One of the many challenges facing beverage marketers is working within a highly regulated industry. Selling Wine and Spirits can be complicated for the uninitiated.
From knowing the difference between a front label and a brand label, to the strict limits on samples to retailers, to Tied House laws and social media. Remaining compliant with the laws of the land is kind of a requirement.
In today’s episode we chat with Liz Holtzclaw, one of the nation’s foremost authorities on beverage industry compliance. Recorded late last year, she gives us some very practical advice on some of the most common compliance issues including label authorization, advertising rules, social media restrictions, and age gating.
Hang on folks, there may be a few you hadn’t thought of. Let’s get to it.
Transcript on Beverage Industry Compliance Tips and Tricks
Michael Wangbickler:
My next guest brings more than twenty-five years of alcohol beverage compliance expertise for all size wineries, large to small.
She founded Holtzclaw Compliance in May of 2012. Since then, she has seen her business grow to a staff of 10 specialists and analysts with a client base of more than one hundred unique clients. She is the leading expert in the United States on federal regulatory compliance.
She is also the leader in federal regulatory issues affecting non-traditional beverage, alcohol, Seltzer’s unique packaging and ready to drink cocktails. Welcome to the show, Liz Holtzclaw.
Liz Holtzclaw:
Hi, Mike. Thank you so much for having me. I’m excited to be here.
Michael Wangbickler:
Well, thanks so much for being on the show. It is definitely a subject that is near and dear to my heart is something that I talk about all the time with my clients. So, I’m happy to have you on the show.
So, to kick things off, why don’t we start with the label? The label is often the first touch that our consumer has with a particular brand, and so it’s super important, so a lot of marketers spend a lot of time on it, but there are certain regulatory considerations that they need to have when they’re designing a label.
So, what does it take to get a label to market?
Liz Holtzclaw:
Well, the first thing is we have to determine whether or not the product is one that requires a COLA. COLA stands for Certificate Of Label Approval. If your audience has been in the wine business for more than a couple of minutes, they will have heard about a COLA.
And so, some products are subject to COLA and some are not. But in order to get a label approved, if it’s subject to a COLA, every single label has to be submitted to the federal government.
They have to look at that label. They have to say, yes, indeed, it has everything that’s required, and it doesn’t have anything that’s prohibited. And then they issue a certificate of label approval. And a lot of people don’t understand that that’s necessary right from the gate.
Michael Wangbickler:
And so, what are some of the considerations in the design itself that they need to consider?
Liz Holtzclaw:
So, one of the main things is that the TB refers to brand label and commonly we would be calling that the front label. And when I’m talking to my producers, I say we need to make sure that we’re talking about a consumer front and a consumer back label, which may or may not be the legal brand label.
A legal brand label has to have three elements. And the easy way to remember it is A, B and C. A stands for appellation, B stands for Brand and C stands for class and type. So that would be like white wine, red wine, a grape variety such as Cabernet Sauvignon or Riesling Moscato, one of those. All three of those elements, A, B and C have to be on the same label.
And then there are a number of other required elements that can be on any label. The government warning that many people are familiar with, a sulphite statement of – says contains sulfites. Unless you have a certificate from a TTB lab proving that it has below the detectable threshold of sulfites and all wines have naturally occurring sulfites. And so, a lot of times marketers would like to not put sulfites on the label. But unfortunately, all wines, virtually all wines have naturally occurring sulfites.
And so, we have to have that contained sulphite statement. There’s a bottling statement, a producer’s statement, name, and address, and those are the elements that are required on every label.
Michael Wangbickler:
OK, so what are some other considerations that we need to have when we’re talking about compliance and marketing programs? Like how about advertising?
Liz Holtzclaw:
So with advertising, one of the things to make sure is that if you have a print advertisement and that includes on a web, anything that’s a visual ad as opposed to just sound – is if you depict a product, that product has to be a legal label. It can’t be a made-up label and it has to have all the required elements.
