Tito's Lawsuit Problem Expands Beyond California

FILED OCTOBER 2, 2014

We reported in September that Tito's Vodka was hit with a class action lawsuit in the California court system, alleging unlawful course of conduct regarding its label and marketing [see WSD 09-17-2014]. Tito's problem has now expanded into a federal issue as another lawsuit was filed in a US district court in Florida, alleging false advertising and deceptive trade practices.

PLAINTIFFS' CLAIMS: The plaintiffs in the federal case, Shalinus Pye and Raisha Licht -- who are also petitioning for class action status -- say they understand Tito's may have produced a "handmade" vodka "at some point in the past," but they believe Tito now produces the vodka "in massive buildings containing ten floor-to-ceiling stills and bottling 500 cases an hour," according to the official complaint.

Moreover, Tito's "attempts to maintain the fiction of being a small-batch brand despite the fact that [Tito's] 'Handmade' Vodka has exploded from a single 16-gallon pot still in 1997, to a 26-acre operation that proceed 850,000 cases in 2012... drawing in an estimated $85 million in revenue."

Among several other Florida-based consumer protection statutes, the plaintiffs cite Title 27, Chapter I of the TTB's Code of Federal Regulation that prohibited unfair competition and unlawful practices in support of their claims.

The code restricts "Any statement that is false or untrue in any material particular, or that, irrespective of falsity, directly, or by ambiguity, omission, or inference, or by the addition of irrelevant, scientific or technical matter tends to create a misleading impression." This segment of the code also touches on advertising, stating that advertisements cannot contain any statements about the brand that are inconsistent with what's on the label.

Their main beef is that they, as well as the other members of the suit, have purchased Tito's Vodka "under the false impression that [Tito's] product is of a higher quality, is handmade, is crafted in old fashioned pot still and is otherwise as advertised on the product's label," write the plaintiffs.

"Such purchases damages Plaintiffs because, [among other things], Plaintiffs had cheaper alternatives available and paid an unwarranted premium for Defendants' Tito's Vodka." They are requesting declaratory and injunctive relief.

To read the 35-page complaint in its entirety, click here.

TITO'S SIDE OF THINGS: Tito's has yet to formally respond to the lawsuit, but you may recall, founder Tito Beveridge has already released a public statement in regards to the California class action [see WSD 09-23-2014].

In the statement, Tito claimed the vodka is still distilled in pot stills that are "customized and hand-built on-site to our proprietary specifications." He also noted the TTB approved the use of the "handmade" term on the brand's label after sending out a field agent to review their process.

CONSTELLATION'S WINE AND SPIRITS UP 3% IN Q2

Constellation Brand's wine and spirits division has taken a back seat in the company's earnings calls lately, but in the second quarter call this morning, chief Rob Sands did say the division grew sales by 3% in the quarter ended August 31. Constellation attributed the growth to higher volumes and lower promotional expenses.

The wine brands driving depletion growth include: Mark West, Kim Crawford, Rufino, Black Box and the Dreaming Tree. Meanwhile, the spirits division's "strong sales growth" were driven by the launch of new flavor extensions for Svedka and Paul Masson.

Overall, Rob expects that we will "continue to see improving depletion trends as we progress throughout the year similar to last year."

IS ALCOHOL DELIVERY SUSTAINABLE?

Last week, we published a profile of a new and rapidly expanding alcohol delivery service called Drizly [see WSD 09-25-2014] . Although Drizly is doing well thus far, one industry expert called into question the sustainability of the alcohol delivery model.

"I've seen 20 of these things come and go," Brian Rosen, award-winning retail consultant and founder of Illinois' Sam's Wines & Spirits, tells WSD in response to the article. "We don't sell a service, we sell a good... There's not enough gross margin in the goods that we sell this day and age to give a percentage back to the aggregator."

The categories where alcohol delivery makes the most sense, says Brian, is in high-end wines, craft beer and spirits. "But, by the very same token, those three categories are specialized items that need a little bit of hand sale, a little bit of knowledge and a little bit of salesmanship."

Moreover, Brian says the constant consolidation is another barrier for alcohol delivery. "The way the business is growing, you have the 110,000 independent retailers and then you have the chains. The chains are consolidating and suppliers and wholesalers are consolidating. It's going to come down to big box, which fight on price and selection, and mid box and independents, who are going to fight on service selection and knowledge.

Having the ability to deliver your goods in 40 minutes, while it might be a differentiator, is not a sustainable business because the very [retailers] that are fighting the battle to stay afloat can't afford to consistently give up margin, especially around Christmas time," says Brian.

WSD BRIEFS:

O'NEILL VINTNERS & DISTILLERS EXTENDS AUSTERITY BRAND. The two new additions, 2013 Austerity Arroyo Seco Chardonnay and 2013 Austerity Santa Lucia Highlands Pinot Noir, will retail for approximately $17 each. Austerity aims to capture the post-recession wine consumer that is "clamoring for quality appellation wines at an affordable price," per a release from the company.

WILLIAM GRANT RELEASES ULTRA-PREMIUM RUM EXTENSION. In partnership with William Grant & Sons, Nicaragua's Flor de Cana brand has released its "finest" and most expensive brand extension: Flor De Cana Centenario 25. Centenario 25, which retails for a suggested price of $155, joins the Centenario Collection's other offerings, including a 12-, 18- and 25-year-old rums.

Until tomorrow,
Emily

"That kid's about as sharp as a pound of wet liver."
-- Foghorn Leghorn

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