Supreme Court Refuses Havana Case, Pernod Poised to Launch Havanista

FILED MAY 14, 2012

Dear Client:

Pernod Ricard was dealt another blow today in its ongoing effort to sell Havana Club in the United States, but this time they have a plan. First the story and then details on Havanista. This morning the US Supreme Court refused to hear Pernod's case against the Department of Treasury. You may recall Pernod lost a March 2011 ruling by the US Court of Appeals for the District of Columbia when two of three judges agreed with a lower district court that said the government was correct in blocking Pernod Ricard and Cubaexport from attempting to renew the Havana Club Rum trademark in 2006. It all goes back to a law passed by Congress in 1998, known as Section 211, that makes trademarks confiscated by the Cuban government unenforceable in the US. So far it has only been applied to Havana Club.

QUICK BACKGROUND ON APPEAL. In its appeal, Cubaexport argued that Section 211 should apply only to new trademark registrations, not renewals of previously registered trademarks. But even if the 1998 law does bar previously registered trademarks from renewing, Cubaexport alleges that it violates the substantive due process doctrine. However, Judge Kavanaugh and Judge Edwards "disagree with both arguments," saying Section 211 applies to both new and renewed trademarks.

Pernod found hope in the dissenting opinion by Judge Silberman, who recommended the case be sent back down to a lower court because the trademark registration rule shouldn't apply retroactively. He wrote that Section 211 applied "to the future only" because it uses future tense "shall be."

PERNOD POISED TO LAUNCH HAVANISTA. In light of the Supreme Court decision, Pernod announced it has registered the trademark Havanista with the US Patent and Trademark Office (USTPO). The premium rum is produced and bottled in Cuba, and will be launched if the embargo is lifted. It is considered likely that President Obama will consider lifting the trade embargo if he wins another term, but not until after the election.

Meanwhile, Havanista is specifically aimed at the US market and will "benefit" from the same production process and quality requirements as Havana Club. "With Havanista, if the embargo is lifted, we will be happy to bring the unique quality and taste of Cuban rum to U.S consumers," said Jerome Cottin-Bizonne, ceo of Havana Club International. "If you like Havana Club - you will love Havanista."

This is an interesting development indeed and we are watching this one closely. Any thoughts? You know where to find us.

THE OTHER HAVANA CLUB CASE. This is not to be confused with a separate case where Pernod accused Bacardi of trying to mislead consumers into thinking its Havana Club rum (only sold in Florida) was made in Havana. In August 2011 the Third Circuit appeals court agreed with a lower court ruling that said Bacardi is not in violation of false advertising because the label says it was made in Puerto Rico. Judge Kent Jordan said this in the opinion: "It appears that this false advertising dispute is a proxy for the real fight the parties want to have, which is over the right to the exclusive use of 'Havana Club' as a trademark."


Television is poised to become the go-to medium for spirits advertising if recent trends continue. In 2010 spirits brands paid a collective $142 million (34% of all media spending) for TV ads, up from $102 million and 23% in 2005, reports AdAge. DISCUS data shows that magazines had 41% share of spirits ads in 2010, but that is down from 58% in 2005. Of course, a big driver is the fact that broadcast networks have loosened their rules and created more opportunities for national buys. "Just as the federal government doesn't distinguish between beer and wine and spirits, most of these broadcasters are recognizing that alcohol is alcohol," DISCUS senior vp Frank Coleman told AdAge.

Here are some examples of what we're talking about. Currently (and for the first time) Beam has five brands on TV including Maker's Mark, Devil's Cut, Hornitos, Pucker Flavored Vodka and Skinny Girl. Meanwhile, Diageo spent the most money on TV advertising last year at $17 million for Captain Morgan, while it also made a major upfront buy on Univision Communication's Galavision cable network with Ketel One and Johnnie Walker in order to reach more Hispanics. Diageo is expected to continue the relationship this year.

Further proof of spirits' growing presence: Jagermeister, Wild Turkey and two-year-old Tequila Avion are on TV for the first time. Also, Brown-Forman yanked Southern Comfort's TV ads in 2009 in favor of an all-digital strategy, but returned to TV in 2010 and 2011 to launch new flavored versions.

So while we're sure the beer industry is watching this development closely, keep in mind that spirits still has a small presence by comparison. Note that Anheuser-Busch spent more than $230 million on TV ads for Bud Light alone in 2011.


In order to help control states deal with alcohol beverage infusions, the TTB has crafted a statement pertaining to the concoctions. TTB writes that under the FAA Act, blending distilled spirits may only be lawfully done by a person with a TIB permit and may be conducted only on the premises of a distilled spirits plant by a registered proprietor. However, the mixing of tax paid spirits for immediate consumption is not considered processing. Since tax paid spirits are used in on-premise infusions, "TIB believes there is little risk to the Federal excise tax revenue. Additionally, because infusions are served on premises as or in cocktails, we do not foresee FAA Act packaging and labeling concerns." Therefore, TIB exercises its enforcement discretion not to take action solely on the basis of violations with regard to a retail liquor dealer that mixes tax paid spirits to produce infusion for on-premise consumption. So infusions made at licensed on-premise retailers are perfectly legit.


A JERSEY SHORE RTD IN THE WORKS. Reality show "Jersey Shore" cast member Pauly D has introduced a signature RTD cocktail called Remix. Pauly D has teamed up with Skinnygirl Cocktails co-founder David Kanbar to create the drink, according to TMZ. The vodka-based drink will come in various flavors.

L.A. CONSIDERS BANNING ALCOHOL ADS ON CITY PROPERTY. L.A. city councilman Richard Alarcon has proposed the city ban alcohol ads on any city-owned and city-controlled properties. The ban would forbid ads on everything from bus shelters, to kiosks at LAX and the L.A. convention center, reported the Daily News. The proposal faces opposition from advertising companies.

RESTAURANT INDUSTRY NUMBERS FOR APRIL. Restaurant industry same-store sales were up 3.2% in April, according to a survey from NRN. Quick-service restaurant saw solid sales increase of 4.6%, while full-service restaurants (both fine-dining and casual) saw increases of only 1.6% in April. Guest traffic was also up 0.9% overall in April. Though the numbers are increases, they are mildly disappointing when compared with much higher numbers in March. Restaurant operators are still optimistic though with 34% believing sales will be better in May versus April.

SCOTLAND FURTHERS MINIMUM PRICING LAWS. Legislation proposed by Scotland's SNP health minister to increase the minimum pricing per unit is making its second passage through the Scottish Parliament after having been blocked by opposition the first time. The proposal will lead to increases in the price of about 75% of alcohol drinks in Scotland, according to The Telegraph. The health minister has less opposition this time due to a promise that the law will be reviewed in six years to ensure effectiveness, but the measure may still be declared illegal under EU competition law. Legal action is expected from the drinks industry.

Until tomorrow, Megan

"The truth is the kindest thing we can give folks in the end."
Harriet Beecher Stowe

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