The following is a student article written for my last craft beer law class at McGeorge.  The student author is Katie Green, and as a “reward” for receiving the highest grade in the class, here is her article for your reading pleasure.  Ms. Green makes an interesting argument about why craft beer needs to explore PACs instead of relying on grassroots movements.  And with all the whisperings I keep hearing about craft beer PACs, maybe she isn’t off the mark.  Enjoy, and congrats Katie.

Politics and Pale Ales: How Grassroots Activism, Lobbying, and Legislation Impacts the Craft Beer Industry.

Introduction

    Visit any one of the many independent breweries in downtown Sacramento, and you’ll likely find lobbyists, Capitol staffers, and even a politician or two, talking shop over their favorite locally crafted beer. This subset of patrons, many of whom may have been unaware of Craft Beer much before five years ago, also have a hand in the success and expansion of the industry. Craft Beer, both in California and in the nation as a whole, has exploded over the last decade. The Golden State is home to more breweries than any other state in the country, and the state’s market of craft breweries continues to grow at an astonishing rate. Most Californians live less than ten miles from one of the nine hundred independent breweries.[1] These local breweries employ more than fifty-five thousand full-time employees and produce over seven billion (yes, with a ‘B’) dollars in revenue every year.[2] In 2016 alone, California’s independent craft breweries contributed almost one and a half billion dollars in tax revenue.[3]

The vast expansion of Craft Beer is almost unbelievable at a time where monopolies dominate many economically viable industries.[4] Indeed, just six years ago, ninety percent of the beer industry was controlled by a rather infamous duopoly – Anheuser-Busch InBev and Miller Coors.[5] Interestingly, at the same time that shipments from five of the biggest brewers in the country have dwindled, beer has also become America’s most popular alcoholic beverage.[6] Some have reasoned that Americans are simply drawn to better-tasting beer. Other perhaps more romantically inclined theorists have likened the shift to a heightened awareness of cultural and social differences between Craft Beer communities and Big Beer companies. “Craft breweries are the living room, the town hall and the gathering place” for communities across California, says Tom McCormick, the executive director for the California Craft Brewers Association (CCBA).[7]

As the Craft Beer community continues to grow at such staggering rates, the need for a united front when it comes to lobbying for and against legislation has become a must. The industry, which prides itself on its grassroots culture, is hesitant to formally induce California brewers into joining together as part of a Political Action Committee (PAC), as Big Beer brands have done for years.[8] Whether this reluctance is sustainable for the long term is doubtful at best. Even some of the most philosophically committed Craft Beer loyalists admit that where legislation is concerned, big (beer) money talks, and walks, and creates bills that hurt smaller breweries. Leaders in the community seem hesitantly resigned to the idea that at some point in the not-so-distant future, Craft Beer will need to play in the same league as that of Big Beer. The endgame is almost certain, especially in big markets such as California – the Craft Beer community must join together, not only as one political voice but as one politically driven financial contributor.[9] The fear that Craft Beer will lose its soul if politics is involved is perhaps misguided; a PAC is merely a stone that David can use to defeat Goliath. Craft Beer doesn’t have to join Big Beer to beat it, but it does have to be willing to play the same game.

Democracy is the Ethos of Craft Beer.

   In 1978 President Jimmy Carter deregulated home brewing, which had been banned since Prohibition in the 1920s.[10] President Carter is often credited with saving the Craft Beer industry, but he isn’t the only modern president to appreciate homebrew.[11] During his presidency, Barack Obama became the first Commander in Chief to brew beer at the White House.[12] President Obama and his staff, none of whom had any experience with brewing before creating the now famous honey ale, are said to have been inspired by craft brewers across the nation.[13] Indeed, independent brewers inspired the country’s leader to try his hand at their craft.

Craft brewers are entrepreneurs first, but they have also become community organizers. Of course, as small business owners, brewers must be active in providing for their employees and patrons, but their activism often goes much further. Breweries have hosted meetings promoting Planned Parenthood, HIV testing, and climate change awareness.[14] Hundreds of brewers from California participate in an annual “Hill Climb” at the U.S. Capitol in Washington D.C. to educate legislative staff on issues affecting the industry.[15] During the 2016 election, over four thousand breweries sold beers that were branded in reaction to Donald Trump’s candidacy – “Dumb Donald.”[16] Meanwhile, Pete Coors hosted a Trump fundraiser.[17]

Despite Coors’ high profile, high price, fundraiser, the 2016 election solidified craft breweries as a must have community in any politician’s campaign stop repertoire. The candidates, most likely in an attempt to be elected the person that voters would most like to have a beer with, made brewery visits the new “political troupe,” in a “proverbial toast to the economy and to local businesses.”[18] Craft breweries and their employees became a voice for America during the last election, and they have continued to be pervasively socially conscious in the wake of the country’s political unrest.

Just one example of Craft Beer’s commitment to more than their product is the People Power Beer initiative. More than fifty breweries across the U.S., including five in California, have pledged to take part in the social initiative that promises to donate a portion of its proceeds to ACLU.[19] The pledge states that the initiative supports championing equal voting rights, and is concerned with “civil rights threats in our culture.”[20] Notably, the bottom of the People Power Beer website states, “This site was created by a federation of brewers who care about our country.”[21]

Democracy is part of the genetic makeup of Craft Beer. The “keep your politics out of my beer” folks are a minority that is losing ground and that, quite frankly, seem to fit more appropriately in the Big Beer crowd (even if Big Beer is quietly shelling out millions to politicians).[22] While leadership at CCBA and the Brewers Association may be concerned that politically driven breweries may alienate patrons, leadership in the community must also recognize that Craft Beer has never been more popular and that a significant portion of the industry’s patronage may be in favor of Craft Beer’s community-oriented values and love for diverse groups of people.

The First Amendment, The Supreme Court, and Dark Sudsy Money.

            Over one hundred years ago, Congress passed the first-ever legislation intended to prohibit corporations from influencing election campaigns through financial contributions.[23] Wealthy alcohol manufacturers, who were fearful of Prohibition, were some of the first to challenge the new law by arguing that their cash contributions to local and federal political candidates were a protected right under the First Amendment’s free speech protection.[24] Courts and legislatures of the time saw these contributions very differently, which led the Brewers Association to bring a suit in federal court.[25] The Association was rebuked by the Court which reasoned that corporations were in fact not “citizens of the United States.”[26]

Almost a century later, the Supreme Court reversed that reasoning and found that corporations were indeed afforded free speech rights, and that campaign finance laws placed undue restrictions on corporations’ abilities to exercise them.[27] Citizens United gave industries, including Big Beer, the ability to spend millions of dollars in “dark money” donations to political groups that finance candidates, only then to withhold the details of their spending.[28] Unsurprisingly, laws in California and across the country have and continue to favor Big Beer, and have often directly attacked small, independent breweries.[29]

  1. Big Beer Financial Contributions and Subsequent Legislation.

The philosophical divergence between Craft Beer and its bigger and less community-oriented competitors is striking. There is a certain amount of nobility that comes with Craft Beer leadership’s reluctance to conduct pay-for-play type lobbying in favor of more grassroots, boots-on-the-ground political advocacy. However, Craft Beer must come to terms with the current rules of the political game. When it comes to favorable legislation, campaign finance can sway even the most well-intentioned of politicians.[30]

Though it might be naïve to hold on so tightly to its grassroots beginnings, California’s Craft Beer community refuses to use any of its billions of dollars in annual revenue to combat the reasonably apparent kickbacks that Big Beer receives from contributing to both state and national political campaigns.[31] According to Bob Pease, the chief operating officer for the Brewer’s Association, Craft Beer is still “adjusting to the political scene.”[32] Further, Pease notes that because they don’t feel particularly challenged by significant producers, craft breweries aren’t in any major rush to create a PAC.[33] Tom McCormick has offered similar sentiments about creating a PAC for the CCBA.[34] Both nationally and in California, Craft Beer leadership isn’t saying that the community won’t eventually need a Political Action Committee, but merely that they aren’t seriously considering making one yet. It begs the question: What exactly is Craft Beer waiting for?

