Control the Control-ables
A Guest Article by Rhonda Kallman
Well, on this topic I can speak from experience…many times over! One event that happened is worth sharing, if only to highlight that there needs to always be Plan B, C, D, Etc.
Given that I had been in the beer industry for 15 years, I expected the battle for shelf space, for recognition from distributors and for the financial backing to sustain a new brewing business wasn’t going to be easy. I remembered what it was like how Jim Koch and I had to bootstrap Sam Adams and how that brand started as a spit in the market. Here I was, in 2001, prepared to go at it again by starting a new beer company that I hoped would be an incubator for the beer industry.
What I had not prepared for was the government intervention, specifically the FDA, 10 years into the start of New Century Brewing Co. You can’t control government regulation, and you can’t control timing. And timing was not on my side when I introduced New Century Brewing Co, literally launching the company in Las Vegas at a National Beer Wholesalers convention on the eve of 9/11. Unbeknownst to me, that was the start of a 10-year doom loop, both personally and professionally. As there are many stories to tell, I’ll share one in particular in this post.
After being at the forefront of the craft beer movement, innovation is part of my DNA. In 2003, I had my radar up, as I always do, particularly when I’m in places where people are consuming alcohol and having a good time (tough job, though someone has to do it)! I realized that the brands that were being consumed (i.e., Starbucks, Red Bull and Mountain Dew Code Red) all had one thing in common – caffeine. It struck me that in a then $100B beer industry there are no caffeinated options for beer lovers, who love the taste of beer though may want a pick me up at some point of the day or night.
With this new epiphany, I picked up the phone and called my partner, Dr. Joseph Owades (credited with the invention of light beer in 1967) and asked him if he could make me a beer with caffeine. He literally hung up on me! So, I called him back and walked him through the business reasons why this was a good idea. Two days later, he called me back “we can do this” he said! My investors and advisors were elated as well “if you can pull this off, you’ll should have no problem getting this business capitalized properly, finally)”.
After filing the formula with the federal government, it became a waiting game. What normally would take 30-45 days, became 3-4 months, as it was something that hadn’t been done. Finally, the day came when the TTB (Trade and Taxation Bureau the agency that rides herd over alcohol—formally the BATF) approved our formula.
Moonshot ’69 was born -- an all-malt pilsner style beer with 5 percent alcohol and 69 milligrams (the year the astronauts landed on the moon) of natural caffeine. This was clearly innovation in beer, which some would argue hadn’t happened since Dr. Owades’ recipe became Miller Lite in early 1970s.
After gaining process patents in four countries, including the US, for adding caffeine to beer and ale, we were going full on with this brand. In fact, 7-11, authorized a test of two SKUs of Moonshot ’69 in 800 of their stores nationally. That was the validation we needed. Although still extremely capital constrained, we set up distribution options in eight new states. After 10 years, being cash flow positive was within sight!
Two industry giants were finally taking notice of what little New Century Brewing Co was up to and decided it would be prudent to have an incubator that was on their team. This was something I had been working towards my entire career! During the time that we were negotiating our deal that would allow us access to their network, two major unforeseen, unimaginable things were happening: Both of the industry giants were in the midst of a takeover and/or forming a joint venture with other industry players. These deals were in the 10s of billions of dollars.
At the same time, there were forces trying to stop the emergence of other caffeinated alcoholic beverages, namely Four Loko, a jumbo 23.5-ounce can packed with 12-percent alcohol and 135 milligrams of caffeine. That’s like having four or five beers, a Red Bull and a shot of espresso. Four Loko had proliferated on college campuses and were among the top sellers in every convenience store nationally. Not only did they end up using our patented process, Moonshot and Four Loko were drinks clearly in an entirely different class. Moonshot was for beer lovers who wanted something different. And besides, mixing a little caffeine with alcohol was innovative in beer form, but nothing new. Take Red Bull and vodka, coffee drinks, even Twisted Tea. People have been drinking caffeinated alcohol for decades.
As the TTB had approved our mark on four occasions, they were on our side. However, it became very political. So when the TTB said they wouldn’t stop it, the FDA was mobilized to stop that and similar beverages from being sold. Period.
Because we deliberately added caffeine during the brewing process, they decided that Four Loko and Moonshot should be categorized as dangerous and should be banned and removed from the market immediately. In fact, it was quarantined in Massachusetts!
I fought the FDA, with the help of a well-heeled government relations firm, taking my plea all the way to the commissioner of the FDA in Maryland. I attracted more than 5,000 fans to leave online signatures on my website to protest the FDA’s actions. After years of trial and error, I finally had broken through with the brand, earned shelf space and garnered excitement. All that from launching with my credit card!
Instead of regulating, as the FDA is in place to do, they outright banned the category. They should’ve enacted a threshold or formula that was a parts per million of caffeine to percentage alcohol and anything above that line would be illegal. Moonshot ’69 would’ve fallen well below that. Evidently, it was not meant to be…Moonshot ’69 is prohibited from being produced, transported and sold in the US -- the first thing since the end of Prohibition in 1933!
I lost my heart for beer and inhibited my excitement, not to mention my business proposition. I was so passionate and committed to beer, and this was the final straw. My other brand, Edison Light, had a following but not enough to sustain New Century Brewing Co. on its own. So, I decided it was time to shut down the beer company and get on with the next chapter of my life.
It is surprising how alarming and how powerful politics are and, frankly, very disappointing. So how do you deal with events such as that, those that you cannot control? You look at yourself in the mirror and go, ‘What could I have done differently?’ It wasn’t anything I could control.
Ironically, with my new venture, Boston Harbor Distillery, I’m happy making whiskey from distilling Sam Adams beer varieties and making a coffee liqueur that is outstanding. It has four times the amount of caffeine and alcohol as Moonshot ’69 did, though because it tastes like coffee, it’s legal…Go figure!!
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