And so, any advertisement for alcohol beverage has both state and federal minimum requirements. You have to have the responsible advertiser; you have to have the name and address of that responsible advertiser. And if it’s not, unless it’s an advertisement for a broad category, it has to have a class and type, i.e. champagne, if it’s an imported champagne, sparkling wine, a variety, or something of that nature.
And one of the things that you have to make sure when you’re putting together any advertisements, especially on social media, is that you have to make sure that you’re not breaking any of the many, many laws and prohibitions.
Michael Wangbickler:
So, one of those is often referred to as Tied House. Can you explain Tied House a little bit?
Liz Holtzclaw:
Right. So Tied House actually goes back to the time of the repeal of prohibition. And many times, when I’m dealing with customers who are from other countries, a lot of times I’m dealing with Australians, New Zealanders, people from other parts of the world that are wine producing regions. There isn’t a cultural understanding of the neo prohibition ism that exists in the United States.
So back when they first repealed Prohibition, they put in place all of these rules that were preventing the control of small retailers by large producers. Of course, at that time, that’s the way that the world was organized, is there were many, many, many small mom and pop retailers, literally tens of thousands of them all over the country. And there were a small handful of giant producers. Right now, it’s actually the other way around. There are a very small number of retailers and distributors and there are thousands of small producers.
There are over 9000 small bonded wineries in the United States, and so, these rules were all set up in assuming that the 800-pound gorilla was the producer and the little guy was the retailer, and one of the things that you’re not allowed to do is you’re not allowed to give a thing of value to a retailer.
One of the things that happens frequently these days is somebody who is promoting a small winery, they may produce less than a thousand cases and they’re all excited because they just got a placement at a local pub and so they post on their social media that they got a placement at local pub, and so, they say “Great news! You can now get our product at Joe’s Bar.”
That is a violation because you’re giving a thing of value, i.e. free advertising to a retailer. And so, what we tell people all the time is if you name a retailer in a social media post, you have to name at least one other unrelated retailer, one that’s not owned by the same company.
Michael Wangbickler:
And that’s all… Stems from when the mob owned the entire distribution. And so the idea here is basically that you can’t I mean, the spirit and letter are different, but the spirit of the law is basically that it basically keeps producers from having an unfair advantage over other producers by being able to bribe a retailer for a placement, for instance.
Liz Holtzclaw:
Exactly, exactly. And the TTB has put about five million dollars that was specially earmarked by Congress into trade practice investigations that have been going on for the last two years. And there have been many, many widely publicized sting operations in this trade practice area, most of them targeted at wholesalers, but a few of them at winery producers.
People who were quite innocently doing things they thought they were allowed to do, and it turned out that they were violating these Tied House laws without even realizing that they were doing it.
Michael Wangbickler:
Do you have some examples of that?
Liz Holtzclaw:
So, an example of that would be, as I said, making a social media post that calls out one retailer without also calling out another one. Another one would be providing some advertising space beyond what you’re allowed to, providing more samples to a potential retailer than two bottles.
You’re only allowed to give a retailer two bottles of samples for them to try and taste. Anything more than that can be construed as bribing the wine buyer.
It’s like I’m going to fill up your garage with several cases of my wine if you’ll buy some and put it on your shelf and [crosstalk].
Right? Exactly. Yeah. And so, two bottles is the limit. Now, that’s two bottles to a retailer, that’s not to say that your listeners can’t send more than that to, say, a wine writer.
Michael Wangbickler:
Right.
Liz Holtzclaw:
You can send as much as you want to a wine writer and or other influencers so you can send as much as you want to influencers, social media influencers, any of these kinds of things, so long as that as they are not also a member of an entity that owns a retail operation.
Michael Wangbickler:
Yeah, they’re not selling wine.
Liz Holtzclaw:
Exactly. Exactly.
