in conflict with Anheuser-Busch's intent with this petition.” Gary Fish, founder of Deschutes Brewing Co. and President of the OBG said, "The petition has been used to create acrimony and disharmony in the craft brewing industry. This was never the intent of the Guild. The Oregon Brewers Guild will continue to promote the voluntary listing of the 'brewery of origin' on the label by all breweries."6

In its opinion issued September 10, 1998, the court in Pete’s Brewing agreed with the Plaintiff breweries’ contention that § 311.360.2 violated the Dormant Commerce Clause.7 Citing SDDS, Inc. v. South Dakota, the court noted that a state law may discriminate against interstate commerce on its face, in its purpose, or in its effect.8 Even if a state law does not overtly discriminate against interstate commerce, it may nonetheless be contrary to the Commerce Clause if it unduly burdens interstate commerce.9 Non-discriminatory state laws, however, are subject to a less rigorous balancing test. The court cited Pike v. Bruce Church, Inc., arguing that such a law “will be upheld unless the burden imposed on ... commerce is clearly excessive in relation to the putative local benefits.”10

With the analysis laid out, the court set out to prove discriminatory effect, purpose and/or intent. The court relied heavily on Hunt v. Washington Apple Adver. Comm., (a statute has a discriminatory effect if it raises the cost of doing business for out-of-state producers but does not raise the cost for in-state producers) and Exxon Corp. v. Governor of Maryland, (statutes which “raised the cost of doing business for out-of-state dealers, and, in various other ways, favor[ ] the in-state dealer in the local market” have a discriminatory effect.)11

The statute’s impact on out of state brewers was clear. There was no evidence to suggest that a single Missouri brewer would have to change its labels. The three biggest brewers in Missouri, which accounted for 99.8% of the Missouri-brewed beer sold in the state, would not have to change their labels.

The court analogized this to the situation in Hunt. In Hunt, Washington State apple growers were being forced to change the label on boxes of apples sent to North Carolina. The apple producers were left with three choices: “obliterate” the prohibited writing on their old labels, develop labels only for use in North Carolina, or change all of their labels to accommodate North Carolina's law. The court argued that beer producers and importers in this case were faced with almost identical considerations and burdens. Brewers could develop Missouri only labels, resulting in higher costs. They could change all of their labels to meet the Missouri statute, which, the court stated, might lead to market confusion and competitive disadvantages in other states. Finally, they could simply stop selling their products in Missouri.

Quite apart from the increased cost of doing business, the court noted that the statute would also deprive out-of-state producers and importers of marketing advantages. The court cited Hunt, noting that in that case, the statute was unconstitutional in part because it stripped the Washington apple growers of the economic advantages they had established through their own grading system.12 In Pete’s Brewing, the statute stripped Plaintiffs of the brand equity they had built up through advertising and trade names. The opinion argued:

The public may associate a brewery owner's name with completely different product qualities of brand identity than the brewer. This compromises the effectiveness of competitive strategies which the Plaintiffs feel best meet their business needs. These competitive strategies include the use of trade names to create distinctive brands and broaden the product's appeal, and the use of other companies' factories to avoid the expense of buying or building a brewery. Though legal in every state, Missouri brewers do not employ these competitive strategies and they would benefit if other out-of-state brewers were prevented from being able to use them.13

The court found that both the increased costs to out-of-state brewers and their potential loss of brand equity were sufficiently of the type of burden found unconstitutional in Hunt.14

The court next looked to whether the in-state brewers were benefited by the statute. Here the overbearing manner in which Anheuser-Busch had pushed for the law was used against it. Apart from the competitive advantages mentioned above, the court took Anheuser’s aggressive support for the bill as evidence that it derived a benefit from the statute. In a particularly damning piece of evidence, Anheuser’s goal of removing its rivals was made perfectly clear to the court.15 The court looked not just at the discriminatory effect of the statute but considered evidence of discriminatory purpose. Testimony by administrators and the legislative history of the bill clearly showed that the statute was a product of Anheuser-Busch’s lobbying. There was no evidence that consumers had been complaining, or that the statute advanced a legitimate state interest. The court subjected the statute to strict scrutiny and it was summarily found to be an unconstitutional violation of the dormant commerce clause.16 Alternatively, the Court found that § 311.360.2 failed even the more flexible balancing test set forth in Pike.17

The Defendants argued that the statute could be saved by § 2 of the Twenty-first Amendment.18 The Supreme Court has recognized that the Twenty-first Amendment provides an exception to the limitations of the dormant Commerce Clause in certain situations. The court relied heavily on the “balancing” aspects of Brown-Forman Distillers Corp. v. New York State Liquor Authority and Bacchus Imports, Ltd. v. Dias in its analysis of the aims of the statute versus its impact on interstate commerce.19 Ultimately it decided that the statute did not adequately support any of the core temperance goals of the 21st Amendment.20 The injunction was issued and statute was not enforced. After Pete’s Brewing, the petition for rulemaking to the BATF died as well.

