27 Jan Bi-Suited: Sazerac is Sued Over Fireball Cinnamon and Sues Over RNDC Non-Payment
by Mark E. Lasbury for Indiana On Tap
This isn’t an artisan spirits story, but it is a peak into the business side of big liquor and gives the spirits fans out there something to consider. Sazerac is a large distiller based in Kentucky and Louisiana, with over 400 labels for sale in every state of the country. Known less by the Sazerac name than by the names of its brands, it may surprise people to know that Sazerac products include many of the premium bourbons and whiskys, including Pappy Van Winkle, Buffalo Trace, Weller, Blanton’s, Eagle Rare, and others.
As good as those brands are, and as much revenue as they are responsible for, none of them are Sazerac’s biggest seller – that prize belongs to Fireball Cinnamon Whisky, by both volume and revenue. Sold in volumes from the 50ml mini-bottle up to a liter, Fireball Cinnamon Whisky is a huge moneymaker. From a previous story I wrote about min-bottles in general (link here), the State of Maine in 2019 saw the purchase of over 10 million mini-bottles and 40% of those were Fireball. If Maine is representative of the country, then somewhere north of 200 million bottles of this single brand are sold yearly in the US.
Early in January, a federal court in the state of Illinois took on a lawsuit filed by several state residents against Sazerac. The lawsuit is trying to gain class-action status, and while it concerns Fireball Cinnamon Whisky, it’s not a lawsuit involving the whisky itself, rather, it’s about the lack of it. It turns out that this about similar looking products within the Sazerac labels.
image credit: Sazerac
First released in 2020, Fireball Cinnamon (as opposed to Fireball Cinnamon Whisky) is a very different product than the flavored whisky that everyone knows and many people love. Losing the word “Whisky” in the name is a big deal, because whisky is a distinct spirit with a definite definition. Not using “Whisky” in the name means that Fireball Cinnamon is nowhere near the same liquor. And that’s the problem.
Whisky (or whiskey) is defined as a spirit distilled from cereal grains and aged in wood, and this is the base liquor for Fireball Cinnamon Whisky, with the addition of cinnamon flavoring. Fireball Cinnamon, on the other hand, is a flavored malt beverage (FMB, more about these beverages here), with flavorings added. FMBs are based in a neutral spirit, often from fermented and distilled grain or simply from fermented/distilled sugar.
The different ingredient list and time involved makes FMBs much cheaper to make than by selecting grains/cereals, brewing them, distilling them, and aging them in barrels or wood. Yet, the pricing of the mini-bottles on the shelf is about 99 cents each, similar or even higher than Fireball Cinnamon Whisky mini-bottles. That’s problem #1. True, that may be more about the retailer than the manufacturer, but it wouldn’t be possible without the Sazerac-based decisions issues explained below.
The labeling on Fireball Cinnamon is problematic. In small print, the label lists “with natural whisky & other flavorings.” It would have been much more appropriate if it stated, “with natural whisky flavoring, as well as other flavors.” The reason for this is because the Fireball Cinnamon can’t really have much whisky in it at all. FMBs are limited in the volume of their flavoring; no more than 1.5% of the total liquid can come from the flavoring agents. For a 50ml mini-bottle, that means that BOTH the natural whisky flavoring AND the cinnamon flavoring can only equal a maximum of 0.75 ml (that’s less than 15 drops total flavoring).
Fireball Cinnamon Whisky is on the left while Fireball Cinnamon is on the right. Can you tell the difference? image credit: Walter
It’s very unlikely that the “natural whisky flavor” then actually comes from whisky. This conclusion is supported by the alcohol levels of each product. Fireball Cinnamon Whisky is 66 proof, while the Fireball Cinnamon FMB is only 33 proof. Yet pretty much the same price gets charged for both.
Labeling is probably the most glaring problem and is a big basis for the lawsuit. Look at the two mini-bottles show in the image to the left. One is much more expensive and labor/time intensive to make, but if you were grabbing things from the aisle, would you pick out the difference? The coloring, size, shape, and images of the labels and bottles are nearly identical, only the small print shows the difference. You could easily end up with a much cheaper product while paying the premium price, and getting only half the alcohol as well.
The profits from the lookalike Fireball Cinnamon are probably even greater than suspected because it can, and is, sold in many stores that cannot legally sell liquors (gas stations and grocery stores in many states). However, this is moot in Indiana as it is not listed as one of the states included in the class action lawsuit. The lawsuit now stands at north of $5 million in damages, but I am guessing that the number will grow as plaintiffs and sales increase.
Meanwhile, Sazerac is bringing its own suit against Republic National Distributing Company (RNDC). Prior to August of 2022, RNDC and Sazerac had worked together for more than a decade and in more than 30 states. RNDC distributed products for Sazerac, its lower priced products all the way up to its most premium bourbon labels. Sazerac claims that RNDC owes them more than $38.6 million for stock distributed to retailers since after September of 2021, the date at which the relationship between the two companies was altered.
image credit: RNDC
Sazerac claims that reduced sales, bad mouthing of Sazerac to retailers, raised prices, canceled promotional activities, and demands that retailers buy premium products in order to be able to order lower priced products (called “tie-in” sales) are what forced them to adjust the relationship with Texas-based RNDC. They switched to a flat per case payment, but six months into that arrangement, RNDC reneged on the agreement and stopped all payments.
Sazerac also claims that the continued non-payment will run their losses to $48 million or more in the weeks to come due to lost stock and lost interest. The product was likely sold to RNDC in December of 2022 or before, and then sold by RNDC to retailers, but without payment on the stock to Sazerac.
The two lawsuits involving Sazerac which were both filed during the week of January 7-13: not a great way to start the year. The Fireball Cinnamon situation seems to be a straight up horrible decision on the part of Sazerac, while the RNDC lawsuit seems to be a tit-for-tat business squabble. The two combined have already made it harder for Sazerac to maintain distribution of its products, and may make it harder to find them on shelves for a while. Let’s hope that everything works out – our son would be shattered if he can’t easily get his Eagle Rare from Buffalo Trace.
Information for this piece taken from: https://vinepair.com/booze-news/sazerac-rndc-lawsuit-2023/, https://www.thedrinksbusiness.com/2023/01/sazerac-files-us38-6-million-lawsuit-against-its-distributor/, https://vinepair.com/booze-news/fireball-class-action-lawsuit/, https://www.brewbound.com/news/sazerac-hit-with-class-action-lawsuit-over-malt-based-fireball-cinnamon-product/
No Comments