While the industry continues to waver between not having the fiscal resources and not believing that Big Beer threatens independent brewers’ livelihoods, Big Beer is spending big and winning big both federally, and in states such as California.[35] Molson Coors Brewing has given over 1.7 million dollars to federal-level (mostly Republican) candidates and campaigns.[36] Constellation Brands, which owns Corona beer, is also another top alcohol driven political contributor.[37] Employees affiliated with that company joined its PAC and gave almost two-hundred thousand dollars to federal-level candidates (sixty-nine percent Democrats) during the 2010 cycle.[38] AB InBev spread the “love” evenly, giving to both Democrats and Republicans during the past two decades.[39] The Boston Beer Company, maker of Sam Adams, contributed nearly 32,000 dollars to federal-level Democratic candidates (none of Sam Adams’ money went to Republicans).[40] Donations from these beer-filled cash cows pay dividends in favorable legislation.

In 2010, the California Beer and Beverage Distributors (CBBD) donated ten thousand dollars to oppose California’s Proposition 19, which would have legalized marijuana (which was later legalized in California by voter initiative in 2017).[41] Backlash from independent breweries, Sierra Nevada and Stone Brewing, was swift. Both publicly asked to be disassociated with the CBBD and its political decisions.[42] The CCBA was also quick to announce that it had no knowledge of, or involvement in, the decision to contribute to the campaign to defeat Prop. 19.[43] Noticeably, brands such as Heineken and AB InBev, which are also represented by the CBBD, did not comment on the trade association’s apparent opposition to the legalization of marijuana.

One particularly recent example of legislation that was pushed by, and favorable to, Big Beer is California’s Assembly Bill 2573, otherwise known as “California’s Glassware Bill.”[44] The bill will allow a licensed beer manufacturer to give up to five cases of retail advertising glassware to an on-sale retail licensee per year, and will also permit an on-sale retail licensee to accept up to ten cases of retail advertising glassware per location for every calendar year for use at the licensed location from beer manufacturers.[45] The legislation, which has gone through several amendments and just passed the Assembly last month, was authored by Evan Low.[46] Anheuser-Busch happens to be one of Assemblymember Low’s top contributors.[47]

Mobilization of brewers and Craft Beer supporters is no longer enough to successfully combat Big Beer. Craft Beer, over the past decade, has shown that it has staying power. This threatens Big Beer. AB InBev, Coors, and other Big Beer brands are becoming more reliant on the loosened restrictions that Citizens United provided for them.[48] What they lack in taste and moral values, they make up for in monetary hubris and a willingness to pay for political favoritism. Particularly in big markets such as California, lobbying cannot come in a purely grassroots form if craft breweries want to sustain their growing impact.

2.  California Craft Brewers Association’s Route to Favorable Public Policy.

The California Craft Brewers Association is a 501(c)6 non-profit trade association that represents craft brewers across the state.[49] The CCBA monitors legislative activity, primarily at the state Capitol, and responds on behalf of the almost one thousand breweries in California.[50] In addition to supporting brewers in bringing Californian’s quality brews rather than soap water, the CCBA sometimes acts as a watch and attack dog when Big Beer pushes legislation that hurts smaller independent breweries. But with California’s breweries producing billions of dollars every year, in addition to Big Beer’s relentless legislative attack on small brewers, using every tool CCBA can muster is crucial. Pitting Craft Beer’s purely grassroots movement against Big Beer’s cash contributing machine is a little like asking a t-ball player to go up to bat against Madison Bumgarner.

The good news is that trade associations such as the California Craft Brewers Association aren’t prohibited from using Political Action Committees to donate to legislators in order to influence policy.[51] While the Federal Election Campaign Act places strict limits on how not-for-profit organizations may contribute to political campaigns, trade associations may create a PAC in the form of a subsidiary, which then allows the association to solicit contributions to the PAC from its members.[52] Creating such an entity would allow California’s brewers through CCBA’s PAC to donate to political campaigns that are socially responsible and align with the Association’s values. Of course, CCBA could and should still use its talent for grassroots mobilization to influence policy and social awareness, as it always has. A Political Action Committee is merely a tool that shouldn’t replace the soul of Craft Beer. Nevertheless, the time has come for Craft Beer to show Big Beer that It isn’t afraid to play their game when necessary. Craft Beer and the patrons who love and support it deserve leadership that is willing to fight fiercely to protect the community that craft brewers have built.

Conclusion

   Lobbying efforts on the ground can only combat the money given by Big Beer to a certain extent, but it cannot cure the problem. Stalling the inevitable when the Craft Beer industry in California makes billions of dollars annually, doesn’t make much sense anymore. Craft beer doesn’t have to sink to the levels of Big Beer, and it shouldn’t. The industry can keep its morals intact while simultaneously playing the political game that, at least for the half-decade, every major industry has had to play. Yes, Craft Beer is different in that community values are integral to a craft brewery’s success. While modern Craft Beer highly values the First Amendment, it certainly didn’t ask for the Citizens United decision.[53] The reality is that for many craft brewers, their businesses are much more passion projects and labors of love than they are traditional companies. Nevertheless, the political reality is that Craft Beer must use every opportunity to solidify its place in modern history as America’s anti-Big Beer. By using Political Action Committees, Craft Beer trade associations, such as the CCBA, can better protect Craft Beer’s legacy.

[1] “Craft Beer Statistics.” California Craft Beer, 15 Dec. 2017, www.californiacraftbeer.com/ca-craft-beer/craft-beer-statistics/.

[2] AmericanCraftBeer.com. “Record-Breaking Number Of Craft Breweries In California.” American Craft Beer, 13 Dec. 2017, www.americancraftbeer.com/record-breaking-number-craft-breweries-california/.

[3] Id.

[4] Lynn, Barry C. “America’s Monopolies Are Holding Back the Economy.” The Atlantic, Atlantic Media Company, 24 Feb. 2017, www.theatlantic.com/business/archive/2017/02/antimonopoly-big-business/514358/.

[5] Lynn, Barry C. “Big Beer, A Moral Market, and Innovation.” Harvard Business Review, 7 Aug. 2014, hbr.org/2012/12/big-beer-a-moral-market-and-in.

[6] Thompson, Derek. “Craft Beer Is the Strangest, Happiest Economic Story in America.” The Atlantic, Atlantic Media Company, 19 Jan. 2018, www.theatlantic.com/business/archive/2018/01/craft-beer-industry/550850/; Gallup, Inc. “Beer Remains the Preferred Alcoholic Beverage in the U.S.” Gallup.com, 19 July 2017, news.gallup.com/poll/214229/beer-remains-preferred-alcoholic-beverage.aspx.

