Alcohol Industry: A Look Back at 2022 + Predictions for 2023 - McDermott

Key Takeaways | The Evolving Alcohol Industry: A Look Back at 2022 + Predictions for 2023


During this February 16, 2023, webinar, Alva Mather and Nichole Shustack reviewed how significant developments and enforcement actions in the alcohol industry from the past year are influencing industry members to meet the changing needs of consumers and drive innovation in 2023.

Below are key takeaways from the discussion.

  1. Federal Enforcement: The US Department of the Treasury’s recent report assessed the current market structure and competition conditions. The report called on the Alcohol and Tobacco Tax and Trade Bureau (TTB) to consider its rulemaking to reduce barriers to market access, avoid targeting entities lacking in market power and focus its enforcement efforts against large players. It also recommended that the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) consider anticompetitive distribution behaviors and encouraged them to revise merger guidance to focus on highly concentrated markets. The TTB is seeking public comment on proposed rulemaking by June 7, 2023, so companies should start preparing their comment and provide feedback to the TTB on key focus areas such as the digital marketplace, category management, slotting fees and more.
  2. Supply Chain: Areas continuing to impact supply chain issues in the alcohol industry include labor shortage and inflation. To prepare for uncertainty, alcohol industry members should work closely with their legal team during the lifecycle of the product so they can identify risks and have necessary contingency plans in place. They should approach contracts with the current challenged environment in mind and consider commercially addressing issues such as supply chain disruptions, inventory management, and increased cost of goods and services.
  3. Alcohol Delivery: Prior guidance on how states manage licensing for third-party delivery and shipping services has been evolving, but it is now starting to solidify. Some states require the sale to take place on the licensed premises but allow orders to be placed by phone, online or through a mobile app. If the beverages are delivered through a third-party, most states require training on age verification and signs of intoxication to ensure alcohol is not being sold to underage or intoxicated patrons.
  4. E-Commerce and Third-Party Providers: In 2022, more guidance from New York specified that any business that is receiving 10% of the revenue from alcohol sales under their regulatory scheme must be disclosed as a “co-licensee.” While this is specific to New York, platforms that are operating more globally will see a continued shift in focus on flat fee structures. Unlicensed entities should think about fee structures that aren’t tied into any type of alcohol revenue sharing, as only a licensed entity should receive the benefit or privilege of the sale of alcohol. Unlicensed delivery service providers may not receive funds for the sale of alcohol, as they are required to provide the funds to the license holder.
  5. Ready-to-drink (RTD): RTD products have seen tremendous growth in the last year, but rules and regulations haven’t quite caught up to the category. The categorization of an RTD product impacts how the product is regulated. Products that are made like alcoholic beverages or that have even trace amounts of alcohol could be treated like alcohol for regulatory purposes federally and in states that lack a lower alcohol by volume (ABV) threshold in their definition of alcohol products. This could impact tax, labeling, trade practices and licensing. The most important factor of how an RTD beverage may be regulated is the base of the drink (g., if it has a spirit base, malt base, fermented sugar base or a wine base).
  6. Health-Related Marketing: The TTB released guidance on health-related marketing claims, prohibiting health-related statements in advertising that are untrue or create a misleading impression of the effects of alcohol consumption on health. As consumer demand for “better for you” products continues to grow, alcohol producers must be careful of misleading consumers through ambiguous terms such as pure, natural, local, fresh and clean. In particular, “clean” cannot be used in a way suggesting that the consumption of alcohol will have health benefits or that risks associated with alcohol consumption will be mitigated.
  7. Sustainability: There has been a steady increase in sustainability efforts within the alcohol industry. These efforts focus on packaging, manufacturing, supply chain management and the impact on innovation. While these efforts started out on a small scale, sustainability is expected to greatly influence industry trends in 2023.

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