Michael Wangbickler:
So, let’s dive a little bit deeper into social media, because I know that there’s a lot of questions around this. We’ve been having kind of this conversation for a long time now, and there’s still confusion out there as to what’s acceptable in social media and what isn’t.
So, you’ve given a good example of one where you basically can’t post about a retailer saying, hey, our wines are available at XYZ retailer. What are some other examples of social media posts that wineries should avoid and or what are some of the things, they should do to remain compliant?
Liz Holtzclaw:
One of the things that we need to make sure is that depending on your channel, you have to make sure that 80 percent of your – it should be 80 percent – there’s kind of a moving target there. But 80 percent of the listening audience should be of legal purchase age.
Michael Wangbickler:
Oh, yeah.
Liz Holtzclaw:
So that’s one of the things if your channel is on a YouTube channel and the target for that YouTube channel is normally teenagers, then our advertisers should not be on those channels. In social media, it’s very hard to target, but it’s also very hard to prove. So as long as you’re not being completely ridiculous. So, the old example back in the print media days was that you would not put a print ad for wine in the magazine Seventeen.
Michael Wangbickler:
Right, yeah, but you can actually control that sort of…
Liz Holtzclaw:
You can sort of…
Michael Wangbickler:
I mean, you know, users on Facebook, they self-report their age, they’re not they’re not actually being carded when they set up a Facebook account. But, you know, you can actually when you’re setting up your channel, you can actually make sure that the age restriction is there for people over 21 or alcohol related and therefore people who have self-reported under the age of 21, they won’t actually see any of the posts from that.
Liz Holtzclaw:
Correct. Exactly. And as long as there is reasonable diligence in trying to direct it, you’re likely not going to get in trouble.
Michael Wangbickler:
Yeah. And, you know, this is actually one of the reasons why Snapchat is so frustrating is because Snapchat still doesn’t have an age gating ability.
Liz Holtzclaw:
Right.
Michael Wangbickler:
And so, a lot of people who use Snapchat are under twenty-one. So, I, I that’s a it’s a channel that is growing and is able to reach a more millennial audience. The problem is, is that because there’s no age gating, we can’t use it because it would be a violation of that.
Liz Holtzclaw:
Exactly, exactly. I, I, I personally am a very, very young “boomer” so I’m not on Snapchat, but my daughter is.
I have a daughter who’s 21 years old. She’s now legal purchase age and she’s not in any of the channels on any of the media that she’s looking at because she has just become – she turned twenty-one last February. And so, I personally would never see the kinds of ads that she would see because I’m not in the same markets, in the same channels. But those are the things that we have to be aware of. One of the things that to be aware of and I typically never find this with marketing professionals, but I do sometimes find it with owners.
Liz Holtzclaw:
Somebody will be frustrated with a competitor. You may not make a disparaging comment about a competitor. And as I was prepping for this, I was thinking about one time that I… Social media – I’m Facebook friends with a lot of my clients. And so their social media posts will come across my feed, and I was sitting on my couch one evening, and one of my clients got upset with something that a competitor was doing, and he posted about it and he posted it using his official page.
Michael Wangbickler:
Oops.
Liz Holtzclaw:
Yeah, whoops. And I had to like… I’m sitting on my couch at ten o’clock at night and I had to like private message – I had to stop what I was doing, private message him, you know, get a hold of him. And one of his partners is an attorney, and I contacted the partner and I’m like, you need to get this down now.
So cannot make a disparaging comment about a competitor. Cannot target under twenty-one, cannot have gross nudity or what would be considered to be obscene. And you know, the old joke about what’s obscenity, you know, there was a judge that said…
Michael Wangbickler:
I don’t want to see it.
Liz Holtzclaw:
Right. I don’t… I can’t tell you how I defined it, but I know it when I see it, and now I’ve been in this business for twenty-eight and a half years.
