Category: Mead

Up Your Consistency and Repeatability Game With Quality Testers and Meters

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By: Gerald Dlubala

Testers, meters, monitors and probes make it possible for craft alcohol producers to raise their standards and improve their craft. The overall move from older, unreliable, visual-based testing to greater process control with more accurate and precise analysis means repeatable sample measurements and more product consistency for reporting purposes.

Quality Control and Analysis at Your Fingertips

  “Measurement and meter use within the distillery are critical for quality analysis and quality control,” said David Zavich, Applications and Technical Support Manager for Mettler Toledo. Mettler Toledo is a leading provider of precision instruments and research and development-related services, quality control and production across numerous industries.

  “At the very least, the distiller should possess a quality pH meter and density meter for help in making informed decisions throughout the production process, and know if and when to intervene and make any needed adjustments. The best way for a distiller to know when the mash is within the acceptable pH range – 5.2-5.8, 5.4 being optimal – for the enzymatic activity to convert starches to sugars is with a quality pH meter. It also helps monitor the critical fermentation activity of a distiller’s beer, when pH should decrease to 4.0-4.5 as yeast metabolize ammonium ions and excrete organic acids. A pH remaining above 5.0 indicates a lack of activity, and pH below 4.0 may indicate the presence of undesirable bacterial contamination.

  “Benchtop density meters are invaluable for determining the proof and quantity of distilled spirits for TTB reporting purposes,” said Zavich. “Handheld versions can determine mash extract efficiency before fermentation, measure distiller’s beer to ensure fermentation is complete, calculate alcohol by volume, and measure proof during the distilling process that aids in making cuts.

  “To measure density, the distiller has three available options,” said Luke Soposki, marketing specialist for Mettler Toledo’s Analytical Chemistry division. “They can use a hydrometer, which is inexpensive and offers several industry measurement scales, but they are fragile, dependent on the user for results and have longer measurement cycles. Pycnometers are also inexpensive and can achieve a level of accuracy, but they require a higher level of training and have limited measurement scales available. The best choice is a digital density meter. They are more expensive but easier to use, more consistent and reliable, and have a shorter measurement cycle. They cover a wide density range, have automatic temperature compensation, and are available in a variety of models to meet the specific needs of the distiller.”

  “Density meters are quite durable,” said Zavich. “Benchtop units are quite self-sufficient with a suggested yearly preventative maintenance. They have an expected lifespan of around 10 years, but we’ve seen operational units well beyond that mark. Handheld units have no specified terms of use but are equally self-sufficient and expected to last many years under normal use.”

  “The main thing is to ask questions before purchasing,” said Soposki. “Mettler Toledo offers a full suite of testing solutions that include density meters, refractometers, titrators, spectrophotometers and pH meters. We can also talk about automation and multi-parameter options when needed. Distillers’ needs are always evolving, and we know that they are still looking for an easier way to release product after testing, specifically with TTB approved handheld density meters. Ask specific questions about the instruments related to your process applications. Ask for a demo, either onsite, virtually, or even in a try-and-buy program when available. Look for manufacturers that can support you across your business needs and offer service and support beyond just the equipment purchase.”

All in for Peace of Mind

  Or, you could go all in and buy the Rudolph Research Densitometer, the same machine that the TTB uses to send off samples for auditing. That’s what Greg Pope, Master Distiller of Missouri Ridge Distillery, did when he opened his distillery in Branson, Missouri.

  “It was pricey for sure,” said Pope. “At the time, it was a huge investment, around $6,500, plus another couple of thousand in training costs. It easily outpaced the cost of other densitometers, but it’s the one piece of equipment I thought was worth it based on time value savings, and in our case specifically, the frequency of the breakage factor of common hydrometers. I use it every day for my spirits as well as my beers, so for me, it’s a quality investment.”

  Accuracy and repeatability are always priorities in the distillery, and Pope told Beverage Master Magazine that he’s tried all the gadgets, getting hands-on experience at American Distilling Institute conferences and conventions. With the Rudolph Research Densitometer, he proofs a barrel in 25 to 30 minutes versus the 24 to 36 hours needed using traditional proofing methods.

  “When I got audited, and the agents saw that we have the same equipment that the TTB uses, we were already in favorable standing for trying to do the right thing,” said Pope. “This one piece of equipment holds all of our historical data that is time-stamped, properly labeled as tester batches, bottling runs, etc. and is transferable to a thumb drive for easy auditing. It’s designed for upgrading rather than obsolescence, saving money in the long run. We added the refractometer package when it came available for true and corrective proofs on our line of cordials.”

  Pope said that the training was an intensely monitored, two-day affair, but by the end of those two days, he was comfortable using the equipment for all of his applications and performing all necessary tests independently.

  “The only hiccups I’ve had with this equipment has honestly been because of human error,” said Pope. “Our machine is set to give us a recalibration reminder every Monday at midnight, and we can’t do any further testing until that recalibration is completed. The process is easy, and then we’re good to go for another week. This densitometer also has international settings, and because we export our bourbon to the U.K., we can provide their required test results.”

  Pope said that he also helps other distillers by testing and auditing their samples, providing another way to grow and support the distilling community.

Quality H2O: Good Water Equals Good Beer

  “That’s what brewers will tell you, and it’s certainly a good rule to follow,” said Mike McBride, marketing, IT and social media manager for Industrial Test Systems, a leading American manufacturer of instruments and chemistries designed to test water quality parameters. “It’s just a fact because beer is over 90% water, so it follows that good water makes for good beer.”

  Industrial Test Systems offers their popular eXact iDip Smart Photometer and their eXact pH meter to help brewers stay on top of their water parameters.

  “Visual testing only gives the end user a baseline guide or range versus digital testing that is much more precise and provides exact, repeatable results,” said McBride. “Our meters bring those types of laboratory quality results to you, and that’s important because of the many different tests performed on the water within a craft brewery. One example is testing for water hardness because different beers require different levels. Dark beers require harder water, while lighter beers use softer water. You have to have an accurate, quality test to determine what type of water you’re using.”

Brix and pH Meters: A Brewer’s Best Friend

  “Measuring pH and Brix levels in brewing is essential,” said Jason Brown of Milwaukee Instruments. “Both units are a must because those measurements ultimately determine the type of beer you will brew, how the flavor will turn out, and what percentage of alcohol the brew possesses. To measure alcohol content with a meter like our MA871 digital Brix refractometer, you take an initial Brix reading of the unfermented wort and then a follow-up reading once fermentation is complete. Those values are plugged into a conversion chart to determine the percentage of alcohol in your final product. Taking pH readings on a meter like our MW102 within the brewing process takes place from the beginning of the brewing process to the end, using it for multiple applications and processes.”

  Brown told Beverage Master Magazine that brewmasters typically already have basic knowledge of pH testers and refractometers. Still, even if they are new to the game, Milwaukee Instruments provides user-friendly equipment, with complete YouTube tutorials instructing the user on the operation, maintenance, storage and calibration of the meters. Most units come with a two-year warranty on the base unit and six months on the electrodes. Their bench meters offer data logging that is an advantage over comparable handheld units.

  “It’s recommended that both types of meters be calibrated before each use to maintain accuracy across all samples tested,” said Brown. “Our units can be calibrated by the end-user with no issues.”

Steam & Water Flow Measurement: Going with the Flow

  “Given the need for accuracy, consistency and repeatability, brewers should always choose the highest quality meter they can afford,” said Marc Bennett, regional sales manager for McCrometer, Inc., worldwide providers of precision flow meters for liquid, steam and gas applications. “Flow metering is all about optimizing production to give the brewer consistent and reliable results through understanding the precise temperatures, pressures and flow being used.

  “The best way to measure steam is through equipment like our V-Cone Meter. It helps a brewer understand the precise temperature, flow and measurement of their team processes, allowing them to optimize their consistency,” said Bennett. “We know craft brewers are frequently tight on space, so our V-Cone Meters are designed for tight fit and retrofit applications while handling most operating environments. Some of the largest, most well-known breweries use V-Cone meters for steam measurement, but they are very applicable for smaller brewers as well.”

  McCrometer also offers a line of electromagnetic flowmeters (MAG) for accurate water flow measurement. Their pumps rely on velocity and pipe diameter information to determine flow over wide ranges with high precision accuracy. Their SPI MAG measures everything from in-flow water through wastewater, including industrial flow processes involving potable water, slurries, sludge, cooling water and pulp stock.

  “Whatever the choice, brewers should always choose U.S. manufactured meters,” said Bennett. “U.S. manufactured meters are often more readily available and more quickly shipped than the non-U.S. manufactured counterparts. If you choose a high-quality meter with a long lifespan and U.S.-based support, you’re getting a great return on your investment. The last thing you need or want is to have your brewing process impacted or even halted because of support issues.”

  Bennett told Beverage Master Magazine that McCrometer meters have great attributes, including the aforementioned long lifespan and support. Perhaps one of the best advantages of both their MAG flow meters and the V-Cone DP meters is the advantage of having no maintenance or repair schedules.

  “That’s a big load off of a brewer’s calendar and his mind,” said Bennett. “Our new ProComm converter on the MAG meters is available with built-in verification that uses stored data to check a meter’s operation against its baseline. That’s true peace of mind. Our V-Cone Meters have been around and studied in applications that are a lot more rugged than what the typical brewery would put them through and have shown no shift whatsoever in their calibration coefficient.”

How Your Intellectual Property Can Make or Break a Merger

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intellectual property cover

By: Ashley Earle, Attorney, Dinsmore & Shohl

Like a good recipe, a good brand name for a beer, wine, or other beverage can drive sales. That recipe, distilling process, bottle design, or logo is all a form of intellectual property that helps define who you are in the industry. It can also be a defining and important part of any transaction.