[7] “Record-Breaking Number Of Craft Breweries In California,” supra note 3.

[8] Cooper, Jonathan. “Like Craft Beer? Big Beer’s Leading Lobbyist Says You’re A Chucklehead.” Medium, Augmenting Humanity, 12 Feb. 2015, https://medium.com/@jemersoncooper/like-craft-beer-big-beers-leading-lobbyist-says-youre-a-chucklehead-6d7842c83386

[9] “Record-Breaking Number Of Craft Breweries In California,” supra note 3.

[10] Murphy, Libby. “The Day Homebrewing Was Legalized.” Craft Beer & Brewing Magazine, 2016, beerandbrewing.com/the-day-homebrewing-was-legalized/.

[11] Id.

[12] Smithsonian.com. “How Barack Obama Became the First President to Brew Beer at the White House.” Smithsonian.com, Smithsonian Institution, 12 July 2017, www.smithsonianmag.com/smithsonian-institution/how-barack-obama-became-first-president-brew-beer-white-house-180964016/.

[13] Id.

[14] Bernot, Kate. “Where Politics Stand in the Taproom in 2017.” DRAFT Magazine, 2 Feb. 2018, draftmag.com/politics-breweries-taprooms/.

[15] Holtog, Laurie. “California Craft Brewers Visit the US State Capitol!” California Craft Beer, 12 June 2018, www.californiacraftbeer.com/california-craft-brewers-visit-the-us-state-capitol/.

[16] Gill, Andrew. “Craft Beer Has Become a Potent Protest Symbol in the Age of Trump.” The Takeout, Thetakeout.com, 20 Jan. 2017, thetakeout.com/craft-beer-has-become-a-potent-protest-symbol-in-the-ag-1798256545.

[17] MCCASKILL, NOLAN D., et al. “Report: Coors, Shanahan to Host Trump Colorado Fundraiser.” POLITICO, 27 June 2016, www.politico.com/story/2016/06/mike-shanahan-peter-coors-trump-fundraiser-224847.

[18] “Is 2016 the Craft Beer Election?” Food & Wine, 9 May 2016, www.foodandwine.com/blogs/2016-craft-beer-election.

[19] “People Power Pledge.” People Power Beer, www.peoplepowerbeer.com/.

[20] Id.

[21] Id.

[22] Murphy, supra note 11.

[23] “Important Dates: Federal Campaign Finance Legislation.” Center for Public Integrity, 19 May 2014, www.publicintegrity.org/2004/03/25/5852/important-dates-federal-campaign-finance-legislation; “Anheuser-Busch: Summary.” OpenSecrets, www.opensecrets.org/orgs/summary.php?id=D000042510.

[24] Id.

[25] Id.

[26] Phillips-Fein, Kim. “Company Men.” The New Republic, 29 Mar. 2018, newrepublic.com/article/147374/company-men-legal-struggle-citizens-united-corporations-rights-people.

[27] Citizens United v. FEC, 558 U.S. 310, 316 (2010).

[28] Id. at 327.

[29] Thompson, supra note 7.

[30] Brusoe, Peter. “That Time George Washington Bought an Election with 160 Gallons of Booze (and Other Presidents’ Day Stories).” Bloomberg Government, 12 Feb. 2016, about.bgov.com/blog/that-time-george-washington-bought-an-election-with-160-gallons-of-booze-and-other-presidents-day-stories/.

[31] Mackinder, Evan. “Politics on Tap: Alcohol Producers Pour Out Campaign Cash for Parties – OpenSecrets Blog.” OpenSecrets, 23 Mar. 2011, www.opensecrets.org/news/2011/03/politics-on-tap/.

[32] Id.

[33] Id.

[34] Swindell, Bill. “California Brewers Assess Political, Business Challenges (w/Video).” Santa Rosa Press Democrat, 15 Nov. 2014, www.pressdemocrat.com/business/3059182-181/california-brewers-assess-political-business.

[35] Phillips-Fein, supra note 26.

[36] Id.

[37] Id.

[38] Id.

[39] Steinberg, Brian. “This Presidential Debate Is Brought to You by Budweiser.” Variety, Variety, 7 Oct. 2016, variety.com/2016/tv/news/presidential-debate-anheuser-busch-budweiser-trump-clinton-1201881568/.

[40] Phillips-Fein, supra note 26.

[41] Grim, Ryan. “This Bud’s Not For You: Beer Industry Battling California Pot Initiative.” The Huffington Post, TheHuffingtonPost.com, 25 May 2011, www.huffingtonpost.com/2010/09/21/this-buds-not-for-you-bee_n_732901.html.

[42] Id.

[43] Coolican, J. Patrick. “Beer Lobby Gives $10,000 To ‘No’ On Proposition 19 Pot Legalization.” L.A. Weekly, 21 Sept. 2010, www.laweekly.com/news/beer-lobby-gives-10-000-to-no-on-proposition-19-pot-legalization-2385120.

[44] Bill Text – AB-2573 Beer: Premiums, Gifts, and Free Goods., 26 May 2018, leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB2573.

[45] “California Glassware Bill Passes Assembly.” Brewers Association, 11 June 2018, www.brewersassociation.org/current-issues/california-glassware-bill-passes-assembly/.

[46] Supra note 44.

[47] “Evan Low’s Campaign Finances.” Vote Smart, https://votesmart.org/candidate/campaign-finance/70415/evan-low#.WzcCEMaZPzV

[48] Notte, Jason. “Partisan Politics Is Even Infecting the Craft Beer Industry.” MarketWatch, MarketWatch, 30 Mar. 2017, www.marketwatch.com/story/partisan-politics-is-even-infecting-the-craft-beer-industry-2017-03-30.

[49] “BreweryDB.com Guild: California Craft Brewers Association.” Base Camp Brewing Company : Beers : BreweryDB.com, www.brewerydb.com/guild/huKquc.

[50] “CCBA in Your Neighborhood.” California Craft Beer, 10 June 2016, www.californiacraftbeer.com/ccba-in-your-neighborhood/.

[51] Miller, Barbara. “Trade Associations and Political Activities – Is a PAC Right for You?” ORBA, 15 May 2015, www.orba.com/trade-associations-and-political-activities-is-a-pac-right-for-you/.

[52] Id.

[53] Croxall, Daniel. “More Tied-House Laws (Probably) Bite the First Amendment Dust: Independent Brewers Should Pay Attention.” Craft Beer Law Prof, 3 Feb. 2017, www.craftbeerprofessor.com/2017/02/tied-house-laws-probably-bite-first-amendment-dust-independent-brewers-pay-attention/; “Flying Dog Brewery Establishes Non-Profit To Advocate For First Amendment Rights.” Brew Studs, 11 May 2016, wearebrewstuds.com/stories/news/craft-beer-flying-dog-brewery-establishes-non-profit-advocate-first-amendment-rights/.