So what was allowed on labels twenty-eight and a half years ago is very different from what is allowed on labels – or on our, by extension, any marketing, because basically the rules for labels and the rules for marketing are the same in terms of the prohibitions. And so, we had a label one time that was an impressionistic painting of a woman who was in a pool of water. And it was I mean, it was an actual work of art.
It was a picture of a work of art, and TTB tried to turn it down. We called that label “Brook Choking Her Sister” because it was a reflection of woman in it. And they told me that it was obscene, that you could see her parts. And I’m like, no, you can’t. It’s an impressionistic painting of reflected water. And now instead, if you look at… this was twenty-five years ago – these days almost anything goes, things that I would have never even thought of trying to submit to the TTB get approved all the time.
But we don’t on live pictures show people that are scantily clad. We recommend that you not show people actually swallowing. You can show them holding a glass, laughing, cheering, having fun, but don’t show them tipping the bottle up and drinking from the neck of a vodka bottle.
Michael Wangbickler:
Right.
Liz Holtzclaw:
Those kinds of things. All of them should have some kind of statement that say enjoy our products responsibly. And then if someone’s to come back to you later and saying you’re encouraging overconsumption, you can say, no, we’re not.
You know, we’ve made all these comments about, you know, enjoy our products responsibly. So, we don’t want to ever encourage overconsumption. But there isn’t anything wrong with having adults use the products appropriately.
Michael Wangbickler:
And the other thing is, is that you can’t make any health claims.
Liz Holtzclaw:
That is correct. You cannot make any… Well, yes and no. First of all, you must have the mandatory government warning statement. One of the things that I just discovered is you cannot have any government warning from another country. I just as a matter of fact, had something that came up yesterday and we had a label for a Saki that’s being imported into the United States and in Japanese in like in vertical – what to me look like hieroglyphics because I don’t read Japanese.
But in the cryptograph characters was a vertical statement, and the translation of that vertical statement was the Japanese health warning about don’t drink while you’re pregnant. And the TTB made us remove it from the label, the Japanese characters that said Don’t drink while you’re pregnant because it’s not the US health statement.
Michael Wangbickler:
That’s interesting.
Liz Holtzclaw:
European labels will often – you’ll see a picture of a pregnant woman with a circle and a line through it. That’s one of the European common things that we see, they’re not allowed on US labels. Conversely, your health claims, if you make a health claim, it has to be substantiated. And the problem is, is that no matter what evidence you give the TTB to say that your health claim is substantiated, they’re going to turn it down. So effectively, no health claims.
Michael Wangbickler:
That’s true.
Liz Holtzclaw:
Yeah.
Michael Wangbickler:
And you know, to that point, you know what we’re talking about compliance that you know, this is just compliance here in the US. Of course, we have 50 states we have to deal with, but you need to have different labels for different countries.
Liz Holtzclaw:
That is correct.
Michael Wangbickler:
And if you’re importing any labels here into the country, as you say, you need to have a COLA for this country as well. And you have to have the whatever special labeling requirements are required for the United States.
Liz Holtzclaw:
That is correct. So there has to be a special label printed and approved for importing into the United States, and if you don’t have it, you can’t even get the wine shipment out of customs. I have had cases where we had a problem with something in the wine, was literally on the water and had arrived at the port and it was stuck in customs and we couldn’t get it out because there was a problem with the label on the bottle, didn’t match the certificate of label approval that had been issued.
Michael Wangbickler:
Yeah, that’s just a bad day at the office.
Liz Holtzclaw:
That is a bad day at the office, yeah.
Michael Wangbickler:
I’ve had things stuck in customs too, but not for that reason. But yeah, that’s never fun.
Liz Holtzclaw:
One of the things that I… questions that I get all the time – and we didn’t talk about this ahead of time Mike, so I hope it’s alright if I’m going off script a little bit – is CBD.
Michael Wangbickler:
Oh yeah.
Liz Holtzclaw:
Yes. Since the FDA has not approved CBD as a… What’s called GRASS, which stands for Generally Recognized As Safe. Right. You cannot put CBD in any alcohol product. Even if the CBD is derived from hemp rather than from marijuana.