  In today’s COVID world, breweries, wineries and distilleries of all types are doing what they have to in order to survive and one day thrive. Some are turning to mergers and acquisitions as potential strategies for survival and success. It’s important to know how your intellectual property (IP) can make a difference, good and bad, to a potential deal. Below are the five things you need to know about IP in a merger or acquisition. 

What Is IP?

  Before we get there, it’s important to quickly define the different types of IP that exist:

•    Trademarks: A trademark is the most common form of IP protection in the alcoholic beverage industry. It protects anything that functions as a source identifier, (product names, company names, logos like the NBC peacock, bottle or can designs like the Coca-Cola bottle, or even sounds like the ESPN tones). Trademarks can be registered and unregistered, though unregistered marks are limited in geographic scope.

•    Patents: This protects a unique invention (a brewing process, a novel distillation column), a unique design (bottle designs), or a unique plant (strains of yeast or grapes). Patents must be registered and issued to be enforceable, though pending applications will be relevant in an M&A deal.

•    Copyrights: Copyright protection arises automatically as soon as an original work of authorship is “fixed” into something tangible. Basically, once you draw the artwork for your bottle or can, write the code for your website, or draft up a piece of marketing material, it is protected by copyright. Registration affords several key benefits but is not required to claim ownership in a work.

•    Trade secrets: A trade secret is something that gives you value because it is secret. Examples include customer or vendor lists and recipes.

  Additionally, when you go through a merger or acquisition, you will often be asked to list out all of your domain names, social media, and in some cases, any software that is material to your business. It is important to make sure you keep a list of these assets in case an opportunity arises.

  Now that we’ve covered the basics, let’s dive into the top five things you need to know in a merger and acquisition when it comes to your IP.

What IP Do I (and They) Have?

  Start by taking an inventory of everything you have that is protectable – beer names, wine names, logos, artwork, packaging, unique brewing processes or recipes, social media accounts, and domain names – to name a few. This should include anything you registered, anything you are trying to register (like pending applications), and anything unregistered but material to your business. Disclosure schedules are used to list all of the IP and what is to be transferred in the transaction (if not everything). Be clear to fully disclose what you have without overstating.

  The same should be true of the other side. You should ask them to disclose all of their IP assets that will be a part of the deal, all the way down to their social media accounts and domain names.

  As you and the other side are pulling this together, you also want to collect all of your documentation to evidence the IP. This could include trademark applications and registrations, copyright registrations, patent applications, patents, email accounts, and social media accounts. You will also want to pull any licenses you have to use IP, independent contractor agreements regarding creation of IP, liens on IP (if applicable), and any documentation relating to disputes or claims of infringement involving your IP (if applicable). Make sure you have clear documentation of the chain of title (meaning who owned it at each point) from origination to present day.

Do Both Sides Actually Own Their IP?

  The next question you need to ask yourself in any deal is: Do we actually own that IP? The answer may not be as simple as you think. You need to be sure that all assets are owned by the company and not an employee, owner, or even a third party. A lot of companies don’t realize that if they hire an independent contractor to make something, whether a website, logo, or marketing materials, unless they have the contractor expressly assign the finished product to their organization, the contractor owns it. Employee-created works should automatically transfer to the employer, but it is still good practice to include an assignment in your employment agreements. 

  Ownership issues can derail or even terminate what would otherwise be a great deal. Make sure that the ownership of IP on both sides is clearly documented and validated as you move forward.

What Are We Agreeing to In the Deal Terms?

  Within the deal documentation, there will be a number of representations and warranties and indemnity provisions that relate solely to IP and the disclosures and transfers being made in the deal. This is why it’s so important to make sure you have your ducks in a row with your IP as you move forward.

  These reps and warranties will range from confirming ownership of the IP to promising your IP does not infringe the rights of others. You can also see reps and warranties that ask you to declare that your employees have not created any IP that is not owned by the company. Your legal counsel can help to finesse the reps and warranties to match your circumstances and protect you as best they can, but it’s important you ensure everything stated is accurate. A broken rep and warranty in a transaction can be expensive and arise after the deal is done.

  You may also be asked to indemnify the other side for any claims of infringement of the IP, even if you are selling your business to them and walking away. Typically, indemnity provisions should only last for a particular time period following the sale and have a few caveats of what does and does not trigger indemnity. It’s important to make sure you understand them and how they may impact you in the future.

  It’s also important that you understand what will happen to your IP or the other side’s IP after the deal is done. Who will end up as the owner? Who has control? Will any IP be left behind with either party? Are there any pitfalls with the IP that need to be addressed (like prior enforcement matters that resulted in Coexistence Agreements or liens)? Given the importance of IP to any business, it’s doubly important to understand what happens to the IP in the deal as you look to the future.

Were Things Done Right with the IP by Both Sides?

  While you want to believe all assurances a party makes in fostering the deal, both sides must do their due diligence. Did an employee copy and paste images from Google that are infringing someone’s copyright? Did you use unauthorized background music in a promotional video or advertisement? Did you see a great idea at a trade show and implement something similar, not realizing it was patented or trademarked? As the brewery, distillery, or winery grows and expands, so do the footprint and the risk for claims against you.

  Similarly, data privacy can be another pitfall. If any customer information is kept, such as names, birthdays, addresses, or credit card information, (or more abstract information such as IP address or use of cookies, beacons, and pixels), you have to be sure that this information is kept safe and confidential. Ensure there are no data breaches and never have been any breaches.

Likewise, if you are keeping any data, a clear privacy policy must be in place. Do not be tempted to copy and paste a privacy policy found online. The Federal Trade Commission (FTC) often comes down hard on businesses for having a policy that does not match what they are actually doing. Copying and pasting can lead to a policy that misleads consumers as to how you handle their data – and that’s a big problem.

A privacy policy can be fairly simple and straight forward: Explain what information you collect, where you keep it, how long you keep it, and how it is stored, and provide an option for customers to opt out (such as an email address to contact). The more information (and the clearer the information) the better – and when in doubt, ask for affirmative consent.

  With these five things in mind, you can approach a deal with confidence and find the perfect fit to expand and secure your brewery, distillery, or winery. When in doubt, consult your attorney – we’re here to help!

  Ashley Earle is an attorney at Dinsmore & Shohl who focuses on branding protection through trademark and copyright law. Dinsmore represents breweries, distilleries, wineries, cider companies and other alcoholic beverage producers in business, regulatory, intellectual property and litigation matters. Dinsmore attorney represent these entities in every stage of their business, from formation to operation to final sale or closure.  Ashley can be contacted at…513-977-8522 or ashley.earle@dinsmore.com

Ontario’s Strict Liquor Laws

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bottled beers in a grocery stall

By: Alyssa Andres

In Canada, each province is governed under its own liquor laws. In the province of Ontario, there is a multitude of guidelines, fees and licenses required to successfully become a producer or supplier, many of which are not found in other provinces across the country. The restrictions, guidelines, and costs associated with the production, importation and sale of alcohol in the province impact the market for producers and consumers alike. By enforcing such strict laws, the Ontario government limits the province’s ability to showcase its top quality products and dissuades international suppliers and manufacturers from importing their goods from other regions. 

  Manufacturers in Ontario must prepare for substantial start-up costs and to spend a lot of time in the initial phases of business planning before starting production. Separate licenses are required before producing, selling and storing alcoholic beverages, and packaging guidelines, as well as chemical analysis of each product, are required once these licenses are obtained. For suppliers, it means facing mark-ups of well over 100% and tight restrictions on the import, distribution and sale of products. For consumers, it means selections tend to be limited, prices are higher than average and there are very few places to obtain alcoholic beverages.

  The body controlling the alcohol, tobacco and cannabis industries is the Alcohol and Gaming Commission of Ontario. This body is responsible for forming the Liquor Control Act and administering liquor licenses beyond the federal license required to produce alcohol in Canada. The AGCO also oversees most aspects of alcohol sales and service in Ontario. This means they not only control the manufacturing of alcohol but also the distribution and sale of any kind, including bars, restaurants and private events.

  The initial step in becoming a brewer, distiller or winemaker in Ontario is to obtain a federal license to manufacture alcohol in Canada. According to the Government of Canada website, one must prove that they are of legal age and have sufficient resources to conduct a business before applying for the license, which does not carry with it any fees on its own. This license allows producers to manufacture alcohol in bulk, but producers must pay an excise duty once the alcohol is packaged to store it on-site. In Canada, as of April 2020, spirits containing more than 7% alcohol by volume are subject to an excise duty of $12.61 per litre of absolute ethyl alcohol. The only way around paying an excise duty at the time of packaging is to apply for an excise warehouse license that allows manufacturers to store non-duty paid packaged spirits for an extended period.

  Once a producer is licensed by the federal government to produce bulk alcohol, the AGCO requires a separate manufacturer’s license to sell the wine, beer or spirit within the province. The AGCO has strict guidelines surrounding where alcohol may be sold in the province. The Liquor Control Board of Ontario is the main outlet for alcohol sales in Ontario. There are 666 LCBO stores across Ontario responsible for providing the Ontario public with spirits, wine and beer in quantities of less than 12 units per case. A separate chain known as The Beer Store, also mandated by the AGCO, provides Ontarians with cases of beer. If a producer or supplier does not have this license, they will not be allowed to sell their product in the province.

   In 2017, Ontario started allowing a limited number of grocery stores with proper licensing to carry beer and wine, but, according to the AGCO website, these premises must also sell a variety of food products that must occupy at least 10,000 square feet of the retail space. Therefore, only large chain grocery stores are eligible for these permits, and there are only about 450 grocery stores that carry alcohol in the province.

  For breweries and distilleries to operate retail shops out of their own facilities, another license must be issued, even once producers have successfully obtained a manufacturer’s license. Yet another license is required to operate a “Tied House” or restaurant facility out of a brewery or distillery. Each of these licenses carries with it separate fees and must be renewed every two years. Since many Ontario breweries and distilleries are in remote towns across the province, the best way to get their product into the hands of the general public is to apply to have them on the shelves of the LCBO.

