THE GIST
How beverage alcohol companies can legally describe and label their drinks is at stake in two class action lawsuits against Anheuser-Busch InBev (ABI). Legal filings in Illinois allege that ABI’s Bud Light Platinum Hard Seltzer and Cacti Hard Seltzer make misleading claims about the use of agave—alleging that both hard seltzer brands cause consumers to believe the seltzers contained “a more valued type of agave ingredients” than they, in fact, contain.
The lawsuits are relevant to an alcohol industry in which products such as hard seltzers and ready-to-drink (RTD) cocktails have blurred the lines between traditional categories like non-alcoholic sodas, beers, and spirits. Most importantly, they draw the courts’ attention to the slippery nature of ingredient claims in alcoholic products. Most hard seltzers, RTDs, and many flavored malt beverages (FMBs) are sold at higher prices than domestic beer, creating and relying on public perception that they are premium beverages in order to justify the cost.
Both suits allege that consumers will expect the seltzer to contain agave spirits, when in fact it is made from fermented cane sugar and agave syrup. At issue is whether phrases such as “100% Premium Blue Agave” and “Agave Spiked Seltzer” misled drinkers into thinking the hard seltzers contained tequila, and therefore, paid a premium price for the seltzers because of it. Should the plaintiffs win, or merely succeed in being enough of a legal headache for beverage makers, companies will need to reevaluate the way they try to market these products as premium goods.
WHY IT MATTERS
As traditional beverage category lines blur, it’s easier for consumers to misunderstand which ingredients a given drink contains. In July, alcohol e-commerce marketplace Drizly found that only a third of respondents could correctly define hard seltzer as a malt- or sugar-based product. The same percentage answered that hard seltzer is a “carbonated drink made with liquor like vodka or tequila.”
The question before the Illinois courts is whether ABI is responsible for potential customer confusion through its branding and advertising. Plaintiffs in both lawsuits are being represented by lawyers from Sheehan & Associates, P.C., a law firm that reportedly files as many as two to three similar “food fraud” suits each week. While the law firm’s eponymous lawyer, Spencer Sheehan, tells Law Street Media he is accustomed to losing many of these suits, merely forcing companies to defend against such fraud claims might be enough to change how they market products. “The rise in food-related fraud litigation, led by Sheehan, could eventually lead to companies being more cautious with the claims they put on packaging and more correct labels,” Law Street's Emily Ashcraft wrote in an analysis.
Both of the pending hard seltzer lawsuits contain more or less the same claims: Plaintiffs assert that labeling and marketing of Cacti (the #9 hard seltzer brand in U.S. retail) and Bud Light Platinum Hard Seltzer (#11 hard seltzer brand) are intended to make drinkers think they contain tequila by featuring images of agave plants and phrases including “Made With 100% Premium Blue Agave From Mexico.”
“It all turns on the false and misleading standard: Was it actually false? Was it actually misleading? In this case, they’re alleging it’s misleading, because there is agave in it,” says Shauna Barnes, principal at Kaleo Legal. “They never said there was tequila in it, but was it misleading enough for them to think that it was in there for the premium price point?”
The crux of the case is whether customers misunderstand what’s in a product like hard seltzer due to innocent ignorance, or because drinks makers have actively misled them. But how can plaintiffs prove they’ve been actively misled? “It’s squishy,” Barnes says.
The most important implications of the lawsuit aren’t only for the two brands in question, but for what the lawsuit filing might do to other brands in the hard seltzer, RTD cocktail, and FMB categories. Seeing the potential for lawsuits and not wanting to spend money on legal fees, companies could begin labeling their products more explicitly, say with “seltzer with agave syrup” rather than “agave spiked seltzer.” Barnes says that small beverage companies tend to watch how large companies like ABI label or market their products, and will follow suit.
“Depending on how companies respond to this, you might see some copycat changes where that becomes the new standard in the way we talk about this,” Barnes says. “A lot of the small brands will look to what the other guys are doing and copy it because they assume the bigger brands have got it down.”
To prove that a beverage company intentionally misled drinkers, plaintiffs could cite hypothetical evidence such as emails that reference ingredients’ obfuscation or the desire to confuse customers would be a legal setback to the beverage maker—but there’s nothing to indicate those exist in these two particular cases.
Instead, to bolster their claims, plaintiffs in both cases cite the popularity of tequila and tequila-based beverages, which they claim is what consumers would reasonably think forms the base of Cacti or Bud Light Platinum. The popularity claim isn’t unfounded: tequila is the third largest spirits category in the U.S., behind bourbon and vodka, and sales of agave-based spirits grew faster than any other type. Those bands accelerated almost +20% in 2020, according to data from IWSR, an alcohol data and analytics company.
What’s driving that demand, according to IWSR, are exactly the characteristics that hard seltzers also bring to the table: celebrity endorsements—in Cacti’s case, rapper Travis Scott. However, famous names are also associated with other RTD products (Grammy-winning singer Maren Morris has promoted CANTEEN Spirits, and actress Aisha Tyler is behind the Courage+Stone line of premixed cocktails), and FMBs (musicians Post Malone and DJ Khaled have both promoted Bud Light Platinum Hard Seltzer, and singer Lance Bass has promoted New Belgium Brewing’s line of Fruit Smash Hard Seltzers).
“Multiple factors are driving growth for agave spirits, but the main trends impacting the category include increasing household penetration through celebrities, extending consumption occasions through ready-to-drink (RTD) products, as well as new and exciting flavoured products entering the market,” IWSR research director Adam Rogers recently wrote in a report analyzing the category.
Discovering that the “agave” referenced on the front of the Cacti and Bud Light Platinum Hard Seltzer cans is agave syrup, rather than tequila, requires customers to read the fine print in the ingredients list, which the suits argue is misleading. On Cacti’s website, a scrolling ticker reads “100% PREMIUM BLUE AGAVE FROM MEXICO” with no reference to agave syrup.
“Consumers buying alcoholic beverages are more aware of agave spirits than agave sweetener and are not looking for alternatives to sugar,” plaintiffs claim in Read v. Anheuser-Busch InBev Worldwide Inc.
These lawsuits typically move slowly, according to Barnes, who says she wouldn’t expect a response or motion from ABI for up to six months. There’s also the potential that ABI and the plaintiffs could settle out of court before an actual trial begins.
But this isn’t always easy, given the blurring of alcohol categories and products. Some products, such as hard seltzer versions of the typically tequila-based ranch water cocktail, are intentionally brewed with a malt or sugar base to afford the products lower excise tax rates and greater potential for retail placements. Ditto canned cocktails that are made with wine, rather than spirits. But these raise potential questions for labeling standards, should courts find that these products are misleading drinkers with their marketing claims.
And, given changing statutes in various states (especially California), Barnes says these types of class action suits against labeling claims on consumer packaged goods are becoming more common.
“There are whole plaintiffs’ firms whose whole jobs is to troll the internet or liquor stores’ shelves,” she says. “You get one win and a lawyer can get a good payday.”
Words by Kate Bernot