 

Many people lament big beer purchasing former craft breweries and folding them into the global collective. The reasons behind the aversion vary from person to person. I like to play a game whereby I send out a friend or a family member and ask that person to bring back some “craft beer” from the grocery store. Inevitably, that person brings back a Golden Road or a Saint Archer with a smile on his or her face like “see, I got ur craft beer.” I thank them politely and usually drink one with him or her (I wouldn’t want to be rude). Another fun game I play with my alcohol-free Research Assistant (shout out Paige) is I take a photo of the “craft beer” section of a retailer and ask her to pick out which of the breweries represented in the photo are actually independent. Inevitably, it’s very hard for a non-beer geek to pick out beer that is truly craft—i.e, truly independent.

So consumer confusion is one thing. It exists. It is real. It costs independent beer money. But that is not the main problem with Big Beer’s saltation into the craft world. The bigger problem has to do with price. This is where the starve out strategy comes into play. So when Big Beer buys a former craft brewery, one of the benefits is that Big Beer can brew that “same” beer (many folks would argue that the quality and flavor goes down) for significantly less cost than a true independent craft brewery could. What that means is that a former craft brewery (take Wicked Weed for example) might have been able to sell a half barrel for $190 dollars to see a minimal profit (depending on the ingredients and beer style, of course), but with the production efficiency and backing of Big Beer, that similar beer can now sell for $180 per half barrel (maybe even $170). Profits be damned.

That is the game, my friends. Big Beer can afford to sell its “craft beer” at a loss in perpetuity. And it plans to. Why would Big Beer do that, you ask? It’s actually kind of simple. Sell “like” beer at a loss for as long as it takes until an independent neighbor closes, then another, then another. Once the playing field is empty, guess what will be left: Elysian, 10 Barrel, Wicked Weed—all “craft” beer right? Big Beer is in this for the long game. Independent beer is a pesky mosquito to be swatted or starved out. Then things can return to normal.

If you don’t believe me, take Big Beer’s word for it. Recently, an AB-InBev spokesperson said during an interview that “I think the term [craft] will be gone in a couple years’ time.” Be wary, my friends. It’s so easy not to know who made your beer. Big Beer is hoping, actually it knows, that most people won’t care or won’t bother verifying. That’s the point. Don’t trust. Verify (Sorry Ronald).

And maybe it isn’t a bad thing that the term “craft” is (might be?) dead. Maybe it is time that independent brewers not even bother with that label—after all, it has been bought and/or stolen. Maybe independent craft brewers should just say “we are a brewery.” That might take some of the ammo away from Big Beer’s attempts to be something it is not. But then again, maybe that is playing into Big Beer’s hands. Maybe it desperately wants that term to go away. That way, it wouldn’t have to starve anybody out. And it could start making money on each half barrel tomorrow.

Let me know what you think. Cheers.

Alcoholic beverage control agencies across the U.S. prohibit inducements. That is, a brewery can’t “induce” a patron to buy a beer through means of solicitation, payment, free goods, or other things of value. For example, California Business & Professions Code section 24200.5(b) requires mandatory license revocation if a brewer allows “any persons to solicit or encourage others, directly or indirectly to buy drinks in the licensed premises under any commission, percentage, salary, or other profit-sharing plan, scheme, or conspiracy.” (Emphases added). There are other anti-inducement laws and regulations out there. Simple enough, right?

Not really. Independent craft beer is a community-minded lot. Brewers, patrons, hangers-on like me—we all tend to be down with various social causes. And as a whole, we are a very caring community. Most independent breweries donate beer to causes including such things as children’s causes, cancer research, and the list goes way on. Brewers: don’t do it until you are well-versed on the laws surrounding donations. Grass roots activities are one of the things that make this community so incredible.

But rules are rules—especially in beer. So one thing that has been giving me legal heartburn lately is whether “beer for causes” constitute an “inducement.” That is, people who are committed to certain causes might be likely, indeed way more likely, to purchase beer from a brewery that made a “beer for a cause,” especially if that cause gets a cut of the purchase price or profits (see how Section 24200.5(b) sneaks in?). I know that I have seen a brewery supporting a certain cause and thought to myself that I should hunt that beer down and buy it because I love that cause.

To the point. Is this an inducement? Did the brewery making a beer to support Parkinson’s disease, breast cancer research, or any other given cause induce me to buy that beer? I suppose as a technical matter, that “cause” might sway me to purchase one beer over another. Does that violate the ABC Act or the associated regulations?

I’m not aware of any ABC Board pronouncement on this issue (let me know if there is one). It seems to me that a strict reading of the anti-inducement laws suggests that “beers for a cause” in fact violate those laws and could lead to a fine, suspension, or revocation because they arguably “encourage” purchases and could be described as a “scheme” to sell that beer. I would hope, however, that the ABC would either (1) look the other way for these types of sales, or (2) issue a regulatory advisory or regulation saying that this conduct is just fine. Keep in mind that the ABC and the attendant regulations are what we call a “permissive statute.” That means that if the statute doesn’t say a licensee can do something, that licensee can’t do it. So without express permission, and in the face of statutes like Section 24200.5, are beers for a cause a violation? I don’t know. I hope not.

Cheers. Let me know what you think.

 

With the California legislative cycle coming to a close, California independent craft beer received an unexpected boost from Governor Brown. AB 2573, an Anheuser-Busch sponsored bill, passed the legislature. But last Wednesday (on the first day of the California Craft Brewers Association (“CCBA”) 2018 Summit), Governor Brown vetoed the bill with a nice explanation. More on that later.

AB 2573, as originally introduced, would have allowed a beer manufacturer to give a licensed retailer up to ten cases of glassware per brand every year. The CCBA, through its legislative efforts, was able to amend that bill to basically limit it to five cases per manufacturer per year. Seems innocuous enough, right? Not so much. Imagine if the deepest pockets in the industry were legally allowed to give away expensive glassware to any retail account it wished. Retailers would be flooded with those big, corporate brands’ glassware with the (wink, wink, nod, nod) hope that the retailer would reciprocate by pushing that manufacturer’s products.

Independent brewers cannot keep up with that. A simple Googleization shows that glassware is expensive—ranging from roughly $30.00 to $80.00 per case. And that is without etching or imprinting. The math should be clear. Contrary to popular perception, most craft breweries are operating under pretty tight margins. An expense such as this to keep the goodwill of certain retailers only plays into the hands of those extremely large breweries who can sneeze that kind of money. The rest would have been simply priced out of what would have amounted to little more than legalized pay-to-play. Independent craft beer simply doesn’t need another exception to tied-house. I am aware that some independent craft brewers wouldn’t have cared and might have welcomed the opportunity. But I believe this one could have really hurt some of the little guys and would have taken another bite out of an already exception-heavy tied house structure.

Back to Governor Brown. His explanation as to why he vetoed it is golden: “I also worry that this law creates an economic disadvantage for small beer manufacturers who might not be able to provide free glassware in the same manner as the larger manufacturers.” Right on. It’s nice to see that we have some folks in important government positions that are paying attention.

As a funny aside, I happened to be at the CCBA Summit on Wednesday. One of my craft beer law students, Katie Green, emailed me Governor Brown’s letter vetoing the bill right after it came out–like right after. Shortly after that, I ran into several friends who are important in the craft beer world. But they hadn’t heard yet. I got to break the news and see the happy reactions for the first time. Priceless. Thanks Katie.

Cheers and let me know what you think.