  According to the LCBO, they review over 50,000 submissions annually from producers and suppliers trying to sell their products through this system. Even products already approved must reapply for the license every two years. Per the AGCO licensing guide, to be eligible to apply for a Liquor Sales License, producers must submit their federal license to manufacture, a registered business name, a summary of their business plan, including detailed floor plans of their facilities, a marketing plan and images of the bottle/packaging of the product. The roughly nine-week process of approving product submission ends with an LCBO chemical analysis. This LCBO analysis is done on every active product on the shelves once a year, at the suppliers’ expense, to ensure quality. Once approved, the product then has to go through label and packaging reviews.

  The LCBO also has extremely specific requirements surrounding the labeling of not only the packaging of alcoholic beverages but also on shipping containers and cases. While many provinces follow general Canadian guidelines for packaging requirements, Ontario has developed its own set of rules. A 64-page document entitled LCBO Product Packaging Standards dictates not only what information is present on the bottle but also gives incredibly detailed guidelines on everything from the size and placement of this information to the “print contrast standard.” If a product doesn’t adhere to these standards, a producer must go back and have the label or shipping package redesigned.

  Once the product makes it to Ontario liquor store shelves, the LCBO must adhere to the LCA standards for minimum pricing. This means, according to the LCBO Pricing Standards Guide, updated in April 2020, a 750mL bottle of Canadian whisky sold by a supplier to the LCBO for $6.16 and charged a federal excise duty of $3.71 ($12.61/LAA) would end up on retail shelves for $27.50 after being marked up a standard rate of 139.7%. Of that total revenue, $16.17 goes to the Ontario government and $4.92 to the Canadian federal government, with only $6.21 making it to the supplier after a $0.20 container deposit. Manufacturers must adhere to this uniform pricing even when selling from their own bottle shops, with most of the revenue going to government bodies.

  These taxes and guidelines mean the selection and quality of products on the shelves at the LCBO are not always impressive. Many international producers will not bother applying at all. Many of the province’s most talented producers are too small and cannot afford to. As a result, the representation of Ontario beer, wine and spirits in the LCBO doesn’t always showcase the incredible quality of the local industry.

  However, the Ontario government has made some changes to its liquor laws this past year to aid businesses in the food and beverage industry that have struggled with closures and other factors related to the COVID-19 pandemic. The government started allowing restaurants and bars to sell sealed alcoholic beverages for takeaway. They also amended a law prohibiting alcohol delivery to private residences, allowing third-party services such as Uber Eats to deliver liquor from restaurants without a special license. These laws, originally considered temporary, have become a permanent amendment to the Liquor Licence Act as they encourage consumers to support local sources when purchasing alcohol for their homes.

  For a brief moment, on December 4, 2020, the LCBO attempted to offer this same delivery service from its stores by pairing with SkipTheDishes but was met with serious backlash from local restaurants who are now relying on alcohol takeout and delivery to pay their bills. As a result, on December 6, 2020, the LCBO paused this initiative.

  As the COVID-19 pandemic rages on and the entire province of Ontario remains in lockdown until at least January 23, 2021, the Government of Ontario will have to continue making adjustments to its rules and restrictions to allow businesses in the province to continue to operate. The hospitality industry has been one of the hardest hit by pandemic restrictions, with most indoor dining in the province’s major cities suspended for most of the year. Those allowed to operate have been limited to 50% capacity and forced to close by 9:00 p.m. each night. This means the licensee sale of alcohol dramatically decreased in 2020. There are many businesses in Ontario that are depending on government subsidizing to stay in operation.

  As the AGCO and the federal government continue to collect from the soaring sale of alcohol in Ontario, while manufacturers, suppliers and licensees in the liquor industry continue to suffer, the province’s small businesses rely on the provincial government’s aid. It is the hope that as the world evolves with the COVID-19 pandemic, so too will the laws surrounding liquor in the province of Ontario.

Intellectual Property for Beverage Manufacturers

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intellectual property law

By: Brian D. Kaider, Esq.

While many people are familiar with the four main types of intellectual property: patents, copyrights, trademarks, and trade secrets, often they don’t know the distinctions between them or what they are meant to protect.  This article is meant to cut through the confusion and explain these distinctions and how each property right applies to the beverage industry.

Patents Protect Ideas – sort of

  Most people have a general understanding that a patent protects an “invention” or an idea.  In a very general sense, that’s true.  But, even though the Congressional authority to grant patent rights comes directly from the U.S. Constitution (Article 1, Section 8, Clause 8), exactly what is patentable is the subject of tremendous confusion among the U.S. population, examiners at the U.S. Patent and Trademark Office, lawyers, and even judges; sometimes requiring clarification from the U.S. Supreme Court.  The purpose behind the grant of a patent is to encourage innovation by granting exclusive rights to one’s discoveries for a limited time.  In other words, it gives the patent holder a short-term (20 years from the date of filing) monopoly on his invention.  Generally, new machines, chemicals, electronics, methods of production, and in some cases, methods of doing business, are eligible for patent protection.

  But, not all ideas are patentable.  In fact, ideas alone cannot be patented.  They must first be “reduced to practice,” meaning that either you must have actually created your invention or have described it in sufficient detail that someone skilled in that area could follow your disclosure and create it themselves.  So, you can’t get a patent on a time machine, because (at least for now) no one has figured out how to defy the time-space continuum.  In addition, to be patentable, ideas must be novel, meaning that no one else has ever disclosed that idea before, and non-obvious, meaning that your idea cannot be an obvious variant on someone else’s invention.

  Given that humans have been making beer for thousands of years, one might think that coming up with something novel in the brewing process would be impossible.  Not so.  In preparation for this article, I ran a quick search of patents containing the word “beer” in the title and got 491 hits.  Some recent examples include U.S. Patent No. 10,570,357 – “In-line detection of chemical compounds in beer,” U.S. Patent No. 10,550,358 – Method of producing beer having a tailored flavor profile,”  and U.S. Patent No. 10,400,200 – Filter arrangement with false bottom for beer-brewing system.” 

  Improvements in any area of the alcoholic beverage industry may be patentable including, new types of bottles, cans, growlers, and kegs; new types of closures and caps; improved methods of separating hops from bines and leaves; new processing equipment, improved testing procedures and equipment, improved packaging, etc.  Essentially, anything that lowers costs between the farm and the consumer, improves the quality of the beverage, or enhances the consumer experience is worth considering for patent protection.

  One word of caution, however; time is of the essence.  The America Invents Act, effective March 16, 2013, brought the U.S. in line with most other countries in being a “first to file” system, meaning if two people develop the same invention, the first to file for patent protection wins, regardless of who first came up with the idea.  Also, any public disclosure of your idea (such as at a trade show) starts a 1-year clock to file or you may lose your eligibility for patent protection.

Copyrights Protect Creative Works

  The authority for copyright protection stems from the same section of the U.S. Constitution as patent protection, discussed above.  Our founding fathers recognized the valuable contribution made to society by authors and artists and, therefore, sought to encourage creative expression by providing protection for artistic works.  Examples of copyrightable materials include, books, paintings, sculptures, musical compositions, and photographs.

  Unlike inventive ideas, which are only protected when the government issues a patent to the inventor, copyrights attach at the moment the artistic work is “fixed” in a tangible medium.  So, for example, if a composer develops a new musical score in her head it isn’t protected, but the moment she translates that tune to notes on a page or computer screen, it becomes protected by copyright.  In order to enforce that copyright in court, however, it must be registered with the U.S. Copyright Office.  While it is possible to wait until an infringer comes along before filing for registration, doing so can severely limit the damages that may be available to the author of the creative work.  So, early registration is the better course. 

  In the beverage industry, copyright issues often crop up with regard to labels and advertising materials.  But often disputes arise relating to who owns the artwork contained within a label, for example.  Generally, the author of a work owns the copyright.  But, if an employee of a brewery, acting within the scope of their employment, creates an image that the brewery owner incorporates into its labels, that picture is considered a “work made for hire” and is owned by the brewery.  Where disputes often arise, however, is if the brewery hires an outside artist or a branding agency to develop the artwork.  In that case, the brewery should include language in its contract requiring assignment of all copyrights to the brewery for the created artistic works.  The same would apply for any artwork commissioned for use inside the brewery tasting room or for marketing materials.

Trademarks Protect “Source Identifiers”

  People generally associate trademarks with the protection of a brand.  In fact, I have often described trademarks as an “insurance policy for your brand.”  But, in more technical terms, what a trademark protects is a “source identifier.”  The purpose of trademark law is to protect consumers from being misled or mistaken as to the source of a product.  So, for example, if a consumer sees a pair of shoes with a certain famous “swoosh” image on the side, they should be reasonably able to assume that pair of shoes was manufactured by Nike, Inc. and was made with the same degree of workmanship and quality that they have come to expect from that company.  That “swoosh” symbol, therefore, acts as a source identifier to tell the public that the product was made by Nike, Inc. 

  What may function as a trademark can be quite broad, including: the name of the business (e.g., Triple Nickle Distillery®), a logo (e.g., the “swoosh”), a color (e.g., the Home Depot orange or the UPS brown), even a scent (e.g., Verizon owns a trademark on a “flowery musk scent” it pumps into its stores to help distinguish them from competitors’ environments).  Not everything can be trademarked, however.  Slogans, words, and images that appear merely as decoration as opposed to a means of identifying the supplier will not qualify for protection unless the applicant can demonstrate that the item has achieved “secondary meaning,” i.e., that the public has come to associate that item with the manufacturer.  As an example, in the 1970’s McDonalds used the slogan, “You deserve a break today” in its commercials and other advertising.  People came to associate this phrase with McDonalds and in 1973 they were granted a trademark registration.  Incidentally, McDonalds briefly let this trademark go abandoned in 2014, but quickly re-filed and the mark is still active today, more than 45 years after it first registered.