At first glance, it would seem that Pete’s Brewing forecloses the entire idea of requiring labels to state the actual brewing facility. However, the context in which this law came to the court must be taken into account. Based on the patently obvious way that § 311.360.2 was a product of Anheuser-Busch lobbyists, and on its near exclusive benefit to the largest brewery in the country, the court was understandably suspicious. The success or failure of any such regulation is entirely dependent on the reasons proffered for its existence and the evidence used to support its effectiveness. In Pete’s Brewing there was simply no reason offered that could dispel the impression that the statute was passed solely to benefit Anheuser-Busch.

However, in the case of interested craft brew consumers, Pete’s Brewing is essentially inverted. Instead of the largest brewery fighting its next two rivals, it is a case of smaller brewers and consumers against the Big Three. Ten years ago, Anheuser didn’t have any faux-craft brews, and now it has several. Meanwhile the industry has continued to grow, and the base of educated consumers has grown. In many states, there are no remaining major breweries, but there is a thriving craft brew industry. A well lobbied campaign, run by consumers and small brewers could address many of the reasons Pete’s Brewing came out the way it did. Studies and rallies conducted by a consumer group could be used to support a claim of legitimate public interest.21 Intrastate regulation would be an easy way to begin, as a state would be well within its power to require in-state brewers to provide detailed labels.

If a state was legitimately interested in more extensive origin labeling, it would have to emphasize the public interest served by informing consumers. They would have to provide evidence that the cost of redesigning labels was minimal. The statute should be worded such that the name brewery or trade name is on the bottle as well as the production brewery, in order to lessen the impact on the brand equity of the trademark. For example, trade names could be allowed on the front label, but the back label must specify the actual brewing company as well. This would let interested consumers inquire while minimally impacting the presentation to uninterested consumers.

Finally, this suggested regulation is, of course, just that: a suggestion. The practical complexities of the brewing industry, the lobbying power of the major breweries, the fractious nature of the craft brewing industry, and the byzantine complexities of United States alcohol law all might well prevent such a regulation from ever happening. However, this analysis suggests that were there to be a will, there would be a way.

-----------------------------

¹ It is interesting to note that, at the time of this litigation, Pete’s Brewing did not in fact have any facilities of its own, a fact used proudly in its investment prospectus. Similarly, Sam Adams retained its original Boston brewery, but due to volume limitations had ceased to brew all but its experimental and premium beers there. The brewery’s flagship Sam Adams Boston Lager, distributed throughout the US, was contract brewed in various locations around the country.

² Letter from Patrick T. Stokes, President, Anheuser-Busch, Inc., et all, to Brad Buckles, Deputy Director, BATF, Re: Truth in Beer Labeling/Petition for Rulemaking (Jan. 25, 1996) available at http://www.thefreelibrary.com/Brewers+seek+new+federal+rules.-a017863701

³ To give an idea of how complex these ownership problems can become, of these original regional breweries: Redhook purchased Widmer in 2007, though Anheuser-Busch retained its prior minority interest in both companies and its exclusive distribution agreement; Hart Brewing became Pyramid Brewing and was purchased by Vermont-based Magic Hat Brewing in 2008; Full Sail actually became employee-owned in 1999, but does contract brew for SABMiller under the 150 year old Henry Weinhard’s label, which Miller acquired from Stroh’s in 1999.

⁴ Brewers Seek New Federal Rules, BUSINESS WIRE, Jan. 25, 1996, available at http://www.thefreelibrary.com/Brewers+seek+new+federal+rules.-a017863701

⁵ Pete's Brewing Co. v. Whitehead, 19 F. Supp. 2d 1004 (W.D.Mo., 1998).

⁶ OBG WITHDRAWS BATF PETITION, BEERWeek, May 12 - 19, 1997.

⁷ U.S. Const. Art. 1, § 8, cl. 3

⁸ SDDS, Inc. v. South Dakota, 47 F.3d 263, 267 (1995).

⁹ Id. 47 F.3d at 268.

¹⁰ Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).

¹¹ Hunt v. Washington Apple Adver. Comm., 432 U.S. 333, 352 (1977). Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 126 (1978).

¹² Hunt, 432 U.S. at 351-52

¹³ Pete’s Brewing at 1012.

¹⁴ Id. at 1014.

¹⁵ “On November 17, 1997, A-B sent a letter to all Missouri wholesalers. The letter highlighted the fact that the Missouri Supreme Court had just upheld § 311.360.2 and went on to state: In other words, retailers will also be in violation of this law if they sell any non-complying products. There is a possibility that this will create a shelf-space opportunity for us as some of these products are eliminated from the Missouri package mix. In particular, you should target the following brands if their labels are not changed: Samuel Adams, Pete's Wicked Ale, Red Dog, Icehouse, Blue Moon. Please cover this topic with your sales force during upcoming sales meetings and take advantage of any opportunities as a result of competitive brand fallout in the market place.(Ex. 315).” Id. at 1014, FN9.

