Some tips on implementing a compliant freshness pull-date reimbursement or exchange program that isn’t a consignment violation.
Drinkers love fresh beer so much that they go so far as to open sealed cases in a grocery store to check the canned on/bottled on dates in the grocery store to ascertain whether they’re getting a recent run or something that’s been sitting on the shelves for a few months. There’s an entire website dedicated to finding out where to look and how to understand any codes over at BeerDates.Com
Many brewers expect their wholesalers to rotate fresh product for stale, or simply pull it from retailer shelves when it has reached a set pull-date (overage date, out-of-code date, freshness date) which is where the TTB has something to say about these quality control standards as pulling anything back or selling it with a privilege of return would likely run afoul of the Consignment sales section of the Federal Alcohol Administration Act without a specific ruling on the activity.
Luckily, the TTB has issues and revised such a ruling for the practice of instituting and expecting your beer distributor to abide by your pull-date program or your freshness – quality control – program. It’s been a little over twelve months since the TTB published its revised ruling – Freshness Dating and Allowable Returns of Malt Beverage Products under the FAA Act (TTB Ruling 2017-2) – and the sheer number of craft beer distribution agreements lacking freshness standards and quality control provisions mandating rotation of fresh stock or having freshness tables with mandatory pull-dates for brands that we’ve seen passed around is simply shocking given that the ruling’s advice was to ensure such provisions or policies are in place in order to take advantage of the ruling – which was specifically:
Held, subject to the conditions described above, TTB considers the exchange of an identical quantity of the same brand or the return for cash or credit against outstanding indebtedness for freshness concerns as a return by a trade buyer for ordinary or commercial reasons under 27 CFR 11.32.
Specifically, with regard to practices and policies regarding this form of quality control for malt beverage products, the TTB determined in the ruling that under certain express conditions, it would view either the return of beers for cash or credit against outstanding indebtedness, or exchange of beer out-of-code, for freshness reasons (think seasonal beers or out-of-code beers) as a return for ordinary commercial purposes (27 CFR 11.32). These conditions are:
- The brewer has policies and procedures in place that specify the date the retailer must pull the product;
- Such brewer’s freshness return/exchange policies and procedures are readily verifiable and consistently followed by the brewer;
- The container has identifying markings that correspond with this date; and
- The malt beverage product pulled by the trade buyer may not re-enter the retail marketplace.
Despite the fact that many craft brewers mandate consistent application of these types of freshness quality control measures, few are writing them down to document these procedures, or including them in their beer distribution agreements or adding them as addendums to ensure the policy is there, in writing, which would go a long way towards proving what the the policy is and that it is applied consistently to satisfy anyone asking about compliance with the conditions of the TTB ruling.
For instance, simple clauses like these ones contained in a publicly filed Brewdog distribution agreement (scroll down through the materials to see the beer distribution agreements at the bottom) can be utilized in conjunction with a simple notation about your dating standards:
6.4 Product Quality. Wholesaler must exert diligent and effective efforts to protect the quality of the Products distributed under this Agreement and to follow all BrewDog quality-control instructions. Wholesaler’s obligations shall include, but are not limited to:
(a) Following all reasonable quality assurance standards instructions set forth by BrewDog from time to time. Such standards shall include, without limitation, avoiding practices that would cause Customers or consumers to receive Products exceeding their code date (“Overage Products”), retrieving Overage Products from retail accounts, and promptly reporting to BrewDog any reported problems in the quality of the Products. BrewDog’s specific code dating system and policies are set forth in Schedule F. At least once every month, Wholesaler and BrewDog must separately conduct market quality inspections at no fewer than 20 retail accounts to which Wholesaler sells Products to ensure that no more than 12% of the audited products consists of Overage Products. The parties must share with each other the results of their respective inspections within five (5) working days of each inspection. If either party’s inspection finds that more than 12% of audited products are Overage Products, BrewDog must send Wholesaler a written notice of deficiency. BrewDog and Wholesaler must then conduct separate follow-up inspections within fifteen (15) days of the date of the notice of deficiency. If either of the follow-up inspections finds that more than 12% of audited products are Overage Products, BrewDog must place Wholesaler on probation. BrewDog and Wholesaler must then conduct third inspections within fifteen (15) days of the date BrewDog placed Wholesaler on probation. Upon either of the third inspections finding that more than 12% of audited products arc Overage Products, Wholesaler agrees that good cause under any applicable state statute and Section 8.2 of this Agreement is established and, accordingly, that BrewDog has grounds to terminate this Agreement in accordance with applicable state law and Section 8.2 of this Agreement.
(As an aside, note the teeth in that quality control provision – a violation amounts to good cause).
The plain text of the referenced Schedule F is simple and easy:
CODE DATING STANDARDS
Each BrewDog USA Inc. brand and package has a specific shelf life in conformity with the Julian/Laser Date Code system set forth herein.
150 days for package and draft unless specified
Another method would be to have a page of your website like Firestone Walker or a downloadable PDF like this or this one from Constellation Brands to tell people about the code dates and combine that with contracting principles in the beer distribution agreement delineating how quality control is to be implemented and what those measures are.
The TTB has made it rather easy to obtain the benefits of rotating fresh beer for old beer to preserve your brewery’s image and reputation. The last thing you’d want to do is to fail to meet the criteria for being allowed to perform that rotation based on a simple want of failing to have an express policy.
[…] living up to its distribution agreement obligations – rotating out stale beer for fresh beer (if this isn’t in your craft beer distribution agreement, it should be). In this recent opinion from the Illinois Appellate Court, Byrne v. Hayes Beer Distributing […]