By Brian D. Kaider, Esq.
One of the take-home messages from the State of the Industry address at this year’s Unified Wine and Grape Symposium was that per capita alcohol consumption is flat. This means that the various sectors of the alcohol industry can only increase sales by re-dividing the pie in their favor. Although wine and spirits are making headway at the expense of beer, new players in the space, such as hard seltzers and pre-mixed cocktails are carving out their own slices.
One of the areas where wine is losing market share is with millennials, who are adopting wine as their drink of choice at a slower pace than prior generations. Winning in this sector, and others, will require strong marketing efforts. But, advertising and promotion in the alcohol industry is a messy affair with wildly contradictory rules in different jurisdictions.
This article surveys the laws in several states, not to provide a complete picture as to allowable advertising practices in the wine industry; that would be impossible, but to highlight some of the issues and how differently they are addressed in different states.
Traditional Ads in Print and Digital Media, Radio, and Television
Generally, traditional ads in these types of media are allowed in most jurisdictions. However, in the words of the Genie in Disney’s Aladdin, “there are a few provisos; a couple of quid pro quos.” For example, in Texas, a winery cannot buy title sponsorship of “hotlines” from radio stations where listeners call to hear prerecorded list of events at retail locations. In Virginia, advertisements in print or electronic media are permitted so long as they are not in publications primarily marketed to persons under the age of 21. And, in Missouri, emergency legislation was passed in response to Missouri Broadcasters Association v. Taylor, expanding the definition of advertising to include electronic means of dissemination, though this legislation will expire on April 17, 2019 unless further action is taken.
Typically, in states that allow the use of billboards for general purposes, they are allowed for alcoholic products, as well. Maryland requires, however, that the ad specifically identify the supplier and not be for the benefit of a specific retailer. Texas requires the supplier to get a permit for a billboard if it is within 200 feet of a retailer that sells the advertised product.
Texas also prohibits the use of an inflatable advertisement outside a retailer’s establishment and only allows them indoors if they are not visible from the outside. Maryland allows the use of inflatables in parades and other functions as long as they not brought to permanent rest in front of a retailer premises. However, they may be on or near retailer premises if promoting an event sponsored by the supplier and not intended to promote a particular retailer.
In Oregon, a winery may give exterior signage to a retailer, so long as it does not exceed 2,160 square inches in size. In Virginia, however, a winery may not sell, rent, lend, buy for, or give to any retailer any outdoor alcoholic beverage advertising.In Texas, a winery may display a branded promotional vehicle inside or outside of a retail licensee’s establishment, but for no more than five hours per day.
In Oregon, a winery may list on its website the retailers carrying its products, but it must include all such retailers and may not include pricing information that would appear to promote one retailer over another. In neighboring Washington State, wineries can not only list their retailers, but include links to their websites, as well. The law is silent as to whether all retailers must be listed, but that would certainly be the safest practice.
In Virginia, a winery may not engage in any cooperative advertising on behalf of any retail licensee. But, in Michigan, while a winery’s advertising material may not include the name of a retailer, it may include that of a wholesaler. A winery may also pay the cost of painting a wholesaler’s trucks and may supply brand logo decals and advertising mats to the wholesaler at no cost.
Signage Inside Retail Establishment
Most jurisdictions will allow a winery to provide retailers with indoor signage, though paying directly or indirectly for sign location, floor space, shelf space, or other advertising space is a big no-no. What a winery is allowed to provide, however, varies widely. In Maryland, the value of any single advertising item may not exceed $150 and the total cost of all advertising at a particular retailer may not exceed $450 without authorization from the Comptroller, which may allow up to $600 on a case-by-case basis.
In Missouri, the total value of all permanent signage and point-of-sale materials given to a particular retailer may not exceed $500 per calendar year per brand, though the signage may include the name and address of the retailer. In Virginia, a winery may only provide (either for free or for a cost) to a retailer non-illuminated advertising materials made of paper, cardboard, canvas, rubber, foam, or plastic that have a wholesale value of $40 or less per item. And, in Michigan, a winery may only provide non-illuminated signage less than 3,500 square inches (unless in a sports/entertainment venue) and it may not include the name or address of the retailer.
