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DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau

Industry Circular

Number: 2010-1

Date: January 13, 2010

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Alcohol Beverage Sampling Programs Target Advertising, Labeling, and Contents Compliance

To:   Proprietors of Beverage Distilled Spirits Plants, Bonded Wineries, Bonded Wine Cellars, Taxpaid Wine Bottling Houses, Breweries, Importers, and Others Concerned.

PURPOSE

This circular announces the establishment of two new market-based sampling programs by the Alcohol and Tobacco Tax and Trade Bureau (TTB).  Through these two initiatives, the Alcohol Beverage Sampling Program and the Alcohol Beverage Advertising Program, TTB will determine the rate of compliance by the alcohol industry with Federal alcohol beverage laws and regulations regarding advertising, labeling, and product content on an annual basis.  TTB conducted pilot programs in fiscal year (FY) 2008, with our first focus on distilled spirits products.  The results of the two pilot programs are outlined in this circular.  TTB concentrated on malt beverage products in FY 2009, and the programs will focus on wine in FY 2010.

It is each industry member’s responsibility to comply with all labeling and advertising laws and regulations concerning its products as found in 27 CFR parts 4, 5, 7, and 16.  TTB’s sampling programs will identify areas of non-compliance, and TTB will raise awareness of these issues with regulated industry members so they may make any changes necessary to ensure that they are in compliance.

SAMPLING PROGRAM METHODOLOGY

Alcohol Beverage Sampling Program:  Label and Content Review

For the Alcohol Beverage Sampling Program (ABSP) in FY 2008, TTB obtained a list from an independent source, Information Resources, Inc., that identified domestic and imported distilled spirits products currently sold in the United States.  We used a stratified random probability sampling process to identify products from this list for marketplace procurement, analysis, and evaluation as part of the new Alcohol Beverage Sampling Program (ABSP).  We then applied standard descriptive statistical techniques to produce accurate estimates of compliance across the distilled spirits industry.

TTB reviewed the label of each product purchased for the ABSP to ensure that it contained all legally required information and matched it to an approved certificate of label approval (COLA).  TTB also tested each product for percent alcohol by volume (ABV), fill, solids, total acids, fusel oils, methanol, ethyl acetate, and where applicable sodium and potassium and product specific analyses to ensure that what was described on the label was what was actually inside the container.  This allowed TTB to determine if the product was correctly labeled.

Alcohol Beverage Advertising Program:  Advertising Review

The new Alcohol Beverage Advertising Program (ABAP) estimates overall advertising compliance by beverage type (i.e., distilled spirits, malt beverage, or wine) and media type (i.e., television, radio, print, internet other than paid ads, and outdoor) using basic statistical analysis of domestic producers’ and importers’ advertising selected through random stratified sampling procedures.  In FY 2008, an independent source, Competitrack, provided a list of distilled spirits television, radio, print, and outdoor ads that recently appeared in the marketplace.  This list served as the sampling frame from which the ads for statistical analysis were randomly selected.  A TTB database of industry members served as the sampling frame from which industry members’ websites were randomly selected for evaluation.

After deriving the samples from those two sources, TTB reviewed all ads to determine their compliance with Federal regulations.  Examples of the advertising information examined included, but were not limited to:  Name and address of the responsible advertiser; statements of class and type; distinctive designations or other statements that are inconsistent with applicable law and regulation or with approved product labels; statements that are false or misleading; statements, designs, or representations that are obscene or indecent; label depictions used in advertisements that are not approved product labels; depictions of the American flag; statements that make misleading curative, therapeutic, or other health related claims; incorrect statements of alcohol content; and references to carbohydrates, calories, fat, protein, and other macronutrient or “component” claims without a Statement of Average Analysis.  We then applied widely-accepted statistical analysis procedures for producing accurate estimates of compliance across the distilled spirits industry.

Results of the FY 2008 Alcohol Beverage Sampling Program for
Distilled Spirits Products

Label Compliance

  • 88 percent* of the distilled spirits products’ labels matched approved COLAs and were in compliance with Federal alcohol beverage laws and regulations for distilled spirits.
 

Findings:

  • Reasons for non-compliance included:
    • Back and neck labels that were different from approved COLAs.
    • Statements of composition that did not match approved COLAs.
    • Net contents were not blown into bottle as indicated on the approved COLA application.
    • Legibility issues.

Product Label versus Content Compliance

  • 62 percent* of the tested distilled spirits’ contents matched the labeled description and were in compliance with Federal alcohol beverage laws and regulations for distilled spirits products.
  • 95 percent* of the content violations were the result of the sample being either over-proof or under-proof beyond established tolerance levels, when compared to the proof statement on the product’s label.
  • The rate of marketplace compliance with Federal alcohol beverage laws and regulations for distilled spirits products regarding product content matching the labeled description is 98 percent*, excluding minor proofing issues.

Findings:

  • The alcohol content statement was the most common reason for distilled spirits products’ contents differing from what was stated on the label.
  • Only two distilled spirits products were found to be under-proof and should have been labeled “diluted.”

Overall Findings

  • We found that imported distilled spirits beverage products were just as likely as domestic products to be found compliant in both labeling and lab-tested content.
  • The overall marketplace compliance rate for distilled spirits product labels together with the compliance rate for consistency between the content and the label, excluding samples with inaccurate proof statements, is 87 percent.
  • Out of all the noncompliant samples, the vast majority (86 percent) were noncompliant due to contents not matching label description.

Results of the FY 2008 Alcohol Beverage Advertising Program for Distilled Spirits Products

  • The compliance rate for all distilled spirits advertisements with Federal alcohol beverage advertising laws and regulations is 82 percent*.

Findings:

  • The top reasons for noncompliance of ads are:
    • No alcohol content statement for the advertised beverage (45 percent of noncompliant ads); and
    • No name or address for the responsible advertiser (58 percent of noncompliant ads).
  • In each media type, the top reasons for noncompliance of ads were:
    • No commodity statement (“Distilled from…”) in radio ads;
    • No class or type statement in internet ads;
    • No alcohol content statement in radio and internet ads; and
    • No name or address for the responsible advertiser in radio, internet, and print ads.

ON-GOING PROGRAM AND FOLLOW-UP

Using both the Alcohol Beverage Sampling Program and the Alcohol Beverage Advertising Program, TTB will review each alcohol beverage commodity—distilled spirits, wine, and malt beverages—on a three-year cycle for comparison purposes.

  • TTB emphasizes that it is the responsibility of the industry member to comply with all applicable laws and regulations.
  • When TTB finds violations of Federal alcohol beverage laws and regulations via these programs, TTB will contact the responsible industry member and take appropriate enforcement action, which may include permit action or action relating to additional tax liability.
  • It is our goal that the sampling program results will improve our capability to more effectively target noncompliant industry members.

QUESTIONS

If you have any questions about the Alcohol Beverage Sampling Program, please contact the Market Compliance Office at one of the following addresses:

Mail:       Alcohol and Tobacco Tax and Trade Bureau
               Advertising, Labeling, and Formulation Division – MCO
               1310 G St, NW, 4th Floor West
               Washington, DC 20220

Phone:  (202) 453–2250 or (866) 927–2533 (toll free number) and press “5.”

E-mail:   market.compliance@ttb.gov.

Fax:    (202) 453–2873

*All marketplace compliance rates are calculated with 95 percent confidence.

All marketplace compliance rates are calculated with 95 percent confidence.

John Manfreda
John J. Manfreda
Administrator
Alcohol and Tobacco Tax and Trade Bureau
 
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