¹⁶ Id. at 1017.

¹⁷ Pike at 142.

¹⁸ Section 2 states “The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.” U.S. Const., Amdt. 21, § 2.

¹⁹ Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573 (1986). Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984).

²⁰ The Court must inquire “whether the interests implicated by a state regulation are so closely related to the powers reserved by the Twenty-first Amendment that the regulation may prevail, notwithstanding that its requirements directly conflict with express [federal] policies.” Bacchus at 275-76.

²¹ Perhaps along the lines of the United Kingdom’s Campaign for Real Ale (CAMRA) http://www.camra.org.uk/

The Deal Goes Through: Hello Anheuser-Busch InBev

InBev shareholders approved the $52 billion takeover of Anheuser-Busch this morning. Looks like the new company name will be Anheuser-Busch InBev, and it will be the largest brewer in the world.

By far. Fifty percent of the US market, ten percent of Russia and China.

What has been most interesting to me about all this is not that one large brewery would combine with another (Miller-Coors, or Heineken's growing empire of brands) but the reaction by some that AB is somehow a "national" brand. You hear talk of 'monopoly!" and "they're going to Belgianize Budweiser!" (If only!) It's interesting that only now are people screaming monopoly.

You cannot understand the meaning of the 21st Amendment and the resulting caselaw without an understanding of the history behind it. The big brewers, AB, Coors, Miller, Pabst, etc., were all in operation before prohibition and their growing power and influence was one of the justifications for prohibition. People feared the concentrated influence and capital of the big brewers (just as they feared the power of other industrial Trusts at the time). In 1933 the three-tier distribution system was theorized by Fosdick and Scott to disrupt the power of these monopolies, as was anti-tied-house legislation. (Btw: Fosdick and Scott is an amazing read, too bad the only print copies for sale on Amazon start at $250...some day!)

The post-prohibition story of American beer has been one of consolidation and homogenization. From thousands of local breweries prior to Prohibition, the national brewing landscape by the end of the 1970s consisted of 44 breweries. So now we come full circle and are facing a scale of monopoly in the large breweries that the prohibition-era lawmakers could never have dreamed of. What will be interesting to see in the coming years is whether the laws that resulted from the 21st Amendment can still achieve their original goals (whatever the courts may currently state those to be...) in the face of what is now the third largest consumer product company in the world.

And do we still want them to?

Democratic Participation for the day

Right, so it's time for some posts.

Up first: I spent some time this morning to contact my House Representative to thank him for sponsoring the Webcaster Settlement Act of 2008, and my senators to urge them to support the Senate vote on it. The bill is HR 7084 (in this instance the Senate is voting on the House number). My democratic good deed for the day.

Technological progress on the internet requires a reasonable approach to copyright and royalties. Under the current system it is cost-prohibitive to run an internet radio station, and unless the current practices are settled in an equitable manner between the copyright-holders and the stations, this branch of the internet will wither. Personally, I have Pandora running most of the time I'm by a computer (such as right now!), and my wife prefers to listen to Seattle's local NPR music station on the web, as Miami's is kindof terrible.

"One of these things is not like the other..."

From Stan Heironymus' Appellation Beer

I really like this photo, it says A LOT about the current beer world.

Corona: Miles Away From Ordinary.

And Mexico.

States try to pull the plug on Sparks

Apparently 25 states have asked MillerCoors to give up plans for an upcoming caffeinated alcohol drink called "Sparks Red". It seems that the AGs of those states consider an 8% ABV malt beverage loaded with caffeine, guarana, ginseng and taurine to be a "recipe for disaster".

Well, yeah. Obviously. Because the only thing worse than a drunk underage driver is a jittery, paranoid drunk underage driver.

But what is interesting about this is that it's not really a novel idea. Irish coffee anyone? Or take Vodka and Redbull, a popular combination out in clubland for years. By volume, (and I'm just guestimating here) it seems like you'd have much them same levels of alcohol, caffeine, guarana, etc. in a double vodka redbull as in one of these cans. Not to mention all the sweet sweet high fructose cornsyrup...

However, Redbull and Grey Goose don't actively market their potential combination, whereas it seems obvious that Sparks is aimed at a, erm, "younger demographic". Traditional ground for liquor control, and one that still has some cache. Alcopops, or "Malt Beverages", typically occupy a weird legal netherworld where they're not quite beer, not quite hard liquor, and typically taxed and regulated more loosely. Which is why Smirnoff Ice in the United States is a "Malt Beverage", taking much science and work to become beer that doesn't taste at all like beer while in Europe they just add cheap vodka to fruit juice. The demographics are typically youth oriented, and aimed at those who wouldn't normally drink beer but are in situations where something cold and fizzy and refreshing would be perfect. The wine cooler set. Sparks it seems would be particularly aimed at clubs and party situations. And teenagers like parties, right?

Another shot across the bow in the Alcopop wars, and one MillerCoors may lose. Anheuser-Busch was slapped for their underage marketing practices back in June for much the same thing.