How can I have product using contract distilling?

By - December 26, 2016 | Alcoholic Beverage Law | Email Rob Pinson

Contract Distilling - BeerBon Blog
Contract Distilling – BeerBon Blog

In what’s referred to as “contract distilling,” a person hires an existing distillery to make products for them. The person might provide a recipe, container specifications, and the TTB-approved label while the distillery does all the rest for a fee. For alcoholic beverage producers who want to make new products, but don’t have the permits or the capacity, outsourcing to another facility can be the perfect solution. Contract distilling can also be great way for novices to ease into the distilling business, since the zoning, equipment, and manufacturing procedures are all taken care of by the contractor.

However, contract distilling does have its downsides. The profit margins are smaller, and unlike operating your own distillery, you don’t have any control of the contractor’s operations or production schedule. To get the most out of contract distilling, it’s important to do your due diligence. Before selecting a partner, consider the following:

Licensing – This isn’t usually an issue with established distilleries expanding their capacity, but your company may need to obtain a license with your state liquor agency (even though the contracted distillery is the one manufacturing spirits). If your company will be handling the distribution, you may also need a federal wholesaler permit from the TTB and additional licenses from the state. Whether you’re an investor with a great idea for whiskey or an established distillery that wants to dabble in a new type of spirit, you should speak with a lawyer before speaking with distilleries to contract with. That brings us to our next item…

The Contract – When you partner with another distillery to create your products, you should evaluate the contract to make sure all of your bases are covered, and negotiate where necessary. Some things to account for include intellectual property, record keeping and reporting, TTB application handling, and tax responsibilities.

Evaluation – When vetting potential distilleries, some questions to keep in mind include:
• How flexible are their production scaling capabilities?
• Do they have distribution partnerships you can leverage?
• Are they fully licensed with the TTB, FDA, and state/local authorities?

In the end, try to learn as much as you can about the potential distillery, ensure both parties have their paperwork in order, and protect your interests via contract. That way, you’ll be in the best position to enjoy the benefits of contract distilling.

A Few Comments and Thoughts on the Fires in East Tennessee

By - December 22, 2016 | Alcoholic Beverage Law | Email Rob Pinson

Electrical Short May Have Caused Gatlinburg Fires
Electrical Short May Have Caused Gatlinburg Fires

I have procrastinated too long on this, and to all reading this and all those impacted by the fires in East Tennessee last month, I apologize. This was a terrible tragedy, especially with the loss of at least twelve lives. The alcohol industry members were also impacted. Some of them suffered at least some damage and we have heard that numerous employees have lost their homes in the fire. More on this later. I am saddened to hear that homes were lost this close to the Christmas season. I have no doubt that many hidden Christmas presents were lost in the fires, as well as personal belongings, food, clothes, etc. Hearing about this loss caused me to donate money to several organizations to help relief efforts and I encourage everyone reading this to dig a little deeper into their pockets and donate at least something. It will take a while for the area to recover; however, the area has opened back up and is ready and anxious to return to its normal level of tourism. I encourage everyone to go visit the area as soon as possible and spend money in the various shops and stores. Take your kids to the aquarium in Gatlinburg and ride the Ferris Wheel in Pigeon Forge. This is one of the best and easiest ways to help the entire area recover since it is so reliant on tourism. Please do not cancel your plans to stay in the area. There is still plenty to do while visiting. I also encourage people to buy the really awesome “Smokies Strong” merchandise to further help relief efforts. http://govols.shgstores.com

Now, back to focusing on the alcohol industry. I know two industry members have set up relief funds for their employees. All amounts collected go to the employees of these companies.

Ole Smoky: Go Fund Me https://www.gofundme.com/displaced-families-of-ole-smoky

Sugarlands:

1) Monetary donations can be mailed to:

CNB, 2661 Parkway, Pigeon Forge, TN 37865

Sugarlands Employee Emergency Assistance Fund – Account Number 4036124

2) Gift card donations can be mailed to:

Sugarlands Employee Emergency Assistance, C/O Sugarlands Distilling Company,

P.O. Box 1517, Pigeon Forge, TN 37865

If any industry member has a fund to add to this list, please e-mail me at rpinson@bonelaw.com

The impact of this tragic event will not be fully realized for some time. I can only imagine how much production has been slowed down by the fires. And since the local members are very dependent on foot traffic for sales, the slow return of tourists will only further negatively impact these businesses. I encourage everyone to go visit the area as soon as possible and support the local economy by spending money, especially that Christmas money you got from your grandmother or that bonus money you got from your employer. Spending it in the area on something you like will benefit both you and the residents of the area.

To members of the impacted community, please let us know how to help and we are here for you. Stay Smokies Strong and have a Merry Christmas!