7th Edition: Trends in Marketing Communications Law
For an alcohol brand trying to gain market share, there are few things more important than getting consumers to try its product. Although most states’ alcoholic beverage codes offer some provision for providing consumers with free samples, the wave of bar and restaurant closures due to the COVID-19 pandemic has turned this practice on its head. As a result, alcohol brands are finding themselves with fewer and fewer ways to engage directly with their consumers.
The federal government and every state in the United States have laws governing the manufacture and sale of alcoholic beverages, and there are two legal restrictions that come into play whenever alcohol brands want to provide samples to consumers. First, generally speaking, an alcohol supplier — the brewer, distiller or winery — cannot itself serve alcohol to consumers. Second, the alcohol supplier cannot pay or provide anything of value to a “retail” licensee — like a restaurant, bar or liquor store — to serve drinks on its behalf.
In the past, suppliers were able to avail themselves of a few specific exceptions to these rules. For example, many states permit suppliers to conduct sampling events, where representatives can provide free samples to consumers and provide educational content about the unique qualities of their beverages. In addition, a few states — including Texas, California and New York — allow suppliers to conduct “invitation-only” branded experience events for consumers under certain restrictions.
However, the current circumstances have severely restricted these possibilities. In the early days of the COVID-19 pandemic, states across the country ordered bars and restaurants to close down. Even though some states have allowed these establishments to reopen, most have reopened with significant restrictions, including the requirement that diners be seated outdoors and strictly separated from one another. And, even where a manufacturer is legally able to provide samples, the practical implications of social distancing can stand in the way of meaningful engagement with the consumer. Moreover, although states have recently expanded the ability of bars and restaurants to deliver drinks to consumers, suppliers are typically not permitted to sponsor such delivery or deliver drinks themselves.
Some suppliers have resorted to more indirect means to get drinks into the hands of consumers. In May, Coors launched a social-media promotion whereby consumers could receive a free six pack of Coors Light. However, because Coors was not legally able to actually send the beer, the promotion was structured as a rebate, whereby consumers purchased beer and then received a rebate via PayPal. In addition, the rebate could not be offered in 11 states due to state laws prohibiting rebates, and consumers could only claim half of the purchase price in another 14 states.
- The COVID-19 pandemic has complicated an already highly regulated alcoholic beverage industry. Many of the marketing practices on which alcohol suppliers once relied are no longer available, and it has become increasingly difficult to reach and engage with consumers.
- With 50 states having different and often inconsistent regulations, legal counsel should be engaged at the earliest possible point to help structure campaigns so that they meet the marketing team’s goals while still complying with various states’ laws.