Michael Wangbickler:
Huh. That’s interesting because I have seen some cannabis infused wines on the market.
Liz Holtzclaw:
Really?
Michael Wangbickler:
Yeah. So, I wonder if they’re only for sale in California?
Liz Holtzclaw:
Even for sale only in California, it’s not legal. I would be very interested for you to snap a picture of wherever it was you saw that and send it to me.
Michael Wangbickler:
Hmmm, OK then.
Liz Holtzclaw:
Yeah, not only that, but even in California you cannot… Like marijuana is legal in California, but you cannot have any marijuana in an ABC licensed premise. So, you cannot pour a glass of wine and have marijuana in the same premise. There are premises where you can smoke, and there are premises where you can drink, but you cannot ever smoke and drink in the same premise.
Michael Wangbickler:
Interesting. That’s the great future of…
Liz Holtzclaw:
Right. I get this call, like literally I get this call like twice a week – I want to do cannabis, I want to do CBD, I want to do all these kinds of things. And I’m like, as long as it’s illegal at the federal level, we’re never going to get… Now, this product that you saw probably was under seven percent. Remember how we talked about how to get a label approval? You only have to get a COLA for wine if it’s over seven percent.
Michael Wangbickler:
Got it.
Liz Holtzclaw:
So, somebody probably did it, didn’t have to get a COLA, and so they just labeled it. And so that label probably has a nutrition panel on it.
Michael Wangbickler:
Yeah.
Liz Holtzclaw:
One of the things that we hadn’t talked about yet are these low alcohol and seltzer’s that are becoming very, very popular.
Michael Wangbickler:
Yeah, like White Claw – tell me about White Claw.
Liz Holtzclaw:
Well, first of all, technically, White Claw is a beer, not a wine.
Michael Wangbickler:
OK
Liz Holtzclaw:
There are many seltzer products on the market that are classed as wine. There are…
Michael Wangbickler:
So, what’s the difference?
Liz Holtzclaw:
Aha. There’s a… It depends on… What did I say it was? I have one particular client – and I won’t say who that was – and the exact same formula i.e. recipe is being produced as a wine, and as a beer. It has the exact same ingredients in it, and what the difference was, is when we filed the formulas for it, the order in which we put the ingredients in was different.
So, a beer by definition is a fermentation of a grain or malt or substitute, and a substitute can be plain old cane sugar.
So, what White Claw is, is plain old sugar fermented and flavored with carbonation added. That’s what White Claw is. It’s legally a beer, and it’s produced at a brewery, and it’s taxed as beer.
There are lots of other white wine seltzer products that are sugar, plus some fruit. So, once I put the fruit in it, I can ferment fruit plus sugar, i.e. I could take orange juice and I can make orange wine, then I can add some more sugar and I can add some flavors and I can add some carbonation, and now what I have is carbonated wine.
Michael Wangbickler:
Got it.
Liz Holtzclaw:
And if it’s under seven percent, I don’t even need to have a COLA. I do have to have a formula, but I don’t have to have a COLA.
Michael Wangbickler:
But if you don’t have a COLA, then you have to have a nutritional label?
Liz Holtzclaw:
That’s correct. If you don’t have a COLA, then you have to have the nutrition panel. So, it’s what we refer to is an FDA label. So, since the TTB doesn’t have jurisdiction over that label, the Food and Drug Administration does. The difference is that you do not have to submit your label to the FDA and get it approved. You just have to know the rules and follow them on our system.
Michael Wangbickler:
Well, that is some really useful information for everybody, and I really appreciate you being on the show Liz.
Liz Holtzclaw:
Alrighty. I was excited to be asked.
Michael Wangbickler:
Thanks a bunch.
Liz Holtzclaw:
All right. Thank you. Bye bye.
Michael Wangbickler:
Bye.