  In general, marks also cannot be descriptive of the product or geographically descriptive of the source in order to be registered as a trademark.  For example, one could not obtain a registration for just the words “India Pale Ale.,” because it simply describes the product and does nothing to differentiate it from every other IPA on the market.  Similarly, an attempt in 2019 to register the name “Philly City Brewery” was refused as “primarily geographically descriptive,” because the applicant could not demonstrate that people had come to associate that name with its business as opposed to the many other breweries in Philadelphia. 

Trade Secrets Protect Valuable Confidential Business Information

  Unlike other forms of intellectual property, there is no registration system for trade secrets, because, by their very nature, they must be protected from all unnecessary disclosure.  Trade secrets can be just about anything that is confidential to your business and gives you a competitive advantage.  Some examples, include recipes, client lists, manufacturing processes, marketing plans, and client lists.  These are things that, if publicly disclosed, would harm the competitive position of the company and, therefore, must be vigorously protected. 

  One of the most famous trade secrets is the formula for Coca-Cola.  This formula has been protected for more than 130 years, sometimes through extraordinary measures.  In 1977, The Coca Cola Company withdrew its product from India, because in order to sell there, they would have had to disclose the formula to the government.  They decided it was more prudent to forego sales to one of the biggest populations on earth rather than risk disclosure of their secret recipe.

  Protecting trade secrets requires constant vigilance in two ways.  First, the information should only be disseminated to people within the company, or outside consultants, who need the information in order to perform their duties for the company.  In other words, the information is on a strictly “need-to-know” basis.  Second, those few people who are given access, should sign non-disclosure agreements with harsh penalties for breach of their duty of confidentiality.  Once the information gets out, it’s nearly impossible to un-ring that bell, so there must be severe financial consequences to someone who leaks the information.

  Brian Kaider is a principal of KaiderLaw, a law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.

For more information please contact Brian Kaider at…
240-308-8032; BKAIDER@KAIDERLAW.COM; www.KaiderLaw.com

SUPPORTING “TRADE” DURING COVID-19

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alcohol and tobacco tax and trademark bureau seal

By: Ryan Malkin

  Does the rulebook go out the window during a pandemic? As the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) and states weigh in via guidance and industry advisories, the resounding answer is no. Still, brands seek to support bartenders with, by and large, pure intentions. That is, brands have money and bartenders may not. Bartenders and brands establish important and long-term relationships over the course of, in some cases, decades. If your friend needed a meal, you’d certainly oblige. However, when the funds are coming from an upper tier (manufacturer, supplier, wholesaler) member’s pockets, we must consider whether and how funds can go towards trade. As a threshold matter, we should consider whether the bartender is employed or unemployed. If a bartender is unemployed, arguably that person is no longer considered a retailer within the meaning of the rules. If that’s the case, the rules with regards to how a brand may engage with that person may also go out the window.

  By way of very brief background, it is unlawful to induce a retailer (an on-premise or off-premise licensee) to purchase your brand to the exclusion in whole or in part of another brand’s products. In particular, the federal and most state rules note that, subject to exceptions, “the act by an industry member of furnishing, giving, renting, lending, or selling any equipment, fixtures, signs, supplies, money, services, or other things of value to a retailer constitutes a means to induce within the meaning of the Act.” In short: unless there is an exception, you may consider the giving of any “thing of value” to be impermissible.

  That means, but for exceptions, it is impermissible to acquire or hold any interest in a retail license, pay or credit a retailer for advertising, guarantee a loan to a retailer, require a retailer to purchase a certain amount of products, or provide any items that are not allowed under an exception. Those of us in the alcohol beverage industry may not realize it, but we largely play in the world of exceptions. The exceptions are where you find it permissible to offer point-of-sale materials, conduct tastings/samplings, provide displays, offer educational seminars to retailers, and stock/rotate your products.

  Federally and in many, though not all, states the providing of the “thing of value” must also lead to exclusion. Exclusion is when the practice “puts the retailer’s independence at risk.” To determine that, the TTB will look at the practice and consider, among other things, whether it required an obligation on the part of the retailer to purchase or promote the brand, and whether it resulted in discrimination among retailers. That means the brand did not offer the same thing to all retailers in the area on the same terms without business reasons for the difference in treatment.

  Now that we’re on the same page with regards to the rules, we want to consider whether the person we want to assist is employed by a retailer or unemployed. If the person is employed by retailer (remember that means on-premise or off-premise), the brand will be more limited in how it may engage with that person. In short, follow the pre COVID-19 rules. TTB’s recent guidance on this topic specifically states that “the furnishing of business meals or entertainment to a trade buyer is an inducement under the Act” if the inducement results in the full or partial exclusion of products sold by that brand in the course of interstate or foreign commerce. In other words, according to TTB, “the furnishing of business meals or entertainment to a trade buyer is not by itself a violation of the Act.” In fact, providing retailer entertainment is quite common and many states have specific regulations that permit the practice.

  Typical states rules will require that the brand’s representative be present, that the entertainment be reasonable, and not conditioned on the purchase or agreement to purchase any of the brand’s products. Retailer entertainment rules are how you often see brand’s take bartenders and liquor store owners to ballgames, concerts and dinner.

  Given the social distancing rules, it is impractical and unsafe to get together with working trade. Instead of going to dinner and discussing business, it may be worth considering whether a brand feels comfortable doing so online via, say, Zoom or FaceTime. The brand can send drinks and a meal to the bartender. When the food and drinks arrive, the brand and the bartender can hop online and eat together. The brand representative would be as present as one can reasonably during this time. Of course, the brand should analyze this against the rules in the applicable state(s) and with its own attorney.

  However, if the bartender is no longer employed, one should now consider him or her as just a regular consumer, albeit with above average mixology skills. Now the brand may feel comfortable entering into an agreement with the person to be a brand consultant to perform any number of services. For instance, to create how-to cocktail videos or conduct virtual tastings. The brand would then pay that person whatever the two agree as reasonable. The brand should consider putting an agreement in place with that out-of-work bartender. The agreement should include basic provisions, perhaps paying particular attention to intellectual property (we own it, you’re using it with our permission and we own what you create) and representations around the unemployed bartender’s status. This compliance section should require the person being hired to acknowledge that he or she does not have any direct, or indirect, ownership in any retailer, and, at minimum, that the fee being paid is not conditioned on or being used to induce any retailer to purchase the brand’s products to the exclusion of any competitive products.

  Now that you have a solution for supporting both employed, though perhaps struggling, bartenders and those out-of-work, go out there and keep your brand alive and relevant during these unprecedented times.  Be careful out there.

  Ryan Malkin is principal attorney at Malkin Law P.A., a law firm serving the alcohol beverage industry. Nothing in this article is intended to be and should not be construed as specific legal advice.

For more information contact Ryan Malkin at…

Malkin Law, P.A.

260 95th Street, Suite 206

Miami Beach, FL 33154

Office: (305) 763-8539

Mobile: (646) 345-8639

Email: ryan@malkin.law

Website: www.malkinlawfirm.com

How Craft Beer Producers Can Incentivize Distributors and Wholesalers to Help Them Go to Market

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lone beer glass in front of a beer stall

By: Nichole Gunn, Vice President of Marketing and Creative Services, Incentive Solutions

As a craft beer producer, competition is fierce. According to the Brewers Association, there were 7,346 craft beer producers in the U.S. last year competing for $27.6 billion in sales. That’s a lot of beer! And, that doesn’t even take into account competition from “The Big Five” or import beer for shares of the overall U.S. beer market.

  For craft beer producers who are looking to scale and increase sales, it might be tempting to start pouring your marketing funds into consumer marketing. But will that really make a splash? Think of the hundreds of millions in media spend by beer companies every year that you’ll be going up against.

  Could there possibly be a more efficient way to use that marketing spend? For craft beers producers who are trying to go to market, it’s important to sit down and ask yourself, “Who has the biggest impact on whether or not end consumers find my beer? And how can I motivate them to prioritize my business?”

Understanding the Craft Beer Sales Channel 

  When it comes to connecting with end consumers, craft beer producers have four options:

•    On-Site: Selling directly to consumers at your brewery.

•    E-Commerce: Selling directly to consumers online.

•    Retail: Selling to consumers through other retailers.

•    On-Premise: Selling to consumers through bars and restaurants.

  However, on-site sales are limited by geography and e-commerce sales require brand familiarity or extremely creative (or very expensive) marketing. For a scalable sales and marketing strategy, craft beer producers have to turn their attention to retail and on-premise sales and the indirect sales force that helps them achieve penetration with these vendors.

Incentivizing Distributor and Wholesaler Sales Reps

  Outside of smaller, highly localized breweries, most craft beer producers rely on distributors, wholesalers and other supply chain trading partners to market to retailers and restaurants. Distributor and wholesaler sales reps are responsible for selling vendors on the value of your beer, negotiating pricing and terms of sale agreements and ultimately getting your craft beer to market.

  There’s one small problem: no matter how awesome your craft beer is, it only a small fraction of your distributor or wholesaler’s supply mix. In this battle for mindshare, it’s up to you to educate reps about your brand, enable them to sell your product and supply them with a value proposition that inspires them to take action on your account.

  This is where an incentive program comes into play. When many people think of incentive programs, they think about rewards. But while rewards play a big role in building relationships with your channel partners and adding to your overall value proposition, modern incentive programs take a more holistic, software-driven approach.

  Today’s incentive programs act as comprehensive sales and marketing platforms that enable craft beer producers to:

•   Build mindshare with distributor and wholesaler sales reps.

•   Target promotions by qualifying participant type, regions or product line.

•   Fill data gaps within their channel.

•   Enable sales reps to sell their product to vendors.

•   Deepen relationships with partners throughout their channel.

Building Mindshare with Distributors and Wholesaler Sales Reps

  Sales reps, for the most part, sell what they know. However, in a crowded supply mix, building this awareness and product knowledge with sales reps can be challenging. While every supplier wants something from these outside sales reps, far fewer supplier focus on offering value and creating memorable brand interactions.

