Phusion cuts a deal with the FTC


Dear Client:

You will recall that last year, when the FDA and the TTB were strongly urging caffeinated FMBs to take the stimulants out of their beverages and clear the shelves immediately of product, the Federal Trade Commission also issued a letter focusing more on the single serve container size and alcohol content, warning Phusion Projects (Four Loko) and others that selling such high alcohol products in such large containers "may constitute an unfair or deceptive act or practice in violation of the Federal Trade Commission."

That letter has been a constant and uncertain cloud over FMB makers. But Phusion Projects has reached an agreement with the FTC regarding the packaging of its FMBs, BBD has learned. The consent order, which was approved for public comment today by the FTC, resolves allegations made by the FTC regarding some of Phusion's marketing practices.

THE DEAL. Under the agreement, Phusion will develop a new, resealable can for its flavored malt beverage products that contain the equivalent of approximately 2.5 regular beers (12-ounce, 5 percent alcohol-by-volume (ABV), which includes Phusion's current 23.5-ounce, 12 percent ABV Four Loko products. The new resealable can technology, which Phusion co-founder Jaisen Freeman told BBD last night has never been seen before in the bev-alc space, is expected to be available in stores by late next spring. The thinking is that a resealable package drives home the notion that these products aren't meant to be consumed in one sitting. In addition, the cans will have additional label information that compares the contents of a can of Four Loko to 12-ounce, 5 percent ABV beers. The additional label will affect only Four Loko in 23.5-ounce cans with 12% ABV.

The agreement, which includes no admission of wrongdoing, is subject to a 30-day comment period before it can receive final approval and become effective.

"Even though we reached an agreement, we don't share the FTC's perspective and we disagree with their allegations. We don't believe there were any violations. However, we take legal compliance very seriously and we share the FTC's interest in making sure consumers get all the information and tools they need to make smart, informed decisions," said Jaisen. "That's why the measures we agreed upon made sense to us and why we worked with the Commission to develop and implement them."

Jaisen told BBD that "[fellow co-founder] Chris and I have been working diligently on this for the past several months to get some of these issues behind us." The agreement is just between Phusion and the FTC, so it remains to be seen how this affects other FMB products. Jaisen added that throughout the negotiations with the FTC, it was important to Phusion that there be no disruptions in the marketplace due to the changeover in packaging. "It was important to us that there be zero issues or pressure on our distributors and retailers. There will be a period where both products will be on the shelves, but the UPCs will remain the same." The price is also the same.

Jaisen also said that their new Poco Loco product is "doing very well in the marketplace so far, and we are very excited about some new innovations that will be coming soon....we will remain proactive in engaging regulatory authorities....I want our distributor and retail partners to know that we are going to be here for a long time. We aren't going anywhere."


COUPONING COMPANY Catalina announced that it is expanding its nationwide point-of-sale media network into convenience stores, following a successful pilot program with technology partner, Outsite Networks, in 500 c-stores. The Catalina Network is currently located at checkout in more than 26,000 retail grocery, drug and mass outlets throughout the United States. The new c-store system features a consumer-facing printer that can issue promotional messages and coupon offers directly to consumers based on their individual purchase behavior.

Until tomorrow, Harry

"At one point, what was supposed to be a dry nation had become the number one importer of cocktail shakers." -Documentarian Ken Burns, Prohibition airs this week on PBS

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