What do comedian Kevin Hart, model Kendall Jenner, rapper Snoop Dogg, actor Dwayne “The Rock”, Johnson and CNBC “Mad Money” host Jim Kramer have in common? They have all signed deals recently to promote alcoholic beverage products. Apparently more celebrity collaborations with wine, beer and spirits makers are being announced every week. Celebrity partnerships have unique marketing and advertising opportunities for well-known brands and specialty alcoholic beverages, and can be profitable for all involved. But this collaboration also raises legal issues that require careful consideration of both the brand and the celebrity.
Here are six main considerations:
What’s the deal?
Celebrity collaborations can take a number of different forms. Some typical structures include:
a. Validation Deals. In this structure, an alcoholic beverage company collaborates with a high-profile speaker to promote a brand or product. In endorsement-style collaborations, a celebrity enters into a sponsorship agreement with an alcoholic beverage company that allows the company to use the celebrity’s name, image, and likeness to promote an existing brand. In return, the celebrity receives monetary compensation which may be related to the performance of the brand and sometimes an ownership stake in the brand.
B. development deals. Celebrities can also partner with distilleries, brewers, or breweries to develop new brands. Kendall Jenner, for example, is teaming up with a “private label” Mexican distillery to produce their brand of tequila, 818. This arrangement gives celebrities more control over the final product—allowing them to develop a unique flavor profile and brand—without the complexities of owning a manufacturing facility. Their own.
c. Full ownership. Some celebrities own the trademark (the trademark and other intellectual property) and the means of production. One example is musician Dave Matthews, who owns a vineyard outside of Charlottesville, Virginia, where he produces Blenheim wine. This gives the celebrities complete control of the production; But it also requires a lot of time and energy in managing operations and sales functions.
Each structure has its advantages and disadvantages for both the company and the celebrity, and must be carefully considered, based on how much control both parties want to have over the development and operations of the brand, as well as ownership interest.
House related issues
In the United States, federal and state laws generally divide the production, marketing, and sale of alcoholic beverages into three levels: producers/importers, distributors/wholesalers, and retailers. Federal and state laws generally prohibit individuals and entities involved in one level of the alcoholic beverage industry from having an interest in another. Accordingly, an individual who owns a bar or restaurant where alcoholic beverages is sold is generally prohibited from having an “interest” in a brewery, distillery or vineyard. What constitutes an “interest” varies from jurisdiction to jurisdiction, making compliance challenging even for experienced participants. So caring for a brewery, while also caring for a restaurant that sells alcohol, may conflict with state and federal regulations.
These rules create a minefield for celebrities (and for brands collaborating with celebrities). Celebrities often have a variety of investments, some of which can be in a company that sells alcoholic beverages at retail, such as a restaurant or hotel. Sometimes the problem is not very clear. For example, a baseball star might own a building that rents space for a restaurant. If the restaurant pays a portion of its revenue or profits as rent, it could create a “benefit” in the restaurant for the baseball star in some jurisdictions, thus preventing the star from having an interest in a distillery.
An experienced counselor can help navigate these rules and devise strategies to mitigate the risks of a bonded home. Celebrities looking to enter the liquor industry, and the brands they collaborate with, should diligently address house-related disputes early in their discussions so that they can properly address any issues.
the target audience
Regulations regarding advertising of alcoholic beverages are subtle and segmented, and must be taken into account before launching any marketing campaign. It is especially important when concluding a deal with a prominent person: whether this person’s core fan base is too small to drink alcohol. Brands should exercise caution when working with celebrities who primarily appeal to individuals who are under the legal drinking age, and when working with celebrities who have fans of all ages, brands should ensure that their alcohol marketing focuses on media that targets Fans who are old enough to drink.
When working with celebrity advocates — including social media influencers — it’s important to note the Federal Trade Commission’s disclosure rules, which require brands to clearly and clearly disclose whether a given spokesperson has been compensated for their endorsement. Of course, if the financial relationship between a celebrity and a liquor brand is obvious, then explicit disclosure may not be required, but this should be carefully evaluated based on the unique aspects of each endorsement arrangement.
Increasingly, brands are including ethical clauses in their celebrity collaboration contracts to allow for a relationship to be terminated if the celebrity engages in behavior that threatens the brand’s reputation or goodwill. Not all sentences will look the same; Brands should pay attention to the unique overall appeal of each celebrity. But these clauses raise a number of thorny issues for brands and celebrities. For example, what actions will trigger the paragraph? Is a credible accusation of prohibited conduct sufficient to terminate the contract? Or should there be some burden on the brand to prove that the prohibited behavior has occurred? These issues are exacerbated if the celebrity has an equity interest in the brand, which usually needs to be resolved if the relationship is terminated due to the behavior.
Many jurisdictions require officers, directors, and/or major authorized shareholders of alcoholic beverages to submit to fingerprints and a criminal background check. Before celebrity negotiations get too far, brands and celebrities alike should make sure they have a clear understanding of any red flags in a celebrity’s background (for example , criminal convictions) that may complicate the ability to obtain necessary liquor licenses. The earlier issues are identified, the faster the transaction structure can be modified to address the issue.
While celebrity collaborations with liquor brands are exciting ways to make the brand stand out in the increasingly crowded liquor market, special care must be taken to ensure brands and celebs navigate their partnership with best business practices and an understanding of many legal considerations.