  Inviting these sale reps to enroll in an incentive program where they have the opportunity to earn millions of rewards or exclusive incentive travel opportunities (and perhaps giving them a generous point bonus upfront) is more than a nice gesture. It’s a strategic differentiator and an opportunity to stand out from your competitors.  

  Your rewards program also creates new opportunities for communication and engagement that aren’t strictly business. These brand interactions are an opportunity to improve personalization and build relationship capital, which can be difficult to achieve in supply chain partnerships.

Targeting Promotions to Minimize Cost and Maximize Return

  It’s worth noting that a channel partner program is an investment. When planning an incentive marketing strategy, craft beer producers need to focus on maximizing the return on their marketing spend. This means that they should target first and scale second.

  For instance, would it make more sense financially to target your program to the sales and brand managers at the distributor level or the individual reps who work beneath them? It depends on your go-to-market strategy and the size and number of distributors you work with. If you sell through smaller wholesalers with a handful of reps, who each are responsible for a significant portion of your overall sales volume, then it might make sense to structure your program to reward individual sales reps. On the other hand, if you’re selling through a number of wholesalers and distributors, or an extremely large distributor with thousands of reps, it might make more sense to target your incentive programs to sales and brand managers.

  Additionally, from those managers and sales reps, craft beer producers can set qualification thresholds, based on sales volume or engagement, to ensure that their incentive program spend is allocated toward the participants who are most impactful to their sales growth.

  Another aspect of your targeting strategy is choosing to set incentive promotions by specific regions or product lines, based on strategic initiatives and opportunities for growth.   

Collecting More Complete Data Throughout Your Channel

  Craft beer producers, like many other companies who sell into a channel, often struggle with having inaccurate and incomplete data about their channel. Your incentive program is an opportunity to motivate distributors and wholesalers to provide more complete data. There are several ways craft beer producers can use their incentive program to fill in gaps in channel data:

•   Structuring enrollment forms that capture contact information and firmographic data during program registration.

•   Including automated tools for sales reps to attach invoices or other documents as part of the program’s sales verification process.

•   Offering rewards to participating sales reps for referring other reps within their organization.

•   Rewarding sales reps for completing voluntary surveys that can be used to clean up your existing database or collect more information about your participants’ interests, demographic and lifestyle.

•   Analyzing engagement datapoints the program generates to spot highly engaged accounts that are ripe for upsells and cross-sells.

  All of this information can be used to inform your sales and marketing strategy and increase the level of personalization you offer your supply chain partners.

  However, all the data in the world is useless unless you’re able to act on it. Modern incentive software includes CRM integration, data filters, reporting dashboards and custom reports to streamline this data for optimal use.

Enabling Your Distributor and Wholesaler Sales Reps

  Do you know one of the quickest ways to build brand preference with an indirect sales rep? Provide quality sales enablement. Using proven strategies to educate sales reps on your brand and your products makes it easy for them to sell your products to vendors.

  Integrating interactive quizzes and training videos with your incentive program is a powerful tool for supplying your external sales reps with the knowledge they need to sell your beer. This education can be supplemented by your incentive program’s digital communication platforms. (If you use this kind of strategy, make sure to break things up into bite-sized pieces and focus on the highlights your partners will need to help you go-to-market). Additionally, these quizzes are another opportunity for sales reps to earn rewards, increasing the overall value proposition of your program.

Deepening Relationships Throughout Your Channel

  Finally, in addition to short-term sales growth and marketing penetration, your incentive program has another benefit that will have a lasting impact on the success of your go-to-market strategy: relationship-building. Non-cash rewards are a social currency that achieve emotional impact and memorability with sales reps at distributors and wholesalers. In addition to motivating sales growth and reinforcing desired behavior, the rewards your program offers create a sense of personalization.

  For craft beer producers, your distributors and wholesalers are more than just conduits to the end consumer. They are your partners – an indispensable part of your go-to-market strategy. Offering your sales reps the opportunity to choose from exciting rewards or treating top performers to unforgettable incentive travel experiences represents the type of brand interactions that will set you apart from the competition. But more than that, these rewards inspire your distributor and wholesaler sales reps to emotionally invest in your brand and take an active interest in your success.

Unsure About Where to Start? Be Smart, Explore Your Options and Focus on Scalability

  An incentive program can be an integral part of a craft beer producer’s go-to-market strategy. However, what about companies who have never used this type of strategy before? If you are interested in creating a channel marketing program for your distributors and wholesalers, do your homework. Identify a goal for your program and the software functionalities you’ll need to achieve that goal.

  Compile a list of incentive program providers who fit your requirements and who have a proven track record, with case studies and testimonials to prove it. From there, begin reaching out to these providers and enlist their help in planning your incentive strategy. Use these conversations to refine your strategy and learn more about what has worked for companies with similar goals and similar distribution channels to yours in the past.

  Once you’ve decided on a provider, you don’t have to go all in. It’s prudent to start small, maybe with a pilot program or highly targeted incentive promotion. You can always scale, once you’ve proven that you can do this successfully.

  However, it’s also important to have a sense of urgency. As craft beer sales continues to grow, so will competition for craft beer dollars. Beating your competitors to building an incentive program for your distributor and wholesale sales reps can be a major competitive advantage. Plus, you owe it to your future customers to help them find their new favorite beer!

  Nichole Gunn is the VP of Marketing and Creative Services at Incentive Solutions (www.incentivesolutions.com), an Atlanta-based incentive company that specializes in helping B2B companies improve their channel sales, build customer loyalty, and motivate their employees. Nichole Gunn can be reached at ngunn@incentivesolutions.com

Distribution Agreements: Negotiate Your “PreNup” Carefully

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Business people shaking hands, finishing up a papers signing
Business people shaking hands, finishing up a papers signing. Meeting, contract and lawyer consulting concept.

By: Brian D. Kaider, Esq.

Starting a brewery requires learning a lot of new skills and practices that have nothing to do with making great beer.  One of the most confusing and frustrating is the issue of distribution.  If their state allows, most new breweries initially distribute their own products and, if the brewery is content to be relatively local, that might never change. 

But, in many cases, brewery growth necessitates working with a distributor.  This is not a relationship to be entered into lightly. A distributor becomes an ambassador for the brewery’s brand and, once retained, the supplier may have little control over how its beer is marketed. Further, these relationships can be difficult or financially impossible to break once established.

  Supplier/distributor relationships are governed by franchise laws in most states. In the absence of franchise laws, the relationship is defined entirely by a distribution agreement between the parties. But, even in franchise states, the distribution agreement can play a critical role, particularly in the termination of the distributor relationship.

  Too often, however, breweries accept a distributor’s “standard” agreement and when the relationship sours, the supplier finds that they are stuck with no viable option to terminate. The best practice is to engage an experienced attorney to negotiate the terms of the distribution agreement. While even the best attorney cannot evade state franchise laws (which generally prohibit a distributor from waiving its rights), there are ways an attorney may help bring balance to the supplier/distributor relationship.  Some of the key terms to negotiate include termination, territory, brand scope, and exclusivity.

Termination

  The most critical section of the agreement sets forth the manner and circumstances under which a supplier may terminate the distributor. In a franchise state, the law typically says that a supplier may terminate for “good cause.” If good cause is defined in the law, it is paramount that the distribution agreement mirror the language of the law, because in many cases, a contract that contradicts the law will be held invalid, leaving the supplier in the position of effectively not having an agreement at all.

  For example, the Virginia Beer Franchise Act states that good cause includes “failure by the wholesaler to substantially comply, without reasonable cause or justification, with any reasonable and material requirement imposed upon him in writing by the brewery.”  Further, the Act provides, “good cause shall not be construed to exist without a finding of a material deficiency for which the wholesaler is responsible.”  Tracking that language, a distribution agreement in Virginia should clearly define certain of the distributor’s obligations as “material requirements” and explicitly define certain actions as “material deficiencies.” 

For example, the Virginia law identifies failure to “maintain a sales volume” of a brewery’s brands as being a reasonable and material requirement.  But, the law does not specify what volume is required.  So, the distribution agreement should clearly lay out specific minimum sales volumes (preferably on an escalating scale) and identify the requirement to hit those volumes as a material requirement of the contract. 

  When the law does not define good cause, and in non-franchise states, it is essential for the distribution agreement to do so. The contract should clearly set forth the distributor’s requirements that are critical to the business relationship and for which failure to perform will be grounds for termination.

Examples of common requirements include: meeting specified sales and marketing goals, maintaining appropriate records and reports regarding inventory and sales, transporting and storing the product under specified temperature and lighting conditions, exercising adequate quality control measures to ensure product freshness, and paying invoices within a specified time frame. It is also common to include termination rights if the distributor is declared bankrupt, enters a voluntary’ petition for bankruptcy, enters into a compromise or agreement for the benefit of its creditors, or fails to maintain in good standing all Federal and State licenses and permits necessary for the proper conduct of its business.

  In some cases, sale of the distributor or even a change in the ownership structure may be justification for termination.  In February 2019, Bell’s Brewery of Kalamazoo, Michigan completely pulled all of its distribution in the Commonwealth of Virginia.  The issue was that its distributor in Richmond was sold to a subsidiary of Reyes Beer Division, the largest distributor of beer in the United States.  Per its distribution agreement, the original distributor was to have provided Bell’s with certain information about the sale to Reyes, but it failed to do so and Bell’s believed that because it did not have the opportunity to properly vet the new distributor, termination of the franchise was warranted.  To this day the dispute has not been resolved and Bell’s beer is not available in Virginia.