During my craft beer law class this summer at McGeorge, many students were surprised to hear about the many ways that Big Beer seeks to restore lost market share. One way in particular that seemed to rankle their eager minds is how Big Beer quietly impacts the supply chain that independent craft brewers (and home brewers) rely on. There are several ways that Big Beer uses the market to continue to dominate production. But there are two examples that people rarely talk about and seem not to know about.

The first example stems AB InBev’s purchase and ownership of Northern Brewer.* Northern Brewer is generally regarded as the largest supplier of homebrew materials for both home brewers and nano breweries alike. As many of you know, home brewers and nano breweries tend to be an independent lot. They typically make beer for the passion of it. But what many don’t realize, and what the public at large doesn’t realize, is that when home brewers or nano-breweries purchase their supplies from Northern Brewer, the profit from that goes to Big Beer. You see, in 2016 AB InBev’s venture capital business (ZX Ventures) purchased Northern Brewer. What this means is that even though a nano brewer might be truly independent as defined by the BA and even use the BA’s independent logo on its packaging, AB InBev still has its fingers in the mash. The same goes for home brewers. Is it illegal? Nope. But it’s just one more tactic that smells like integration and monopolization. One of my brewer friends was quick to tell me last week that “AB will own everything in ten years.” Maybe so.

The other example that seemed to resonate with the students is AB InBev’s purchase of nearly the entire 2017 South African hop harvest.** South African hops contain some of the most desired, newer aroma varietals on the market, including African Queen, Southern Star, and Southern Aroma. Many craft breweries either used these hops or would love to get their hands on them. But AB InBev beat them to the punch. Instead, it just bought all of the South African hops that were to be allocated for North American craft brewers for use in AB InBev’s “High End” beers. Is it illegal? Nope. But you can see the uphill battle that independent breweries face when dealing with such market power.

Ok, so I realize that Big Beer has a business to run and that its pockets are far deeper than any independent brewery can fathom. But there is such a thing as being a fair market citizen. And while Big Beer does step up and do the right thing (like emergency water for Puerto Rico) on occasion, those in the industry view those kind of seemingly altruistic acts with suspicion—especially in light of the type of conduct described above. For good reason.

Let me know what you think. Cheers.

 

*http://www.startribune.com/roseville-based-beermaking-supplier-northern-brewer-bought-by-world-s-largest-beer-company/397142501/

** https://www.pastemagazine.com/articles/2017/05/ab-inbev-just-commandeered-the-entire-south-africa.html

As a bit of a jaded reward for writing a great paper in my Craft Beer Law class, the following is a very interesting paper written by a rock-star McGeorge student, Megan McCauley.  Megan has been a standout student in two of my classes–especially Craft Beer Law.  What I find most interesting about her piece is the idea of creating a dispute resolution mechanism for Brewers Association members to lessen the potential for brewer-on-brewer litigation.  It’s a good read, and it provides a glimpse of what we are doing here at McGeorge in Craft Beer Law.  Cheers!

What’s in a Name? Mitigating the Tension Between Independent Craft Breweries and Trademark Law

Introduction

In the past decade, small and independent craft breweries have taken America by storm. During the industry’s infancy, the number of craft breweries rose from eight in 1980 to 537 in 1994.[1] Today, there are over 6,000 craft breweries in the United States.[2] Largely driven by consumer demand and expedited by self-distribution laws that allow small craft breweries to sell directly to consumers in taprooms, the craft beer boom has created a market that injects billions of dollars into our economy.[3] In 2016 alone, craft breweries contributed $68 million to the national economy.[4]

With more and more breweries entering the marketplace, brewers are struggling to come up with unique and innovative beer and brand names. “Virtually every large city, notable landscape, creature and weather pattern of North America … has been snapped up and trademarked as the name of either a brewery or a beer.”[5] As the market becomes increasingly saturated, the likelihood of conflict between breweries also increases as market players seek to protect and maintain their brands. In recent years, this conflict has primarily come to fruition in the courtroom. This trend is troubling because the adversarial nature of litigation is the antithesis of the craft beer industry’s collaborative and collegial identity. Therefore, to help harmonize the industry and avoid courtroom battles between craft brewers, industry members should pursue alternative tactics of protecting their trademark rights, such as mediation or trademark consent agreements, in lieu of litigation. This paper explores the tension between trademark law and the craft beer industry and proposes two mechanisms that may help minimize the need for litigation in this context.

Protecting Trademark Rights and Respecting the Culture of Craft Beer

For most craft breweries, survival depends on being able to protect their brands and trademarks.[6] In the past, “craft brewers have … solve[d] trademark disputes amicably, rather than through litigation.”[7] However, in light of the industry’s recent growth, many craft brewers have opted for more “adversarial approaches to trademark disputes, including expensive trademark litigation, harming competitors’ reputation on social media, or trademark bullying.”[8]

Trademark litigation is particularly detrimental in the craft beer industry because protracted courtroom battles contradict the collegial nature of the industry. A hallmark of the craft brewing movement is the focus on developing a local fan base, rather than mass distribution or production.[9] While this is often due to tight budgets and limited resources, it is also a product of the “home-grown” mentality that stems from the industry’s humble roots. After all, most craft breweries were born out of home brew kits in basements and garages.[10] Based on this grassroots approach, craft brewers’ unique “culture of collaboration and the cultivation of local community support … have combined to create a close-knit industry with a strong sense of camaraderie.”[11] For many craft brewers, it is critical for customers and industry members to perceive them as “laid back, easygoing, and focused mainly on brewing great beer.”[12]

Based on those concerns, if a craft brewery chooses to pursue litigation to protect its trademark rights, it may experience a reputational hit during the ensuing court battle.[13] For example, many craft beer enthusiasts and consumers have begun “using online petitions to pressure the plaintiffs into resolving their disputes out of court.”[14] They complain that resorting to litigation, as opposed to resolving disputes amicably, contradicts the community spirit that serves as the foundation for the entire industry.[15] This backlash has inspired some breweries to reconsider litigation, while others have remained steadfast in their decision.

Since a craft brewery’s success is often directly correlated to its ability to build and maintain a “grassroots fan base and support in the local community,” this friction between trademark enforcement and the craft beer industry’s culture poses serious challenges to small and large craft breweries across the country.[16]

The Lanham Act, Likelihood of Confusion, and Trademark Coexistence Agreements

If a craft brewery uses its trademark in interstate commerce, federal trademark registration is available to protect their ability to enforce their intellectual property rights in that mark. Pursuant to § 2(d) of the Lanham Act, an application for trademark registration may be refused if the mark “so resembles a mark registered in the Patent and Trademark Office … as to be likely, when used on or in connection with the goods of the applicant, to cause confusion.”[17] A significant share of trademark litigation deals with this section.