In many jurisdictions, such as Missouri, Texas, Oregon, and California, a winery may not issue coupons for its products. In Maryland and Virginia, however, coupons may be provided to consumers at the point of sale, through direct or electronic mail, or through print media. The coupon must have a definite expiration date, require proof of purchase, and require purchaser to be 21 years old or older. Virginia further requires that the coupon may not exceed 50% of the normal retail price of the item and must be redeemed via mail by the manufacturer or their designated agent, but not by the retailer or wholesaler.
Sweepstakes and Contests
Most states allow wineries to hold sweepstakes and contests. Generally, in a sweepstakes, every entry has an equal chance of winning, whereas in a contest, the winner is determined by skill, knowledge, or ability rather than random selection. In states that allow such events, several features are commonly required. First, consumption of alcoholic beverages may not be an element of the game and alcoholic beverages may not be awarded as a prize, though in California, alcoholic beverages may be included if they are incidental to the total prize package. Second, participants must be of legal drinking age. Third, there must be a way to enter without purchase.
Some states have additional requirements. For example, in Missouri, point-of-sale advertising is allowed only if no value is provided to the retailer for conducting the sweepstakes or contest. In Texas, prizes cannot be awarded on the retailer’s premises. In Maryland, proposals must be submitted to the Alcohol and Tobacco Tax Bureau of the Comptroller of the Treasury in time to be approved at least 14 days before the start of the sweepstakes or contest. Maryland also allows instant winner vouchers, but only if placed randomly in product packages and the retailer has no knowledge of the placement.
In Virginia and California, entry forms may be attached to removable neck hangers, but Virginia requires that they be offered to all retailers equally and each retailer must provide their consent for such materials, whereas California will allow them so long as there is no purchase required to enter. California also allows codes to be affixed to the original label, container, or packaging that can be scanned by the consumer to enter. Instant or immediate awarding of a prize is not permitted in California, but, like Maryland, instant notification that a consumer is a winner is allowed.
Perhaps the biggest discrepancies, and the most surprising, involve novelty items. One of the most permissive jurisdictions is Missouri, where wineries may give shirts, hats, bottle openers, corkscrews, etc. to retailers for unconditional distribution to the public. Even the $500 aggregate limitation on point-of-sale advertising does not apply to these items.
Virginia law draws several distinctions. Items not in excess of $10 wholesale value may be given to retailers in quantities equal to the number of employees of the retailer present at the time the items are delivered; and the employees can wear or display the items thereafter. Wineries and retailers may not give such items to customers unless they are participating in a tasting at the retailer’s premises. Smaller items, such as napkins, placemats, and coasters may be provided to retailers only if they contain a message relating solely to and promoting moderation and responsible drinking. They may contain the name, logo, and address of the winery, but only if subordinate to the message. Finally, items such as glasses, napkins, and buckets may be sold to retailers, but the retailer must maintain records of such sales for two years.
In Maryland, promotional items such as paper cups, matches, brochures, napkins, calendars, etc. may be provided to retailers if the advertising is general in nature, does not identify a specific retailer, is provided in “trivial” quantities, and does not relieve the retailer of an ordinary business expense. Hats, shirts, glassware, etc. must be sold to the retailer at fair market value.
Michigan allows wineries to give matchbooks and calendars directly to customers, if nothing else of value is included. The winery can only give calendars or matchbooks to a retailer for distribution to customers upon written order of the commission. Nothing of value may be given to a customer. Other novelty items bearing the winery’s advertising may be sold to retailers only with a written order from the Liquor Control Commission and may not be sold below cost.
Finally, Washington State allows wineries to provide branded promotional items of nominal value, such as lighters, coasters, napkins, clocks, mugs, glasses, bottle openers, corkscrews, hats, shirts, etc. to a retailer, but they must be: used exclusively by the retailer or its employees; include only the advertising matter of the winery and/or a professional sports team for which they have a license; and may not be provided by or through retailers to retail customers.
In a crowded market where every winery is competing against not only every other winery, but every brewery, distillery, meadery, cidery, and other alcoholic beverage supplier, good advertising and promotion is essential. The issues highlighted in this article represent only a fraction of the issues surrounding the advertising and promotion of wine and do not provide a complete picture of those issues even within the jurisdictions mentioned. Before engaging in any marketing campaign, it is imperative that a supplier know the laws and regulations affecting their plans. Consultation with a knowledgeable attorney is always the best practice.
Brian Kaider is a principal of KaiderLaw, an intellectual property law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.