More on Caffeinated Alcohol and the FDA

FILED NOVEMBER 1, 2009

Dear Client:

The FDA sent waves of chatter through the industry last Friday when it was announced they had sent a letter to 30 caffeinated alcohol producers, demanding they provide evidence within 30 days that caffeinated alcohol is not harmful. If they fail to prove their product is safe, then the FDA "will take appropriate action to ensure that the products are removed from the marketplace," which means yanking them off shelves. Those are fighting words.

Although most of the targeted products are malt beverages, as WSD reported on Friday, several are caffeinated spirits brands that include: P.i.n.k. Vodka, Lotus Vodka, 3am Vodka, Belvedere IX, Gravity Vodka and V2 Vodka with Caffeine. Diageo’s Smirnoff Raw Tea Malt Beverage is also on the list.

Of course, it’s not just those companies the FDA is attacking. It appears they are also drumming up a turf war with the U.S. Tax and Trade Bureau (TTB), the federal agency charged by the FAA Act with regulating alcoholic beverages. The TTB has clearly "sanctioned" these products by their approval of their formulas, their labels, and even their marketing practices. The TTB has guidelines about adding caffeine to alcohol beverages -- ironically based on FDA guidelines on caffeine in non-alcoholic drinks -- and all of the products on the market fall within these guidelines. In fact, these beverages are at caffeine levels well below what the FDA deems as unsafe in non-alcoholic drinks. Historically, the FDA has listed caffeine as generally safe in cola-type beverages in lower doses, but there are no "regulations that permit the addition of caffeine, at any level, in alcoholic beverages." That doesn't mean it's unsafe, it just means there aren't any regulations.

Word on the street is that the TTB isn’t too happy about the FDA stepping into their territory. Traditionally the FDA governs food and non-alcoholic beverages, while the TTB oversees beverage alcohol. The FDA says it has jurisdiction because the Federal Food, Drug and Cosmetics Act gives it authority over "articles used for food or drink" and "thus includes alcoholic beverages.” We’re sure the TTB is scratching its head at that one.

Conventional wisdom suggests the FDA could soon target caffeinated mixed drinks like coke and bourbon and vodka and energy drinks, or coffee-flavored liqueurs like Kahlua, but not so fast. Coffee drinks are in the clear, at least at the moment: “This FDA action is not directed at products that are flavored with coffee," says the FDA. Instead, it’s “focusing its attention on products in which caffeine has been intentionally added to alcoholic beverages by the manufacturers. Other products containing added caffeine may be subject to agency review if the available scientific data and information indicate that added caffeine may pose a safety concern, or is being unlawfully used, under the conditions of its use in other products." So stay tuned, mixed drinks that contain caffeinated non-alcoholic mixers could be next. But if the FDA tried to block bartenders from mixing those kinds of drinks, we’re certain bars and nightclubs would suffer and the FDA would be in over its head with complaints from business owners and consumers.

Once evidence is provided, how long will it take the FDA to respond? The FDA provides an ambiguous response: "The timeframe is difficult to predict and it will depend on the amount and quality of data and information that the FDA receives from manufacturers....The FDA's decision regarding the regulatory status of caffeine added to various alcoholic beverages will be a high priority for the agency; however, a decision regarding the use of caffeine in alcoholic beverages could take some time."

We expect that large producers like Diageo will quickly discontinue Raw Tea if they haven’t already, but smaller producers like P.i.n.k. Vodka have much more to lose. It seems unfair that the FDA is only giving these producers 30 days to prepare a defense, so we expect an extension.

Lastly, what about the scientists and physicians who sent a petition to the FDA urging them to increase regulation on all energy drinks? The scientists point to recent studies that claim caffeine masks, but doesn’t reduce, the intoxicating effects of alcohol. We’re not convinced this is the “proof” the FDA needs to go after caffeinated alcohol producers but it remains to be seen.

The National Alcohol Beverage Control Association (NABCA) issued a statement Friday commending the FDA for its actions. "We have been concerned that these products may have a detrimental impact on public safety," said NABCA chief Jim Sgueo. Other industry trade groups have yet to publicly respond.

Send us your thoughts and concerns at megan@beernet.com or simply reply to this email.

[Ed note: To check out the latest updates on this story click here and here]

ALLEGED WINE ARSONIST FACES THE MUSIC

You may remember this story from years back when Mark Anderson (who used the alias Joe Sausalito) was accused of setting fire to a Vallejo warehouse and destroying millions of bottles of wine after being caught in a fraud scheme where he allegedly sold thousands of his clients’ collectables to wine dealers. An estimated 6 million bottles, or $250 million worth of wine, was destroyed in the blaze, which is reportedly the single largest loss of wine in the US. The fire sadly destroyed entire vintages and samples of wine.

His trial is set for tomorrow, Nov 17 (although some news reports say it took place this afternoon), where he will face an arson charge and 18 other criminal counts in a federal court in Sacramento. The case involves 90 wineries, 40 private collectors, the Sausalito police, the US attorney’s office, TTB and the IRS.

Mark’s attorney argues that his client had no reason to start the fire and that authorities are blaming him because of the pending embezzlement charges in Marin County. Eleven of Mark’s clients reported that 8,082 bottles of their wine, worth about $1.2 million, were missing. He pleaded non-guilty to the charges and the Marin case has been postponed until after the federal trial.

QUICK BACKGROUND. In 2003 Mark moved his clients’ wine to Wines Central in Vallejo after being evicted from his space in Sausalito. Mark sublet a 2,500 sq ft space but was again evicted in 2005. The prosecution argues that he was angry about the eviction and set fire to the warehouse, which mainly destroyed wines that didn’t belong to his clients, but to clients of Wines Central.

CASTLE BRANDS Q2 RESULTS

Castle Brands U.S. case sales grew to 67,351 nine liter cases in the 6 months to September 30 from 57,511 cases in the prior year period. This included sales of the company’s recently launched Tierras tequila and Jefferson's Presidential Select bourbon. U.S. case sales for the six months ended September 30, 2009 grew to 115,228 nine liter cases from 106,448 cases in the prior year period.

Overall, net sales reached $8.7 million in the second quarter from $7.4 million in the comparable prior year period. Net sales in the six months were $14.6 million compared to net sales of $13.3 million in the comparable prior year period.

WSD BRIEFS:

KENTUCKY DISTILLERS HOPE TO CHANGE SAMPLING LAWS IN THE STATE. The Kentucky Distillers’ Association is hoping to pass a law that would make it legal for distillers to set up sampling booths at conventions, conferences, liquor stores, restaurants and special events. The location would have to have a liquor license and customers would be limited to three, half-ounce samples per day. Under current law, liquor license holders can apply for special licenses to conduct samplings but distillers cannot.

TRINCHERO DONATES $1M TO UC DAVIS. Trinchero Family Estates has donated $1 million to the University of California, Davis to construct a new $3.8 million, 5,600 sq ft building for a program that produces disease-free rootstock.

APPLETON ESTATE JAMAICAN RUM, imported by The Kobrand Corp, is adding a 30-year old offering to its line. These blends were first individually aged for eight years, then blended together and aged for an additional 22 years in oak barrels.


Until tomorrow, Megan

“Be slow in choosing a friend, slower in changing.”
Benjamin Franklin

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