Calories may be the last thing on your mind when a bartender slides you a lager or martini, but a proposed rule causing discord in the booze industry could soon have you thinking twice before downing your next brew.
The Alcohol and Tobacco Tax and Trade Bureau [TTB], a federal agency run through the Treasury Department, is considering a petition requiring beer, wine and spirits makers to slap nutrition facts on their containers.
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Similar to a traditional label found on most foods and non-alcoholic beverages, the facts would declare the number of standard servings, or drinks, per container, as well as calories, carbohydrates, protein, fat percentages and alcohol content.
“Most people don’t know that Guinness has fewer calories than most light beers or that distilled spirits have no carbohydrates,” said Guy Smith, North American executive vice president of Diageo (NYSE:DEO), the world’s leading premium wine, beer and spirits maker.
“In the 21st century, alcoholic beverages are the only consumable products sold in the U.S. where consumers don’t know what’s inside,” he said. “It is just silly to not have this information available to consumers.”
Petitioners argue that as it stands, consumers have to guess the make-up of the alcoholic beverages they consume; while the industry generally agrees consumers have a right to the information, some still worry that a regulation would inevitably benefit some over others.
“Those who can find some marketing advantage in it should be free to use this information however they wish, just as producers of light beer have resorted to reporting carbohydrate content,” said Ted Breaux, master distiller of Lucid absinthe. “For those of us who produce craft, specialty products, it holds little value, and is far less likely to be considered by consumers thereof.”
The 8-Year Petition
The issue has been on the table since 2003, when several consumer and public health advocacy groups and industry members petitioned the TTB requesting alcohol facts on containers. The supporters staged another push in December, criticizing the agency for dragging its feet.
The TTB has been picking at the request, calling for public comments and trying to determine the feasibility of the regulation, with the underlying goal being to ensure consumers get the information they need while at the same time minimizing negative effects on businesses, according to TTB spokesman Tom Hogue.
“It’s a matter of finding the right balance of getting consumers the information they need, while allowing businesses to create jobs and continue to function,” said Paul Gatza, director of the Brewers Association, an organization representing more than 1,400 U.S. craft brewers.
Hogue called the issue thorny, noting there has yet to be a clear resolution given the industry itself is torn on the proposal, with wineries petitioning for physically attractive labeling, breweries arguing over the acceptable size of a serving and specialty manufacturers flagging the increased costs.
Industry demand for labels originally hit the table in the 1990s, though it was determined at the time that there was no significant consumer interest, and it was subsequently dropped. A study of 600 Americans over the age of 18 conducted in 2003, however, tells a different story.
Of the Global Strategy Group study respondents, 91% said they supported requiring ingredient labeling on alcohol beverages, while 94% said they supported alcohol content, 89% supported the mandatory labeling of calories and 84% supported serving sizes.
Diageo and other supporters argue that the labeling would provide customers a reference point. While a consumer may not know the exact calorie count of potato chips served on a plate in a restaurant, for example, they can at least make an informed ballpark estimate, Smith said, though it remains a guessing game for alcohol drinkers.
“Because it’s a consumable product, we felt it needed to be treated like other consumable products,” he said. “This way, when someone picks up a bottle of gin, they have a point of reference, just like any other product on the grocery store shelf.”
Others argue that consumers don’t care enough about alcohol nutrients for the regulation to have enough meaningful benefits to offset costs.
Breaux argues that alcoholic beverages, unlike food products, are purely elective pleasures, and should not be forced to comply with as stringent nutritional regulations.
“It will have absolutely no effect other than to annoy consumers, equally among all brands,” said Rob Frankel, a branding and marketing expert. “There is no information on that label that’s going to affect my purchase decision; it’s not relevant because I’m not buying it for its nutritional content.”
Frankel likened the labels to warnings on cigarette packages. Despite warnings that smoking is addictive, can cause cancer and lead to death, people who want to smoke continue to do so.
“Those people sucking down two packs a day, you think they’re being held off by labels? No,” Frankel said.
Instead, he argued, the labels may work to the advantage of larger companies looking to clear their names of future lawsuits for obesity and diabetes, similar to lawsuits against cigarette manufacturers for lung cancer and emphysema.
“This isn’t about informing consumers, this is about getting alcohol producers off the hook for certain liabilities associated with their products,” he said. “It could save zillions on superfluous lawsuits, that’s where the real money is.”
Frankel said the legislation could also be a ploy by the larger companies to run smaller manufacturers out of business.
“Will the labels serve any purpose? They may,” he said, “but not the stated ones.”
The larger producers such as Diageo that are in support of the bill, however, are advocating for labels on a voluntary basis, so as to provide their customers with the demanded information without severely impacting smaller rivals. Voluntary labels are favored by a majority of industry members.
“Small brewers don’t have ability to be as consistent with their products,” Gatza said. If every batch had to be tested and new equipment purchased, operations would be hindered, he said.
While larger companies may be able to absorb the financial losses associated with new equipment, the smaller players may not be able to sustain the hefty expenses and could be forced to limit products to market, according to Gatza.
In its 2008 comments to the TTB on the proposal, the Brewers Association estimated that the annual cost of compliance with the labeling requirement could be as high as $18,000 for brewers producing less than 1,000 barrels a year and more than $350,000 for brewers making more than 100,000 barrels a year.
In Wine America’s 2008 comments, the group noted that costs for label redesigning, printing and nutrient testing could bring expenses to an estimated $17,000 annually, which amounts to a 3.4% revenue impact on wineries with less than 500 employees that make an average of $500,000 a year.
“It’s the difference between profitability and not being able to make it,” Gatza said.
The TTB has tried to alleviate cost concerns by proposing to delay the effective date by three years from the time the regulation is passed, an effort to give companies time to use up their existing label stocks and prepare for the new design.
It is unclear at this time when the TTB will rule on the labels.