  In most states, a supplier must compensate the distributor for the lost business even if the supplier is able to terminate for cause.  Sometimes the law simply says the supplier must pay the distributor the “fair market value” of the distribution rights.  There can be an expensive battle just to determine that compensation if fair market value is not defined in the distribution agreement.  Often the value is defined as a percentage of the prior year’s case volume multiplied by some dollar amount per case. The “standard” contracts pushed by some distributors can be very severe in this section. In the beer industry, it is not uncommon to see values set at an entire year’s worth of profits times a multiplier that can range from 1.5 to many times higher. In practice, often a new distributor will buy out the distribution rights from the old distributor, but if the supplier wants to return to self-distribution, this buy-out provision may be cost prohibitive. 

  While the beer franchise laws in most states were written at a time in which large beer manufacturers had significant market power over small distributors, those roles have substantially reversed.  Slowly, state laws are being revised to accommodate this change.  In Maryland, for example, the law changed on January 1, 2020 to eliminate the “for cause” provision of termination for suppliers who manufacture fewer than 20,000 barrels per year and the termination notice was shortened from 180 days to 45.  However, the manufacturer still has to give the terminated distributor fair market value of the franchise.

Territory

  Depending on the size, experience, and reach of the distributor, there may be an opportunity to creatively carve out different territories. Territories are most commonly limited to certain states. However, a supplier may be able to limit a smaller distributor to certain counties or even specific types of establishments (grocery stores, but not restaurants, for example). One of the clearest breaches of the distribution agreement, that may constitute good cause for termination, is for a distributor to make sales outside of its contracted territory. 

Brands

  Generally, when a distributor is hired to carry a brewery’s brand, it has the right to all of the products in that brand. But exactly what constitutes a  ‘brand” is unclear both in the statutory language of most state franchise laws and in many distribution agreements. 

In Maryland’s beer franchise law, for example, “brand” is not explicitly defined, but the law appears to favor the distributor in terms of brand scope. Specifically, section 105 of Maryland ‘s Beer Franchise Fair Dealing Act prohibits a brewery from entering into a beer franchise agreement with more than one distributor for “its brand or brands of beer” in a given territory. One might argue that the language “or brands” means that the first distributor has the right to all brands of the manufacturer in a given territory.

In fact, that very’ issue was litigated in the 1985 case of Erwin and Shafer, Inc. v. Pabst Brewing Co., Inc. and Judge Couch, writing for the panel of The Court of Appeal of Maryland, disagreed. The court held that if a brewery retained a distributor to handle one or more of its brands within a territory, it could not then contract with a second distributor within the territory for those same brands. It could, however, contract with a second distributor to carry a different set of brands.

  How far the court would take its interpretation of what is a “brand” is unclear, however. In the Pabst case, the first distributor was given the right to distribute Pabst brand beers, but Pabst later merged with Olympia Brewing Company and gave the second distributor the right to sell its newly acquired Hamm’s brand beers. Whether the court would have allowed the brewery to contract with one distributor for Pabst and another for Pabst Extra Light it did not say.

Exclusivity

  Even if rights under a distribution agreement cannot be divided by brand (as in the case of the beer franchise law in Maryland), some states may nevertheless allow a supplier to contract with more than one distributor within a territory. If permitted in their state, a brewery should ideally enter into all of its distribution agreements for a given territory simultaneously, providing notice to each distributor. At a minimum, the brewery should ensure that the first agreement entered into is explicitly designated as non-exclusive. Otherwise, the distributor may view the agreement as giving it exclusive rights to the territory and could sue the brewery for diminishing the distributor’s business if it were to engage a second distributor in that territory.

Final Thoughts

  Whether a brewery is in a franchise state or not, it is critical that it review and negotiate its distribution agreements carefully, with the assistance of an experienced attorney. It is also important to remember that the supplier’s diligence does not end when the agreement is signed. No matter how well the terms of the distribution agreement are negotiated and drafted, they are effectively useless if the supplier cannot back up its claims for good cause.

Accordingly, thorough documentation is essential. If a distributor is not meeting sales goals, mishandling product, or failing to provide adequate reports, they must be given written notice of those deficiencies each time they occur.

  There are great distributors out there who become essential partners in a brewery’s business. But, sometimes those relationships can sour and signing an agreement without anticipating complications down the line can make it virtually impossible to sever those ties. A little forethought and planning and a lot of diligence will go a long way toward a successful termination of a bad relationship.

  Brian Kaider is a principal of KaiderLaw, an intellectual property law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.

Suds & Soldiers: Beer and World War I, 1914-1919

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beer carriage

By: Doran Cart, Senior Curator, National WWI Museum and Memorial

By the time of World War I, which started in 1914, beer was already an ancient beverage made and consumed by most the nations involved in the war. In light of the long history already written about beer, this article will center on the personal, official and period-printed references of beer during World War I held in the archives of the National WWI Museum and Memorial in Kansas City, Missouri.

  Many of the early war photographs show soldiers, especially German, posing for their gone-to-war photographs with beer mugs in hand and often sitting on beer kegs. Ceramic beer tankards were illustrated with scenes of soldiers’ service so they could be reminded of what they had gone through while enjoying their favorite brew. A German/Anglo brewery in Tsingtao, China was in production at the beginning of the war and was there when Japanese forces attacked the German garrison taking control. A graphic illustration of that attack is on exhibition at the museum. The brewery still exists.

  Changes in the opening and closing hours of pubs in England occurred during the war when the situation became dire from many of the war industries’ workers spending more time drinking beer and “other intoxicating liquor” than producing artillery shells and airplanes. The Defense of the Realm (Consolidation) Regulations of 1914 specifically prohibited the sale and consumption “on weekdays 12 noon to 2:30 p.m. and 6 p.m. to 9 p.m. and on Sundays [the same hours].”

  British soldiers wrote in their diaries about beer:

“Hallowe’en was celebrated in our billets – beer, soup, roast beef, plum duff.” A. Stuart Dolden, 1st Battalion, London Scottish Regiment

  October 1916 – “I was amazed to get two bottles of Guiness to drink.” George Coppard, British Machine Gun Corps, after being wounded.

  C.H. Williams, 5th Battalion, the Oxfordshire and Buckinghamshire Light Infantry, British Army, wrote after Christmas of 1916: “We had our Christmas dinner in Albert, France in an old sewing-machine factory.  We had beer for our dinner – plenty of it – and a good tuck-in to go with it!  Roast pork!  Beautiful after bully beef!” [Bully beef was canned processed beef issued as a ration].

  In England in 1918, the Hart Family Brewers produced a commemorative extra pale ale called the “Flyer.” It was brewed to honor Wellingborough, England’s “Own Flying Ace, Major Mick Mannock.” Major Mannock was a Victoria Cross recipient for his World War I actions in which he recorded 61 aerial victories with the Royal Flying Corps (later the Royal Air Force). He was killed over France on July 26, 1918.

  Although the American Expeditionary Forces were technically “dry,” prior to the US 18th Amendment ratified in 1920, enterprising soldiers soon learned where the beer and wine were. One US Signal Corps photograph is captioned: “American soldiers in a captured German trench drinking beer out of steins and smoking cigars.”

  From the papers of Captain Clarence J. Minick, 361st Infantry, 91st Division the following order was found: “Headquarters 3rd Battalion, 91st Division, Sarrey, France, July 24, 1918. Extract General Order No. XXI. 1. “The following regulations for the government of troops billeted in Sarrey are hereby published for the guidance of all concerned: (a) Cafes will be open to troops for sale of light wines and beers during the following hours: 1:30 A.M. to 1:00 P.M. 6:00 P.M. to 9:00 P.M. Absolutely no drinking of other intoxicants will be permitted and all cases of intoxication will be summarily dealt with. Wine or beer purchased in cafes will be used on the premises and not carried away in bottles or other receptables.”

  At the Battle of St. Mihiel, France, September 1918, this report of the 353rd Infantry Regiment, 89th Division Intelligence Section related:

  “In the evening of September 13, the Regimental observers established an O.P. [observation post] on the high ground south of Xammes. While occupying this O.P. the observers lived on the fat of the land. An abandoned German commissary in Xammes furnished bread, honey, butter, jam, gold-tipped cigarettes and cigars – from the well-kept German gardens in the vicinity came a variety of vegetables – and crowning all, German beer, wine and schnapps were on tap in former Boche (German) bars (for the ‘dry’ All-Kansas regiment).”

  During the American occupation of Germany in 1919 when the rules regarding consumption of beer and wine had been unofficially loosened, Charles MacArthur, 149th Field Artillery Regiment, related that in his [cannon] battery’s stop in Bittenburg, “we ran into real German beer, a little watery for the famine in grain.”  Another discovery was made in Bittenburg:  eierkuchen, or German waffles.  “With a helmet full of flour and a little corn syrup any hausfrau could produce an elegant set of waffles.”  Evidently, the waffles reached such an esteemed place that “the very name of eierkuchen was transferred to anything that looked appetizing, especially young women.”

  A Captain Biggs related that the clothing worn by German civilians seemed serviceable, but that the “shapeless, heavy shoes” was a noticeable feature.  Much of the material was ersatz [substitute], made of paper products.  Beer was plentiful at 20 to 30 pfennings a glass, but “of a poor grade,” as was the wine.

  As part of the agreement for the occupation of Germany after the signing of the Armistice on November 11, 1918 was one unpopular requirement that all dram shops be closed except during a few hours of the afternoon and early evening.  The sale of any intoxicant except beer and light wines was prohibited.

  A printed announcement of a “Reunion and Smoker” party for the 77th Division’s MP Company on October 25, 1919 at the 77th Division Association Club House in New York City. states that “they will organize an American Legion Post and there will be a keg. Organized by Francis N. Bangs.” Captain Bangs was in the MP Company, 77th Division, AEF.

  A postcard with an inscription, described the outdoor tables in Bourges where the French would gather to drink and socialize, as pictured. Inscription on the back: “the French people like to have this little beer table outside. This is very typical.”