One creative way that craft brewers have avoided the negative impact and costs of trademark litigation is through trademark coexistence agreements, also known as consent agreements. A consent agreement is “an agreement between parties in which one party (e.g., a prior registrant) consents to the registration of a mark by the other party (e.g., an applicant for registration of the same [or similar] mark…).”[18] The goal of these contracts is to permit “potentially confusing trademarks to coexist without [the risk] of trademark infringement suits.”[19] Parties seeking trademark registration often introduce these agreements to overcome refusal of their registration pursuant to § 2(d) of the Lanham Act.[20] Often times, the craft brewing industry’s “sense of camaraderie … translates over to how breweries … approach potential trademark issues with other breweries,” making these agreements particularly attractive to industry members.[21]

While they are not dispositive, consent agreements are usually considered as evidence that confusion is unlikely under § 2(d).[22] The Trademark Manual of Examining Procedure explains the deference that examining attorneys of the Trademark Trial and Appeal Board (“TTAB”) apply to these agreements:

Examining attorneys should give substantial weight to a proper consent agreement. When an applicant and registrant have entered into a credible consent agreement and, on balance, the other factors do not dictate a finding of likelihood of confusion, an examining attorney should not interpose his or her own judgment that confusion is likely.[23]

This deference, however, was brought into question in 2016 with the TTAB’s decision in In re Bay State Brewing Co.[24] In that case, the TTAB refused to register a brewery’s trademark, despite their consent agreement with the owner of a similar mark. One basis for the court’s decision was that “both marks [would] be used in overlapping geographical areas, namely New England and New York.”[25] This suggests that where parties to a consent agreement operate in entirely distinct geographical markets, the TTAB may afford more deference to the agreement. Overall, Bay State Brewing diverges from the highly deferential standard previously employed and complicates a brewery’s ability to use consent agreements to avoid litigation.[26]

Crafting a Solution to Minimize Trademark Litigation

Moving forward, it would greatly benefit the craft brewing industry to avoid litigation whenever possible. Not only would this allow craft brewers to focus on supplying the market with quality craft beer, but it would also preserve both parties’ and the court’s resources. Two courses of action may help reduce litigation, including encouraging craft brewers who choose to use consent agreements to do so with utmost care and detail in light of the heightened scrutiny used by the TTAB, and also by urging the Brewers Association to mandate a non-binding mediation program for all craft brewers participating in the trade association.

          A.      Refining Consent Agreements

If craft brewers are unable to enter into trademark consent agreements, an increase in litigation is almost inevitable.[27] This litigation threatens to undermine the collegial and unique culture of the craft brewing industry. Specifically, the rise in litigation “may hamper the development of many smaller breweries and prevent the craft brewing industry from expanding as it has recently.”[28] In the future, it would be ideal if the TTAB afforded more deference to consent agreements out of respect for the party’s freedom of contract as well as their unique understanding of the industry as it exists on the ground.[29] That said, to a certain extent, Bay State Brewing simply signals that consent agreements will be carefully and meticulously scrutinized.[30] Thus, while these contracts do not guarantee success in refuting trademark registration refusal, they remain useful tools if crafted carefully.

For example, in Bay State Brewing, the TTAB was particularly concerned with the overlap of geographical coverage between the applicant and registrant’s brews. One way to alleviate those concerns is to clearly identify the geographic regions in which each party will operate and ensure there is no overlap. That, however, still does not guarantee that the consent agreement will be given great weight. Alternatively, brewers can pursue concurrent use registration. Concurrent use applications request that a trademark be registered in a specific geographical area of the United States.[31] In their application, the applicant “lists one or more parties who concededly have rights in the mark in other geographical areas of the United States.”[32]

Overall, the takeaway from cases like Bay State Brewing is that when consent agreements deal with virtually identical goods, craft brewers must be prepared for extensive scrutiny by the TTAB.[33] Moving forward, craft brewers who enter into consent agreements must take great care to ensure that their agreements clearly and succinctly show, for example, that the goods travel in distinct trade channels, that the parties mutually agree to limit the scope of their use, and that the parties will take steps to avoid any possibility of confusion in the marketplace. [34]

            B.     Self-Policing Through a Mandatory, Non-Binding Brewers Association Mediation Program

Another approach to minimizing trademark litigation between craft brewers would be to focus on the “possibility of industry self-policing through the implementation of a mandatory non-binding mediation scheme required as a condition of membership in the industry’s trade organization.”[35] Essentially, in order to minimize the inevitable conflicts between craft brewers over concurrent use of a similar trademark, the Brewers Association would implement this mediation process as a component of its dispute resolution procedure and as a condition to membership in the trade association.[36]

Arguably, the Brewers Association has the most accurate and up-to-date information on any developments within the industry. Since it is a trade organization, rather than a legislative body, it can respond quickly and efficiently to changes in the industry on a national scale. This approach is particularly useful when compared with federal legislation because it would not require any changes to the well-established Lanham Act, nor require any legislature to afford special treatment to a specific industry.[37] Furthermore, a state-based legislative approach would likely fail primarily because of the confusion and inevitable discrepancies between different state’s approaches.[38]

The largest benefit of this approach is that it would encourage “brewers to work within the industry to resolve … dispute[s] quietly.”[39] This would increase the chances of settlement, limit the strain on judicial resources, and allow the parties to return as quickly as possible to promoting their breweries and creating great beer. By diverting the resources that are currently being expended on protracted legal battles, this tactic would also encourage even further growth of this already thriving industry.[40]

Conclusion

In recent years, the tension between the “culture and expectations of the craft brewing industry and the requirements for federal trademark registration” has resulted in a significant number of lawsuits between craft breweries across the country.[41] Often times, this friction forces craft brewers to choose between “protecting their valuable trademarks and being subjected to industry ridicule or forgoing trademark protection and allowing their marks to be infringed, diluted, or tarnished.”[42] Therefore, to succeed in the increasingly competitive marketplace while also maintaining the good will of a brand, craft brewers must consider alternatives to litigation in the future.[43] Implementing a mandatory, non-binding mediation procedure as a condition to membership in the Brewers Association as well as encouraging detailed, thoughtful, and carefully crafted consent agreements may help alleviate the tension that extensive trademark litigation places on the craft beer industry.

[1] History of Craft Brewing, Brewers Association (last visited Mar. 9, 2018), https://www.brewersassociation.org/brewers-association/history/history-of-craft-brewing/.

[2] Id.

[3] Derek Thompson, Craft Beer is the Strongest, Happiest Economic Story in America, The Atlantic (Jan. 19, 2018), https://www.theatlantic.com/business/archive/2018/01/craft-beer-industry/550850/; National Beer Sales & Production Data, Brewers Association (last visited Mar. 9, 2018), https://www.brewersassociation.org/statistics/national-beer-sales-production-data/.

[4] C.J. Hughes, How Craft Breweries Are Helping to Revive Local Economies, The New York Times (Feb. 27, 2018), https://www.nytimes.com/2018/02/27/business/craft-breweries-local-economy.html.

[5] Alastair Bland, Craft Brewers are Running Out of Names, and Into Legal Spats, NPR (Jan. 5, 2015), https://www.npr.org/sections/thesalt/2015/01/05/369445171/craft-brewers-are-running-out-of-names-and-into-legal-spats.

[6] Spencer Wiles, The TTAB Should Drink a Beer and Relax: Implications for Trademark Consent Agreements in the Craft Brewing Industry After In re Bay State Brewing Company, Inc., 74 Wash. & Lee L. Rev. Online 103, 105 (2017).

[7] Gabrielle L. Palanca, More Collaboration, Less Litigation: Analyzing Craft Beer Within Intellectual Property’s Negative Space, 88 U Colo. L. Rev. 13, 14 (forthcoming publication), available at http://lawreview.colorado.edu/wp-content/uploads/2017/05/Palanca_Final_Formatted.pdf.

