Red Stripe, a “Jamaican” beer made in Latrobe, Pennsylvania. Tito’s “hand made” vodka mass produced from neutral spirits in a modern distillery. Blue Moon, an “artfully crafted” beer produced by megabrewer MillerCoors.

See a trend? All are alcoholic beverages that have been targeted by litigation claiming false advertising, and they are just the beginning. These cases represent the first wave of lawsuits challenging the claims some craft beverage makers use to differentiate their products in an increasingly crowded marketplace.

Industries in transition

After Prohibition, the number of United States breweries plummeted from over 4,000 to fewer than 100. As of the start of 2016, the surging craft beer market had finally sent the number of breweries back to pre-Prohibition levels with no slowdown in sight. Craft distilleries are also gaining popularity as consumers’ thirst for locally made and crafted products bleeds from the tap to the top shelf and beyond. These craft beverage industries are in a state of rapid transition. First, particularly in the craft beer industry, regional brands are being acquired by Big Beer, which, having largely failed to launch competitive “craft like” brands, employed an “if you can’t beat ‘em, buy ‘em” strategy of buying its craft beer competitors. While consolidation in the spirits industry is yet to gain momentum, pioneers in craft spirit production have been forced to adopt more mechanized and modern practices to meet demand.

These transitions bring both industries under more consumer (and competitor) scrutiny of the advertising claims used to promote these products. Claims that suggest a geographic origin (Jamaica), a manner of manufacturing (handmade) or a standard consumers recognize (craft beer) are becoming less likely to draw yawns from those who question the claims and more likely to draw serious legal challenges. The challenges come from both consumers fed up with industries transitioning away from their homegrown roots and producers that cling to those roots while they watch former friends turn into non-craft corporate competition. Firms already familiar with challenging the food industry’s advertising claims are all too happy to turn their attention to another industry that exhibits a relaxed attitude toward advertising claims.

Take one beer aficionado’s suit against MillerCoors for claiming that its Blue Moon is “artfully crafted.” The craft is in the advertising because, he argues, it falsely implies that Blue Moon meets the Brewers Association’s definition of being made by a craft brewery, which is:

• Small, producing no more than 6 million barrels a year.
• Independent, with less than 25 percent owned/controlled by an alcoholic beverage industry member that itself is not a craft brewer.
• Traditional, the majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation.

This definition is not legally binding. Still, potential litigants can argue that it creates a standard that consumers reasonably expect when they see a product marketed as craft beer. MillerCoors parentage is nowhere on the label of Blue Moon beer. While MillerCoors stands by its claim and, so far, has been successful in defending the suit, this is a harbinger of future claims.

Protecting against litigation

Legal standards for advertising claims are fuzzy. Marketing claims must be truthful and not misleading. Many advertisers do not realize that this standard is applied to any reasonable consumer’s interpretation of a claim, no matter what the maker intended. For example, players in the food industry already know that claims like “all natural” have drawn class action challenges from those who argue genetically modified ingredients are not natural. Also, “made in the USA” claims have been challenged when displayed on foods containing ingredients from foreign countries (pay attention European hop and grain users). These suits may not always make the evening news or have the strongest legal footing, but they have cost the food industry millions of dollars, and most brewers and distillers cannot afford those financial risks.

Brewers and distillers can take these five steps to protect themselves from costly litigation:

1. Drive a clear message: Don’t get cute with claims (see “artfully crafted”), your consumers and critics are listening. Lawsuits spring from ambiguity in the laws and the countless perceptions that messages convey to individual consumers. Clarity gives potential plaintiffs fewer opportunities to argue they’ve been misled.
2. Re-evaluate regularly: The brewer that started with a 10-barrel system but now has a massive, ultramodern facility financed with venture capital funding may need a marketing claims reality check. New product launches are a time to consult with legal counsel, not just on trademarking but on advertising.
3. Know your geography: Red Stripe’s label says it’s “Jamaican Style Lager,” made in Latrobe. Still, two consumers sued, saying the bottling and “taste of Jamaica” claims convey Jamaican origin. Other products might claim “made in the USA” but contain non-domestic ingredients. Location is woven into the heritage of beer and spirits, but producers should avoid casually tossing around geographic terms.
4. Consult the pros: Consult attorneys who specialize in trademarks and false advertising before you commit to a brand or put an advertising claim on your product. Make sure your work is vetted by people who can spot dangers.
5. Be transparent: Ambiguity is a false advertising plaintiff’s best friend. Advertisers that convey clear, unambiguous messages reduce the risk that their claims may be misinterpreted. Instead of a simple claim of being “all natural,” advertisers can use their labels and websites to tell their story and explain what they mean by “all natural.” These storylines woven into an overall message often resonate more deeply with consumers. Remember that images are part of the message. Symbols such as an American flag, the outline of a country or wooden barrels send signals for the consumer to interpret – or misinterpret.

As defendants in class-action suits, brewers and distillers could pay extraordinary amounts to argue their cases in court or to settle and quiet the negative publicity. Additional costs can include changing websites and labels. The consequences for a producer could be financially disastrous, but a little forethought can protect the brand and assure many happy years in business.

Brian P. Gregg practices in the Intellectual Property, Alcoholic Beverage and Liquor License groups at McNees, Wallace & Nurick. He is long time Associate Member of the Brewers of Pennsylvania. In his practice he helps craft breweries and distilleries register trademarks and copyrights and develop advertising campaigns. Brian can be reached at 717-237-5456 or bgregg@mwn.com