  On a printed card from the YMCA, “The Y.M.C.A accepts no responsibility for money or valuables kept by soldiers during the night. These should be handed for safe keeping to the Leader in charge of the Hut. Overcoats, rifles, or other equipment should be stored in the cloak room. You are urged to leave no articles of clothing or equipment in the cubicle after dressing or about the Hut at any time. By order of the Police, Beer and Spirits must not be brought into the Institute.”

  From the service of Private Walter G. Shaw, 18th Infantry Band, 1st Division. He died at Charpentry in the Argonne in 1918:

  Oct 31, 1917 “I like France fairly Well don’t think I would like to live here always [sic] they have fine roads here. white and red wine can be bought for 1.50F a bottle (30c) some of the soldiers get tanked up on it I don’t like it because it is so sour French people have it with every meal. Champagne can be bought for 9.00F a bottle $1.75 this is extra dry costs about $7.00 in the U.S. Beer costs .30 centimes a bottle 10c….”

 From the service of Corporal Reid Disman Fields, Ordnance Detachment, 13th Field Artillery, AEF:

“Feb. 23/19

Dear Clara:

  No doubt you will be surprised to hear I am going down into Germany. Left Mehnin today 11AM. Am going to the Third army. So far as I know somewhere near Coblenz. So don’t expect I will be back very soon. Tell your mother I will drink her share of beer. Ha! All for the time so Bye Bye, Reid.”

  The roster and menu for Christmas dinner, 1915 from the 133rd Company, US Coastal Artillery Corps, Fort Terry, New York listed that the dinner included oyster stew and crackers, roast turkey, oyster dressing, cranberry sauce, mashed potatoes, creamed corn, creamed peas, stuffed olives, tomato catsup, celery, pumpkin pie, mince pie, cocoanut layer cake, chocolate cake, bananas, oranges, apples, grapes, figs, cigars, cigarettes, apple cider, and bottled beer.

  From US volunteer truck driver, Ned Henschel, December 8, 1918, Verdun, France:

  “…a rumour floated around that there was beer to found in a neighboring village. Another lieutenant and I walked eight kilometres to investigate – and found that it was all wrong; there wasn’t even Pinard!” Pinard was a red French table wine.

  During the Easter Uprising in Dublin of 1916 of Irish citizens against British rule, the British Illustrated War News of May 10, 1916 reported that British troops took cover behind a barricade of beer barrels.

  One postcard shows a “German concrete cellar used as cooler for beer, in woods, Meuse, France.” A British humorous postcard shows a tent surrounded by flood waters with a downcast soldier poking his head out lamenting “‘Ah! If it were only beer.” A German postcard that a Karl Rosendahl in writing to Frieda Rosendahl of Riemsloh, Germany related: “My dear Freidelchen, We are sitting in the Train with a nice glass of beer and send you greetings.” [translated to English].

  A letter from F. Thunhorst of Riemsloh Germany to Carl Rosendahl, June 3, 1915, related that one of their acquaintances “Old [illegible] is still the same and he just keeps going. The beer still tastes excellent, and he still drinks a few pints daily. He sends his greetings.” [Translated from German to English].

  American Dale E. Girton, Base Hosp. #78 wrote on May 8, 1919,

“Hello Rummy:

  I guess that is a fitting salutation for one who has told me in a – past letter he has started drinking Rum, BEER, Wine & Cognac. How about it? Haven’t heard from you for some time and we are expecting to leave Toul for a port of embarkation at any day now, so I thot [sic] I would write you a word so that if I am quite a while.”

  Beer was universal in WWI. It was used to quench thirst, to enjoy in comradeship, to relax and possibly, to help for a moment, to forget about the horror of war.

  From the Archives of the National WWI Museum and Memorial.

Safety and Compliance: More Than Just a Checklist

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By: Tracey L. Kelley

Portrait of smiling worker holding clipboard by storage tanks

In the past 10 years, workplace injuries and illnesses declined in the craft beverage manufacturing industry. This is good news, as it’s a thriving employment sector. The U.S. Bureau of Labor Statistics reported that in 2016—the most recent data collected—breweries, distilleries and other artisanal beverage producers employed approximately 75,000 people. In Canada, according to information from the System of National Accounts in 2018, the craft industry had more than 15,000 workers.

  Some experts say a reduction in workplace incidents is the direct result of an attitudinal shift from reaction to prevention. Ashley Heiman is the MRO department manager for Nelson-Jameson in Marshfield, Wisconsin—a single-source food, dairy and beverage processing plant supplier. Heiman explained the vital importance of this approach. 

  “The Food Safety Modernization Act created a significant culture shift. The essential question that the FSMA pushes us and our customer base to ask is, ‘How can I most effectively and proactively create a safe, quality product?’” she told Beverage Master Magazine. “When you think proactively about your product, it pushes you to think proactively about your facility and the staff that produces that product. From floor drains to dust collection in your rafters, every facet of your facility and those operating that facility can make or break a brewery or distillery.”

  Established in 2011 by the Food and Drug Administration, FSMA compliance extended to beverage producers at a graduated rate. It began in 2016 for companies with over 500 full-time employees, scaling down to “very small businesses”—those with beverage sales of less than $1 million—finalizing compliance in September 2018. Inspections of beverage raw materials started this year. For some producers, this compliance required extensive examination and overhaul of processes and systems.

  One might assume that requirements by OSHA and the FDA already cover worker and product safety issues. In many ways, they do, but this additional layer of compliance mandated by the FSMA is a necessity for consumer products. It’s also another thread of bureaucracy to follow—one of many that can be challenging to untangle. 

  “It’s very difficult for business owners to dedicate time to learning all the nuances of compliance to both OSHA and the FDA. They’re really interested in creating and growing their businesses, so having a consultant who’s knowledgeable in these compliance areas allows the owner to both focus on the business and ensure that someone is keeping them compliant,” said Gary D. Morgan, Vice President and senior consultant of SafeLink Consulting in Cumming, Georgia. He’s also an authorized OSHA outreach trainer.

  “Our business is to know everything we can about OSHA safety requirements and FDA regulations on producing beverages that are safe for the public to consume, so we keep our clients as informed as possible in these areas,” Morgan said. He also pointed out that the Canadian Centre for Occupational Health and Safety and its Food Inspection Agency mirror OSHA and the FDA requirements rather closely, so producers sharing a national border are assured of similar compliance between partners.

Create an Environment of Safety

  Doing what’s best for the product starts with the optimum workplace atmosphere and training provided to employees. Ideally, owners and managers should establish these best practices in the early stages of the business.

  “Bringing a consultant onboard at start-up can ensure decisions can be made in the development stage that takes into consideration compliance issues for both OSHA and FDA,” Morgan said. “Trying to retrofit safety considerations into an existing design can be costlier than providing for it upfront. Implementing an FDA-compliant quality system initially can also prevent or handle issues in producing a product that’s fit for consumption.”

Morgan advised that instead of evaluating consultants by price, first outline facility specifications.

  “Then, I would suggest that as part of due diligence, talk to several consulting firms and ask the same questions of each one to ensure an apples¬-to-apples comparison, rather than just looking solely at pricing. A producer should include expenses for these services in the annual budget.”

  Another top-to-bottom safety solution, Heiman said, is color-coding. “We’ve seen a great interest in it. It’s proven to be an excellent proactive approach. Not only can color-coding help prevent cross-contamination in terms of allergens or yeast strains, but it also helps to organize and streamline workflow, designates critical control areas of a facility and assists many of our customers in isolating possible pathogen risks,” she said. “With the wide variety of products we offer, facilities can build a color-coded program to break up their operations into pragmatic zones.”   

  Josh Pringle is the vice president of CO2Meter in Ormond Beach, Florida. His company specializes in the design and manufacturing of gas detection and monitoring devices—mainly CO2—as well as consultancy and training. He advises producers not to rely on state or local inspectors to tell them to improve ventilation or install monitors: do it because it’s what’s best for your employees.

  “Producers should consider the following when preparing to train or educate staff: what’s in the best interest of our employees, what does our insurance provider require us to do, what will OSHA/NIOSH expect as part of a training package, and how should we plan to test and retrain staff,” he told Beverage Master Magazine. “We have a brewing partner who made the following statement: ‘Why would I pay a few hundred dollars for a safety monitor and then not train my staff on what to do if it goes off? Pointless!’”

  Pringle noted that many professional associations offer free training regarding CO2 safety, proper lockout/tagout procedures, and dozens of other critical topics.

  These organizations include, but are not limited to:

•    American Distilling Institute

•    Brewers’ Association

•    International Beverage Dispensing Equipment Association

•    Master Brewers Association of the Americas

•    WorkSafeBC

  OSHA and NIOSH also have online training, workbooks, visual aids and other resources for new employee and refresher training.

  He cautioned against complacency in your facility. “When employees work in and around hazardous situations, materials, ingredients and situations, no duty should be considered mundane or a ‘to do.’ Safety is an every moment, everyday project,” Pringle said. “The statistic always sited from the National Transportation Safety Board is the majority of car accidents occurred within five miles of someone’s home. The data demonstrated that drivers started to let their guard down in more familiar surroundings. Employee safety has no mileage areas. Any training that allows for complacency is flawed.”

  Morgan agreed. He offered these three tips:

1.  Always be vigilant to compliance issues. Oversight is demanding.

2.  Delegate responsibilities to duly-trained and competent individuals.

3.  Training is an ongoing activity, not a one-time event.

More Than a List on a Clipboard

  Workers in the craft beverage industry are prone to the following injuries and illnesses:

•    Overexertion, including medical conditions caused by repetitive motion or lifting heavy items such as barrels, kegs and crates.

•    Slips, trips and falls because of slick floors, ladders, obstacles and carrying heavy loads up and downstairs.

•    Working in fermenters, tanks, vats and other confined spaces, especially when carbon dioxide exposure is a concern.

•    Physical hazards such as pressurized equipment, forklifts, temperature extremes, and moving parts.