[8] Id.; Rebecca Winder, Trademark Protection in the Craft Brewing Industry: A Beer by Any Other Name May Be an Infringement, 15 Wake Forest J. Bus. & Intell. Prop. L. 147, 149 (2014); see The Brooklyn Brewery Corp. v. Black Ops Brewing, Inc., 156 F.Supp.3d 1173 (E.D. Cal. 2016) (action for enforcement of federal trademark rights, which resulted in enjoining Black Ops Brewing, Inc. from using “Black Ops” or “Black Ops Brewing,” and resulting in a name change for the defendant brewery); see also Complaint at 5, Port Brewing v. Moylan’s Brewing Co., No. 10 CV1826IEG (S.D. Cal. Sept. 2, 2010).

[9] Winder, supra note 8, at 150.

[10] Id. at 152.

[11] Id.

[12] Id. at 155.

[13] Id.

[14] Samantha Drake, Craft Beer’s Recent Spate of Lawsuits Has Beer Drinkers Hopping Mad, Quartz (Jan. 13, 2016), https://qz.com/589208/craft-beers-recent-spate-of-lawsuits-has-beer-drinkers-hopping-mad/.

[15] Id.

[16] Winder, supra note 8, at 150.

[17] Lanham Act, 15 U.S.C.S. § 1052.

[18] Trademark Manual of Examining Procedure § 1207.01(d)(viii) (Oct. 2017) [hereinafter “Trademark Manual”].

[19] Wiles, supra note 6, at 127.

[20] Trademark Manual, supra note 18, § 1207.01(d)(viii).

[21] Wiles, supra note 6, at 135.

[22] Id. at 128–129.

[23] Trademark Manual, supra note 18, § 1207.01(d)(viii); see Erica Fang, Brewing Likelihood of Confusion: A Look at Coexistence Agreements, Bend Law Group (July 17, 2017), http://www.bendlawoffice.com/2017/07/17/brewing-likelihood-of-confusion-a-look-at-coexistence-agreements (explaining that “Courts will consider [consent agreements as] evidence that there is no likelihood of confusion because the parties entering into the agreement are those who would most greatly be affected by potential consumer confusion”).

[24] In re Bay State Brewing Co., 2016 WL 1045677, *4 (T.T.A.B. 2016) (refusing to register Bay State Brewing’s “Time Traveler Blonde” mark after finding likelihood of confusion with another brewery’s prior registration of “Time Traveler” for beer, ale, and lager, notwithstanding a consent agreement between both parties).

[25] Id.

[26] Wiles, supra note 6, at 157.

[27] Id. at 158.

[28] Id.

[29] Id.

[30] Sandra Edelman, Consent Agreements – Not Always a Sure Path to Overcome Likelihood of Confusion Refusals in the USPTO, The TMCA (Nov. 27, 2017), http://thetmca.com/consent-agreements-not-always-a-sure-path-to-overcome-likelihood-of-confusion-refusals-in-the-uspto/.

[31] Trademark Manual, supra note 18, § 1207.04(a).

[32] Id.

[33] See Edelman, supra note 30.

[34] See In re A-Plant 2000, ApS, 2017 ITAB Lexis 306 at 15 (T.T.A.B. 2017) (establishing five factors the TTAB looks to when evaluating consent agreements).

[35] Winder, supra note 8, at 149.

[36] Id. at 163.

[37] Id.

[38] Id.

[39] Id.

[40] Id. at 164.

[41] Id. at 161.

[42] Id.

[43] Id.

This last weekend (2/16-2/18), I had the honor and privilege of teaching the first craft beer law class offered at a U.S. law school (and I believe worldwide). Several of my friends and colleagues are asking me what the heck that looks like.  It must be a joke, right?  Nope.  I’m pretty sure California’s 921 craft breweries would agree with me.

To start, as is often the case with new classes, McGeorge offered this class for one unit over one weekend. Going forward, I am confident that we will offer it as a full semester, two-unit elective class.  So for those who are interested, here is what the class looked like.

Day one: Extensive discussion and analysis of historical bases for regulation, the three-tier system, and tied-house laws.  The students also read all three opinions from the Retail Digital Network case, and we discussed those opinions extensively.  We had a quiz on the first day based on tied house and a mock email from a brewery client asking if it could do this or that under the ABC Act and commensurate regulations.

Day two: Trademarks and distribution.  All.  Day.  Obviously, these two things are very important for any craft brewery.  It was intense and maybe a little long, but definitely worth it.  The students took a quiz analyzing the Stone Brewing complaint (re Keystone’s use of “Stone”) filed in early February.  AJ Tendick from Bike Dog came to class and spoke for about an hour about his experiences with regulations and laws, and we went to the Bike Dog taproom on Broadway in Sacramento where we discussed duplicate licenses for type 23s and may or may not have had a beer or two.

Day 3: Labeling (TTB and ABC), ABC structure and enforcement, and licensing.  Tom McCormick, Director of the California Craft Brewers Association, stopped by and gave a very interesting talk about regulations, politics, and tied house.  He was also very careful to point out the need for lawyers who are knowledgeable and willing to work with independent craft breweries.  We also had a quiz on labeling where we analyzed a label on a can actually in the market to determine TTB and ABC compliance.

We did not get to all the material in Candace Moon’s (the Craft Beer Attorney’s) very helpful book called Brew Law 101. So the students were definitely exposed to some areas of the law that we could not hit in class, including employment, entity formation, etc.

The students will finish the class by writing a research paper on a topic of their choosing that impacts independent craft beer (positively or negatively) based on statutes, regulations, case law, or policy. I left it open on purpose because there are so many interesting topics to discuss.  I can’t wait to read them.

In short, the class was a huge success. The students were awesome—engaged, curious, thoughtful, and passionate.  Thanks to University of the Pacific, McGeorge School of law for supporting me in this endeavor.  I can’t wait to do it again.  We only scratched the surface.

Let me know what you think. Cheers.

So what a brewery says on labels and packaging is important. And consumer protection laws (including false advertising laws) are important. Add these two concepts up, and it appears to be class action heaven.  Brewers can avoid this nasty equation by being as up front as possible on both labels and packaging, especially about where a particular beer comes from.

One Northern District of California lawsuit involves Kona Brewing Company (Broomfiled v. Craft Brew Alliance).  The class action complaint alleges misleading or false labeling and advertising.  The plaintiffs allege that they were duped into purchasing Kona beer at a higher price because of Kona’s advertising schemes that play on Hawaiiana and specifically contain a map of the Big Island with a star that identifies Kona’s headquarters and an invitation to visit the brewery.  This, despite all Kona beer sold in the continental United States was actually brewed in the continental United States (the beer labels themselves state this fact).  Kona filed a motion to dismiss and claimed that the packaging was nothing more than non-actionable puffery.  But in late September, the Northern District denied the motion (granting the motion as to some causes of action) and allowed it to proceed, primarily on the grounds that the reasonable consumer test is best left for a jury to decide and that the map identifying Kona’s location and its invitation to visit the brewery could allow consumers to believe the beer was actually brewed in Hawaii.  So the case will go on, dollar signs in plaintiffs’ counsels’ eyes and all.  The class certification process alone can be horribly expensive for both sides.  Settlement anyone?

