It is not uncommon for spirits companies to collaborate with a contract distiller that handles the distillation, bottling, and labeling of a distilled spirits product. The contract distilling arrangement is ideal for those companies entering the spirits industry without dealing with upfront equipment, licensing, or administrative costs. While partnering with a contract distiller can be beneficial, companies must consider crucial aspects.
Here are key questions to address before entering into such a contract distilling or co-packing relationship.
What is a Contract Distiller?
Contract distilling is a partnership where a business (the “brand owner”) hires another to distill or produce spirits. The producing entity, termed the “contract distiller,” is responsible for producing spirits from raw ingredients or using bulk spirits and other ingredients and bottling the final product on its premises. The contract distiller generally handles regulatory requirements, including the Alcohol Tobacco Tax and Trade Bureau (“TTB“) label and formula applications. The company hiring the contract distiller does not necessarily need its own distillery, equipment, or facility (although it is possible it may also be a distillery). This arrangement is popular for smaller or rapidly expanding companies.
What Questions Should I Ask When Starting a Contract Distilling or Co-Packing Relationship?
- Does your company require licensure? While the contract distillery or co-packer must secure federal and state permits, your company’s need for a TTB permit and state liquor license depends on whether you’re purchasing the final product for distribution. If involved in marketing or negotiation, a TTB federal wholesaler permit is generally required. The mere fact that the spirit is distilled and/or bottled by a properly permitted third party does not necessarily foreclose your company from needing a permit and/or license.
- Who is responsible for obtaining COLAs and/or formulas? The entity bottling the product generally handles TTB label and formula approvals. These applications should align with the contract distiller’s TTB permit.
- Do you have a contract on file with the contract brewer and does it sufficiently protect your company? Ensure your contract safeguards your brand. Clarify ownership of intellectual property, brand, and artwork. Specify responsibilities for record-keeping, tax reporting, and payment — typically the contract distiller’s domain.
- Does the contract distillery have the required permits, licenses, and registrations on file? Verify that the contract distillery holds the proper federal TTB permit, state license, and FDA facility registration and ensure that the distillery complies with state or local health and safety licenses.
- How flexible is the contract distillery’s production capability? Is the contract distillery equipped for both small and large-scale production? Assess the facility’s flexibility to accommodate your production needs.
- Is there a DBA or trade name that can be used? Check if the contract distiller has filed a DBA/trade name with TTB. This registration is crucial for featuring your company name in the “Bottled by:” or “Canned by:” section of the label. Unregistered names may require use of the brewery’s TTB permit details or other DBA names on file.
This overview summarizes critical considerations for companies collaborating with a contract distillery. For tailored insights and assistance with permits, licenses, and regulatory compliance, contact us at info@zahnlawpc.com.
How Can Lindsey Zahn P.C. Assist Your Distillery?
Lindsey Zahn P.C. offers support in applying for federal and state permits, helping to decide the best licensing option, and addressing regulatory concerns. For a courtesy meeting, please contact us at info@zahnlawpc.com.