Craft Beverages: Social Media Marketing the Effective and Compliant Way

On April 1, 2015, I stood before a packed room of distillers at the American Distilling Institute’s (“ADI”) annual conference in Louisville, Kentucky to deliver the message that there is a right, effective and compliant way to do state of the art social media marketing.  The best and brightest distilled spirits newcomers and craft favorites are members of ADI and over 1500 were at the national conference.  While every one of them recognized the importance of social media, the legalities and best practices for using social media are a mystery to many.  For those of you who couldn’t be there, here are some highlights and takeaways:

1. Which laws apply to social media?

Alcohol advertising is regulated by the federal regulators (TTB, FDA) and state ABC agencies, meaning there is dual jurisdiction and the potential for cross-violations from federal and state agencies.  There are no general rules, every state is different, and if an advertising or marketing practice is not specifically permitted, it’s often prohibited.  If it is permitted, it must follow both state and federal laws, rules and guidelines.  When marketing on social media and online, brands should tailor national advertising compliance to the most restrictive states, and event advertising is state-specific so each market needs to be reviewed for compliance before activation of event programs.

The TTB has released guidance on social media advertising here, and social media posts sponsored or conducted by brand accounts and those representing brands must comply with the federal advertising requirements in 27 CFR Parts 4, 5 and 7.  The FTC also published a study on alcohol advertising, available here.

There has been limited state guidance regarding the use of social media.  Some states, like California and Illinois, have addressed social media advertising as a potential thing of value to retailers when posts mention a specific retailer and have filed accusations against supplier licensees in these cases. Bills are proposed in both states, which, if they pass, would provide a social media exception to the tied house laws and permit this practice going forward. This state interpretation contrasts with states like Texas that have explicitly permitted retailer locators in social media.  Other states, like Washington and Oregon, permit social media as long as it does not appeal to or solicit viewers under 21 and as long as it complies with other laws (like Oregon’s Happy Hour restrictions).  Still other states, like Kentucky and North Carolina, permit social media advertising without additional guidance, and many more states provide no guidance about social media at all but fall back on the federal government’s regulations.

For still more information on social media, check the material from your relevant industry association, DISCUS, Wine Institute and Beer Institute for their social media and marketing guidelines.

2. What is the biggest social media trap to avoid?

Advertising Retailers!

  • Be cautious of advertising events involving retailers, like the now infamous California accusations against suppliers who advertised the Save Mart Grape Escape in Sacramento, a charity event that did not take place at Save Mart, but was sponsored by them.
  • There are specific state exceptions that permit you to advertise events you are attending at retail accounts – such as wine tastings and bottlesignings in California.  Every state is different though, so you want to understand what events you can and can’t advertise in every market.
  • Federal law and some state laws permit advertising two or more unaffiliated retailers (retailer locators), but the specific information you can share varies.  Some states, for example, don’t permit names, only addresses, where your product can be found.  Here’s a good example of how to do a post with multiple retailers listed without any images or extra advertising material that is not permitted in many markets:

3.       What are some best practices to follow?

  • Place ads responsibly and consider age-gating with DOB

The industry associations strongly recommend this, as does the FTC, and it’s a way of the industry self-policing and demonstrating responsible business practices.  They also strongly advise confirming age prior to engaging in a dialogue with consumers on social media.

  • Create responsible content and monitor posts by others

While there is a safe harbor for posts by others, if your brand account retweets or reposts this content, it becomes yours.  Use privacy settings actively so that you don’t have content on your page or wall that doesn’t represent your brand or promotes the irresponsible use of your product.

  • Educate your partners

Many industry members should know better, but don’t.  Don’t assume that the industry members you’re doing business with know the restrictions on their alcohol social media and marketing.  Also recognize that each company has different risk tolerances, so even the more established industry members may have made the business decision to take advantage of the lack of enforcement in a particular market or the gray areas within the regulations.

  • Create clear privacy policies and a company social media policy

It’s important to control who can represent your brand on social media and in your online marketing, so create policies to determine your social media strategy and compliance rules and use privacy policies and restrictions to protect your customers’ information and how you monitor your own posts.  Make sure employees or paid agents (especially third party providers like delivery platforms and event companies!) who are posting about your brand disclose their affiliation or sponsorship and understand your policies, branding priorities and the regulatory parameters around your product.

If you have additional questions, we are here to help!

Sweeping Changes in Proposed NYSLA Bill Include Expansion for Craft

The New York State Liquor Authority has been busy working on a series of statutory revisions that are intended to revise and streamline the provisions of the NY ABC law governing manufacturing and wholesale licenses. Retailers will also be affected. The SLA plans to submit the proposals to the Governor (who has announced he will be introducing a bill this session to address supplier issues) for his consideration, and held a meeting on April 17 to get input from the industry on the proposed revisions. Stay tuned for an update on the final outcome of this process because the politics and the lobbying from all sides may be fierce; especially over provisions softening the three-tier system in NY.  In the meantime, here are some highlights from the 122-page proposed legislation in its current form:

DTC:  Direct to consumer shipment rights would be extended to craft brewers and craft cider producers.  In addition, any producer with a NY direct shipping permit (winery, brewery or cider producer) would be able to ship products produced by others, in addition to their own, so long as those other producers were located within a 50-mile radius of the shipping producer. The 50-mile radius requirement is interesting because, for example, it would bring most (if not all) of Napa and Sonoma, for example, into the shipping radius for one winery.

Supplier Tastings: The bill would expand the categories of applicants eligible for marketing permits, which allow the holder to conduct tastings and bottle sales at other locations, to certain suppliers and “brand owners.”  Licensed wholesalers and importers would be allowed to obtain a “distributor’s tasting permit” for consumer tastings. “Brand owner” is not defined in the current version, and is likely to spark a battle if it includes, for example, foreign producers, celebrities, and non-producers.

Special Events: Manufacturers and “brand owners” would be able to obtain a permit to sell wine, beer or cider by the glass at special events.

Retailer Tastings:  Grocery stores licensed to sell beer would be able to conduct consumer beer tastings, though all beer poured must be from kegs, not bottles or cans. (The keg requirement was apparently intended to provide some assurance to certain local jurisdictions that have experienced problems with open container violations, though the SLA did indicate that it could be changed down the road if grocery beer tastings go smoothly in the interim).

Wine Growlers:  Retailers would be able to sell wine in growlers.  There is no indication yet how the legislation would address the fact that the TTB currently requires a federal basic permit as a tax-paid bottling house for a retailer to sell growlers; perhaps there would be an exemption provided in the final enabling legislation.

The significance of these proposed measures lies in their potential effect on the three-tier system, not just in NY but in every state that looks to NY for guidance.  Will the proposed changes be viewed by the distribution tier as an attack on their privileges, or as reasonable measures designed to facilitate routes to market for small producers?

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