Asahi Beer U.S.A. finds itself in a remarkably similar predicament. Facing a class action complaint that alleges violations of California’s CLRA, Unfair Competition, and False Advertising, Asahi moved to dismiss.  The complaint alleged that consumers were deceived into overpaying for Asahi beer because they thought the beer was made in Japan.  It wasn’t.  In fact, it was brewed in Canada.  Interestingly, like Kona, each label copped to the fact that it wasn’t brewed in Japan.  In October, the court denied the motion in its entirety on several grounds.  Perhaps most germane, the court held that whether the packaging containing Japanese characters and the name Asahi (meaning “morning sun” in Japanese) was misleading to a reasonable consumer could not be decided as a matter of law.  Starting to see a pattern?  There are more of these cases lurking out there.

This raises two interesting things in my mind. First, there is a vocal group of craft beer pundits that loudly proclaim nothing matters besides what is in the glass.  I respect the position.  But I don’t believe it to be true.  Conversely, consumers do care about things like who made the beer and where it came from.  And if consumer concerns aren’t enough, than maybe false advertising lawsuits are.  Second, and most interesting to me, I have yet to see a lawsuit or an allegation that a truly independent brewer has misrepresented anything on a label or packaging.  They don’t have to.  So while big producers keep trying hard to assert their localness, the clothes simply don’t fit.  Of course, if where a beer is made and by whom is not important, big producers would not need to resort to potentially misleading advertising to gain an edge.  Brewers just need to be forthright in their marketing and packaging.  Honesty is the best (and most cost-effective) policy.

Let me know what you think. Cheers.

Have you seen this yet?

Ignore the interesting syllabic presentation. It’s not quite news anymore in the craft beer world that the Brewers Association recently created this seal so that members can use it on their marketing and products.  So what does this seal mean?  Why is it significant?

According to the BA, the “independent craft brewer seal is a handy tool for enthusiasts to easily differentiate beer from craft brewers and beer produced by other, non-craft companies.” While BA membership is not required, “[q]ualified craft brewers who want to promote their beer in conjunction with the seal may deploy the seal on packaging, marketing collateral, websites, tap handles, menus and other materials only if solely in connection with their [licensee’s] products.”  In other words, independent brewers are free to use this seal to identify their beer as long as it qualifies as craft under the BA’s definition(s), and they agree to a simple licensing agreement. See https://www.brewersassociation.org/brewers-association/craft-brewer-definition/.

Awesome idea. Drinkers should have an easy way to identify where the beer they are drinking comes from.  But there are a couple of interesting issues the seal raises.  For example, who is independent enough?  With investor group ownership on the rise, with mergers and outright purchases, it’s a difficult question to answer.  Since the BA owns the mark and the BA has its definition of what it means to be a craft brewer, it can simply point to that definition and say yay or nay.  But the theoretical answer to that question is elusive, and everyone in the industry seems to be grappling with it.

From a legal perspective, the seal strategy is an interesting one. The BA is technically a not-for-profit trade association and essentially an advocacy group whose mission it is to “promote and protect American craft brewers, their beers and the community of brewing enthusiasts.”  Of course, the BA is generally recognized as THE association in the craft beer world (though some have argued that it is getting unwieldy and perhaps overstepping on some issues like label content).  And as someone who studies, teaches, writes about, and supports independent craft beer, I am very glad and excited that the BA does what it does.

But what will the BA do when a crafty brewery tries to use the symbol? Most of us know that IP owners have to enforce their rights or risk waiving them.  Most often, this comes in the form of a cease and desist letter.  Unfortunately, c/d letters have become quite common in the industry (my loyalty to a major US sports organization has been tested due to ham-handed c/d letters to clients).  Should a c/d letter not work, the next step is litigation.  And we know how expensive and time consuming that is—even if the litigation is border line frivolous or the positions are indefensible.  So the interesting question is how far the BA will take it once the symbol gets on the wrong bottles or packaging.  I’m assuming that it would go all the way, even through an expensive and distracting lawsuit.  I’m also assuming that the BA considered this very question before it put the seal out there.  But what if twelve crafty breweries started using the symbol at the same time?  Six?  Could the BA handle several of these lawsuits at the same time?  I wouldn’t put such tactics beyond the realm of possibility.

I suppose I am saying that the seal puts the BA in a potentially untenable position of having to defend its IP in several fora against several defendants. In the end though, the risk seems worth it, and I applaud the BA for sticking its neck out so that consumers will know what their beer is.  Besides, c/d letters and responses can be quite entertaining to write.

Let me know what you think. Cheers.

 

 

The list of Big Beer owned crafty breweries keeps getting larger (many known as ABI’s “High End”). That is, until ABI recently announced that it is out of its craft brewery acquisition phase.  The focus now, according to ABI, will be on an organic growth.  Check out Good Beer Hunting’s article on this topic here:

http://goodbeerhunting.com/sightlines/2017/9/7/anheuser-busch-inbev-the-high-end-layoffs

Perhaps what is most striking in this age of consolidation is the stark contrast between the way independent craft breweries and ABI’s “High End” crafty breweries actually conduct their business. When Big Beer buys a craft brewery, the common refrain from the acquirer and the acquired is that nothing will change, we are still the same people, we just have more of a marketing budget now, etc.  Trust us, we are still craft beer.

Not really.  We got a small glimpse behind the veil last week.  ABI laid off 360 people from its High End group.  Of course, we will hear that it is simply eliminating redundancy, adapting to market changes, or whatever.  Maybe that is true.  But the layoffs are significant and unsurprising to independent craft beer insiders.  It shows that these crafty breweries try to smell like independent craft and try to look like independent craft, but they simply aren’t.

As one laid off High End employee put it:

“It’s just crazy that they created all of that structure just to destroy it in two and a half years. They just let go of 50+ Cicerones at once.

Their PR guy is already trying to spin the ‘360 people is a small part of the 2,000+ employees in the High End’ angle, but the truth is that the brewery personnel has never been considered a part of the High End by those actually on the AB side. They weren’t even included in national calls for reps or district managers. They just cut the well-educated and experienced sales force that was in place to insert new, and cheaper, blood.”

See the GBH website posted above.

In my experience, this behavior is antithetical to what is most important to independent craft beer, namely community, good people, creativity, and just plain old doing the right thing. And it goes to show that the acquired, at least the employees of the acquired, were never really part of the High End, never really had a say, and never really mattered.  This, despite all the nothing has changed rhetoric.

Last week at the CCBA’s California Craft Beer Summit, I saw many old brewery friends and made many new ones (awesome event BTW). I saw people lending each other hops, sharing brewing ideas, discussing collaborations, and generally being good citizens.  Aren’t they supposed to be tight-lipped competitors?  Without equivocation, these folks care about their employees and want what is best for both the business and their staffs.  I even know one owner who paid for one of his brewers to go to a prestigious brewing program knowing full well the guy is too talented to stay around long.  To many, me included, this ethos is what makes independent craft beer such an amazing and inspiring industry.

While I am sure there were good bottom-line reasons for ABI to do what it did, there’s simply a lot more to independent craft than eliminating corporate redundancy, providing career transition opportunities, and workforce reduction strategies. It goes to the heart of the industry–the people.  The beer speaks for itself.

Let me know what you think. Cheers.