External Influences Affecting the Spirits Sector: Legal

Distilled spirits have a number of laws, regulations, and standards it must adhere to from labeling to serving to those within the Legal Drinking Age (LDA).

Whiskey is subject to a rigorous set of regulations and standards, governing everything from its ingredients and the type of barrel or cask used for aging to the percentage of alcohol by volume. These criteria, among others, collectively define what qualifies as whiskey. The Alcohol and Tobacco Tax and Trade Bureau recognizes 43 distinct types of whiskey, ranging from prominent varieties such as Bourbon whiskey and Scotch whiskey to more specific classifications like a blend of straight rye whiskies or blended straight rye whiskies. While other distilled spirits such as tequila and vodka are not subject to such extensive standards, brandies and cognacs also exhibit considerable variation within their respective categories.

The classification of whiskey and beer is largely influenced by the type of grain utilized in their production processes. Similarly, wine is distinguished based on specific grape varietals. The addition of certain colors and flavors, which must receive prior approval, may be incorporated into a spirit's formulation to achieve the desired taste or appearance intended by the producer or distiller. This pre-approval is provided by regulatory agencies such as the Food and Drug Administration and the U.S. Department of Agriculture, ensuring that all additives are safe for human consumption.

Mandatory labeling regulations require the disclosure of information such as brand, type, ABV percentage, and, when applicable, a statement of age to ensure consumers are fully informed. Within the whiskey category, including a statement of age is permissible; however, strict guidelines dictate the wording used to accurately convey the proportions of straight versus blended whiskey and the duration of aging prior to bottling. For instance, The Balvenie, a well-known single malt Scotch whisky, specifies on its label that the spirit was “matured in two distinct casks” and “aged 12 years.”

As previously discussed in our section "External Influences Affecting the Spirits Industry: Political," the Craft Beverage Modernization and Tax Reform Act (CBMTRA) of 2020 was initially extended through that year and subsequently enacted into law on December 27, 2020. This legislation reduces the federal excise tax (FET) on spirits, beer, and wine for the first 100,000 gallons from $13.50 per proof gallon to $2.70 per proof gallon, with a proof gallon defined as a gallon of spirit containing 50% alcohol by volume (ABV). The Act significantly decreases the excise tax burden for craft producers, thereby allowing greater revenue retention within the industry.

In addition to strict regulations surrounding labeling and composition, marketing practices are also closely monitored within the spirits sector. Restrictions extend to both the content and placement of advertisements, with rules designed to prevent the glamorization of alcohol consumption and to protect underage audiences. For instance, certain networks and publications may limit or prohibit liquor advertisements during programming or in locations where a significant portion of the audience is below the Legal Drinking Age (LDA). These guidelines ensure responsible promotion and help uphold public health standards while allowing producers to communicate their brand messaging within clearly defined boundaries.

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