Alcohol and music, like peanut butter and jelly, just go together. And, the potential income that alcohol generates is nearly unlimited because alcohol is often marked up substantially – sales of alcoholic beverages at live music events can account for 80-90% of the venue’s revenue!
Unfortunately, the artist does not enjoy any of the alcohol revenue generated by the venue due to legal regulations and restrictions. Luckily, there is an opportunity for a musician to benefit from the alcohol markups by venturing into the alcohol industry. Many musicians and other celebrities have been taking matters into their own hands by releasing their own brands of alcohol. Look no further than Nick Jonas, Jimmy Buffett, and Luke Bryan for examples of how this can be an extremely profitable move by any musician. So you want in on this revenue stream? Well, let’s get started…
The Devil Went Down to Georgia – To Find a Distillery
The first step to owning an alcohol brand is to find an establishment to produce the alcohol for you. Most musicians that own their own alcohol brands do not actually manufacture the alcohol. It is costly to purchase the equipment and supplies necessary to operate a distillery, not to mention the skills required to develop recipes and safely distill alcohol. Thus, a well-established distillery capable of taking on the manufacturing process will be necessary. The alcohol can either be manufactured in the U.S. or imported from a foreign country. Most distilleries either have programs to allow for private-label alcohol or are interested in an arrangement like this. It is a win-win for them – they have sold the alcohol before it is made. The best place to start is to contact your local Distiller’s Guild to get some contact information for local distilleries or contact your favorite distillery. Once you have identified your distillery, a contract will ensure they provide the alcohol you want, the quality you want, at the time you want. The distillery may have a contract for you to review and sign, but if not, have your attorney draw one up for you.
Walk the (Permit) Line
Once you have found a licensed distillery to produce your alcohol, it’s time to get your permits. The alcohol brand will need to hold a Basic Permit from the Alcohol and Tobacco Tax & Trade Bureau, or TTB. There is no cost involved, but it can be a time-intensive application process. Once the TTB Basic Permit is granted, the brand can go to their state alcoholic beverage regulatory agency (“ABC”) for authorization to begin sales in the state. Each state has different requirements and different permits for accomplishing the goal of selling your alcoholic beverage in the state, so it is extremely important to hire an experienced alcoholic beverage attorney to assist with identifying and obtaining the proper permit. For example, in Tennessee, the permit would most likely be a Non-Manufacturer/Non-Resident License.
A Boy Named Sue: Naming Your Brand
Once you have the proper permits, you will likely need to apply for a Certificate of Label Approval (COLA). The COLA is often required to ensure that the label affixed to the alcohol packaging complies with all government regulations related to labeling and will not mislead consumers. The bottler of the product will frequently handle the COLA application process and actually hold the COLA under its TTB permit, but it is always good to understand the process as you design the labels for your product.
Another essential point about naming your product is registering a trademark. A trademark is a brand identifier. If your intention is to sell your product in multiple states, then you will want to secure a federal trademark from the United States Patent and Trademark Office. Anyone releasing alcohol brands to the market should conduct a trademark search and clearance to ensure that the new brand is not infringing on an existing trademark.
If You’ve Got the Money, I’ve Got the Time: Distribution
By now, you have signed with a distillery to produce your alcohol, you have your permits, and your brand name and labels are ready to use. Soon your distillery will present you with your first bottle of branded alcohol. So how do you sell it? Unfortunately, this is one of the most complicated questions you can ask. Alcohol manufacture, distribution, and retail are one of the most highly regulated industries in the U.S. Everyone from the manufacturer to the retailer must have the proper permits to sell alcohol. Your permit allows you to hold an alcohol brand and conduct sales on a substantially more limited basis, i.e., to the distributor or wholesaler. Only a licensed wholesaler/distributor can take the alcohol to licensed retail outlets like liquor stores, bars, and restaurants. Every state has licensed alcohol distributors that are able to get the product to the various locations your product needs to be, but you will want to take your time finding a distributor. In most states, once you sign with them, you are contractually and legally obligated to remain with that distributor in that location for as long as the brand exists, and it is nearly impossible to get out of those arrangements. You will also very likely have multiple distributors in each state. It will be imperative to have someone manage these relationships for you. Most likely, you will want your brand sold in every venue you perform, but that is ultimately up to the venue to accomplish.
Always on My Mind
So if you are a musician, manager, promoter, record label executive or anyone in between, contact us to learn how to develop an alcohol brand.
About the Author:
Rachel Schaffer Lawson is Of Counsel in Dickinson Wright’s Nashville office. She has over ten years of experience serving more than 300 businesses in a wide range of industries, including the alcohol and hospitality sectors, offering a range of legal services, including business formation, litigation, trademark search and registration, contracts and agreements, and beer and liquor licensing. Rachel can be reached at 615-620-1715 firstname.lastname@example.org, and her bio can be found here.