  It might require specialized products, protective gear, and consultation to maintain essential worker safety. “Safety concerns are widespread across a facility. Personal protective equipment, noise protection and respiratory protection are some of the most common product areas we deal with for our brewery and distillery customers,” said Heiman of Nelson-Jameson. “Lockout/tagout products are also popular. Additionally, it’s important to be specific with vendors if employees are handling chemicals, lab reagents, machinery, and so on. These details dictate the best products to utilize.”

  Even with a safety plan upon start-up, and as Pringle of CO2Meter expressed previously, crafting operations are integrated with safety in handling not only CO2 but throughout all functions. So the plan becomes more of a living document, refined by training, to help staff anticipate and correct issues before a more significant problem occurs.

  Here are the steps Pringle recommended:

•   Identify the hazard

•   Discuss the hazard

•   Create a plan of action to prevent the hazard

•   Create a secondary plan that accounts for and mitigates the hazard

•   Define methods to disperse the hazard

•   Understand the methodology to test an area to ensure safe conditions

•   Create and institute a policy and procedure to understand an incident

•   Create a safety plan

•   Including safe zones and rally points

•   Practice, practice, practice

“Be mindful. Be aware, Follow procedures, no matter how cumbersome. For example, lockout/tagout has become a mainstay because it’s effective,” Pringle said.

  Regarding C02 specifically, “The most likely points of CO2 incidents for beverage producers are at their canning and bottling lines. ‘Dosing’ areas typically register CO2 concentrations above the OSHA– and NIOSH–permissible time-weighted average standard of 5,000 ppm TWA for employees—placing a typical producer in violation,” Pringle said. “While working around CO2 can often be a necessity for beverage staff members, having proper training sessions and ensuring your staff is informed on the dangers of CO2 is the first step.”

  Morgan of SafeLink Consulting had some final thoughts. “Be proactive in establishing your compliance programs. If you have to be reactive, then something negative has happened that could be very detrimental to the business itself. It could be an employee injury or complaint, or a product that causes consumer complaints or worse, consumer injury or illness,” he said.

  “And there’s always the ever-present specter of an inspection from a regulatory agency with fines, penalties and even forced business suspension or closure. Give yourself peace of mind by being on top of compliance issues, not at the mercy of them.”

SAKÉ: THE NEW FRONTIER IN CRAFT BEVERAGES

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By: Nan McCreary

Saké has been around for thousands of years, but few Americans are familiar with the drink that is deeply rooted in Japanese culture. That is changing, and it’s changing quickly. With U.S. consumers eager to experience alternative beverages and explore new flavors, saké is on the cusp of a revolution here at home. As imports of saké rise dramatically, local artisans and entrepreneurs are seeing an opportunity for a new niche in the craft beverage market: local saké production.

Currently, there are about 20 saké breweries (Kura) in the U.S., including several that originated as American outposts of Japanese companies. These breweries span from California to Maine, from Texas to Minnesota. Wherever they are located, the owners and master brewers (toji) have one thing in common: a passion for the product. Dan Ford, founder and owner of Blue Current Brewery in Kittery, Maine, is one such devotee. After living and working in Japan for years, he decided to “spread the word” by bringing hand-crafted saké to New England.

“I love saké,” Ford said. “I love making it, and I love to see people smile when they taste it. That’s what drives me.”

So what exactly is this mystical brew that is rapidly growing in popularity in the U.S. and around the world? Saké is an alcoholic beverage fermented from rice. It has often been called ‘rice wine’ but, in fact, it is not a wine. Nor is it a beer, nor a distilled product. Rather, it fits into its own unique category.

“Saké has a little bit of identity crisis because a lot of people consider it a wine, but it’s more like a beer, fermented from grain using a saké yeast,” said Tim Klatt, co-founder of Texas Saké Company in Austin, the only saké producer in Texas. “In the past, people’s knowledge was pretty much limited to ‘hot saké,’ which is basically grain alcohol with a little rice flavoring that’s super cheap and heated up so you can’t really taste anything.  Our approach is to make a much more crafted, artisan product.”

Jack Lien, sales and education ambassador at SakéOne in Forest Grove, Oregon, said their brewery, too, is on a mission to introduce people in the U.S. to the joys of quality saké. “Saké is unique,” he told Beverage Master Magazine. “It’s brewed like a beer and drinks like a wine. It offers a nice alternative for people who are conscious of what they’re drinking. It’s sulfite free and naturally gluten-free. Some are vegan. It’s a unique beverage that intrigues a lot of people.”

Basic Ingredients

Saké comes in a variety of styles, but the basic ingredients are always the same: rice, water, koji (a fungus that converts the starch in rice to sugar) and yeast. Like good beer and good wine, good saké starts with quality ingredients, primarily premium rice. Generally, U.S. brewers source their rice from California’s Sacramento Valley, which grows some of the finest rice in the world. Texas Saké Company uses Calrose rice, the offspring of high-end rice used ages ago in Japan. SakéOne uses mostly Calrose rice and an American grown Yamada-Nishiki rice, known in Japan for its use in quality Saké. Blue Current uses Koshi Hikari, a short grain variety of rice named after the historic Koshi Province in Japan.

Water quality is also important, as completed saké is 80 percent water. “Water is critical because it can affect the final product,” SakéOne’s Lien told Beverage Master Magazine. “Soft water produces a soft and mellow saké, while hard water, which contains certain minerals, produces a more full-bodied saké.” Most American brewers prefer to use soft water.

Saké Production

Production of saké is not for the faint of heart: it is a complex process that takes time, patience and skill that can only be acquired by training and experience. This process starts when the rice first arrives at the brewery, where it is polished to remove the outer husk and prepare it for brewing good saké.

The polishing rates vary, depending on how much of the outside husk of each grain of rice is removed to reach the starchy and more desirable core. In general, the more the rice is polished, the more aromatically expressive the Saké becomes, and the higher the grade. The majority of saké made in the U.S. are junmai ginjo, a high-end saké milled to 60 percent of its original size, although some brewers may polish further.

After the rice is polished, residue from the milling process is washed from the grain, and the rice is saturated with water, depending on the type of rice and the desired characteristics of the saké. Next, the rice is steamed, which changes the molecular structure of the starch in the grain, allowing easier breakdown of that starch.

The next step — making the koji — is the heart of saké-brewing. “The Japanese say there are three pillars of brewing saké,” Blue Current’s Ford told Beverage Master Magazine. “The first pillar is koji, the second pillar is koji, and the third pillar is koji. All things flow from making koji. If you can make really good koji, you can make really good saké.”

In this process, the freshly steamed rice is spread out on long tables in a warm, heated environment known as a koji room. The rice is covered with koji-kin, the “miracle” mold that converts the starch in the rice to a form of glucose. Over the next 36 to 45 hours, the toji constantly tends the koji to ensure that it’s developing properly. “The koji is food for the yeast, and it’s critical to fermentation,” SakéOne’s Lien said. “Our toji, Takumi Kuwabara, has 25 years of brewing experience—13 years in Japan and 12 here—and he makes our koji completely by hand. He’s continually tinkering and tweaking the koji to make sure he gets the recipe just right.”

After the koji is made, a small amount is mixed with steamed rice, yeast and water in a tank to produce shubo or moto, or a fermentation starter. Typically, it takes two weeks to create a small batch of starter with a high concentration of robust yeast cells. Next, all the prep work comes together. Water, steamed rice, saké rice and the fermentation starter are added in three successive stages over four days to create the main mash, which will ferment over the next 18 to 32 days. During this time, the toji may adjust the length of fermentation, temperatures, and other factors in creating a specific saké profile.

The actual fermentation process is what separates saké from beer or wine. In wine, no sugar conversion is necessary, since sucrose is naturally-occurring in grapes. With beer, the creation of sugar and alcohol are separate processes: starches in the grain are converted to sugar in the form of wort, then yeast is added to create alcohol. In saké, conversion of starch into glucose and glucose into alcohol occur simultaneously in a process called multiple parallel fermentation. One of the characteristics of alcohol made in this method is high alcohol content. Saké is usually about 15 percent alcohol by volume and may be as high as 21 percent.

Once fermentation is complete, the saké is pressed to separate the newly created alcohol from the rice solids left in the mash. The saké is then filtered to remove fine particulates and pasteurized to kill off any remaining bacteria and yeast. Finally, the product is aged—usually for three to six months—and then bottled. The time to brew a batch of saké, from start to finish, is around seven weeks.

American Spin

While U.S. craft saké brewers typically follow Japanese methods and traditions for brewing saké, they are putting an “American spin” on the product by using processes and ingredients more suited to the local palate. The Texas saké Company, for example, filters their product less than the Japanese. “This gives a more robust saké with lots of fruity flavors,” co-owner Tim Klatt said. “We’re home brewers from the past, so we’re always trying something different. One of our big pushes is oaked sakés, where we toast oak chips in-house and add them to the brew. This delivers an amazing vanilla and oak and tannin experience, which will even stand up to barbeque.” The Texas Saké Company also produces a line of sparkling sakés with seven percent ABV and is preparing to produce a typical Japanese product that “will bridge the gap” between American and U.S. styles of sakés.

SakéOne is on the cutting edge as well, with its Moonstone brands, flavor-infused sakés. These include Cucumber Mint, Asian Pear and Coconut Lemongrass. All are infused right before bottling. “We are making these to appeal to our wild, pioneering side,” Lien said. “This is what we do to have fun.”

As U.S. Saké brewers look to the future, they see more breweries popping up, and more consumers taking notice. All agree that we can expect to see new products, more experimenting with saké-brewing techniques and broader distribution of American-made saké, both in the U.S. and abroad.

“Craft saké is definitely a niche market,” according to Ford, the Harvard-trained entrepreneur who founded Blue Current Brewery. “People are trying new flavors and looking for the next new thing. As a brewer and frequent traveler to Japan, I think it’s wonderful to open the kimono and show people this wonderful new beverage which is probably the coolest thing people have probably never had. The future is looking good: we’re seeing blue skies ahead.”