Launching a new alcoholic beverage product is exciting, but it comes along with legal rules that are easy to overlook. Here are five of the most common legal mistakes new distributors make when bringing a brand to the market:
Assuming a federal permit is enough
Many distributors assume that securing a federal permit is enough. However, each state has its own licensing requirements. This misconception occurs because distributors don’t realize that the U.S. operates under a dual regulatory system where both federal and state governments can regulate the same business activities. What’s legal federally may still require additional state-specific permits, licenses and compliance measures.
Solution: Distributors must obtain separate permits in every state where they plan to operate.
Offering incentives to retailers
It is generally illegal both federally and in the states to give retailers something of value in exchange for shelf space or promotion. This can include cash, free products, signage and even paying for menu placement. These laws stem from “tied house” regulations originally designed to prevent alcohol manufacturers from controlling retail outlets. Violations can result in hefty fines, license revocation and criminal charges.
Solution: Research state-specific tied house laws and work with legal counsel to ensure all retailer agreements comply with local regulations before offering any incentives or promotional support.
Running the promotions uniformly across all states
Marketing rules vary widely. Something as simple as providing signage or a display might be legal in one state and prohibited or restricted in another. This applies to tastings and consumer events as well. Each state has different regulations governing promotional activities, contest rules, sampling requirements and consumer engagement practices.
Solution: Develop state-specific marketing strategies and review all promotional campaigns with local legal counsel before launch to ensure compliance with each jurisdiction’s unique rules. For easy-to-understand guidance in all states, check out SetTheBarApp.com. These rules often apply to suppliers as well.