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The proposal under study comes from the Alcohol and Tobacco Tax and Trade

Bureau (TTB) and proposes a new rule to the labeling and advertising of wines, distilled
spirits, and malt beverages. The intent of the rule is to increase the amount of
information that consumers will have when purchasing or consuming the beverage.
Access to such information will supposedly lead the consumer to make more responsible
and beneficial decisions during the course of consumption. Fundamentally the proposed
rule would require a statement of alcohol content, expressed as a percentage of alcohol
by volume (ABV), on all alcohol beverage products.1 Another aspect of the rule would
require a serving facts panel on all alcoholic beverages similar to those panels found on
most other food and drink items. It would include the serving size, the number of
servings per container, and a statement of calories, carbohydrates, fat and protein. In
addition to those normal facts given, the panel would include the number of ounces of
pure ethyl alcohol per serving as a part of the alcohol content statement. This is important
because of the notion most people have of the alcohol content per drink is the same. A
beer is a beer is a beer does not always apply. The same can be found when examining a
glass of wine. Different types of wines have differing amounts of alcohol, usually
ranging from 6 to 24 % ABV. Beers have between 3.3 to 17 % ABV and distilled spirits
range from 15 to 75% ABV.
The proposal specifies the serving sizes for wine, distilled spirits, and malt
beverages based on the amount normally consumed in a single service. This would not
define a standard drink, just an amount normally consumed. A serving of beer would be
defined as 12 ounces; a serving of wine with an alcohol content of less that 14 % would
be five ounces; a serving of wine with an alcohol content between 14 and 24% would be
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2.5 ounces; and a serving of 80 proof distilled spirits would be 1.5 ounces. The Alcohol
and Tobacco Tax and Trade Bureau request these amendments to ensure that alcohol
beverage labels provide consumers with adequate information about the product.2
As for the format and placement of the proposed serving facts panel, the TTB
would allow for some leeway on that subject. They would prefer the serving fact panel be
in a horizontal or vertical panel format for all product, however, the TTB proposes to
permit listing serving facts information in a linear fashion for containers 50 milliliters or
smaller.3 The TTB is also still open for suggestions via comments on this subject.
This proposed rule does not necessarily reflect a market failure, but rather it
addresses a potential safety hazard to consumers which some believe has been long
overdue. It is an attempt to protect consumers from themselves essentially by arming
them with more information about the alcoholic beverages they consume. The problem is
seen when viewing statistics like the ones compiled on alcoholalert.com. According to
the website, there were nearly 16,700 alcohol-related fatalities on Americas roads in
2004. That made up nearly 40% of all deaths on the roads that year. Though this
percentage is down from what it was at some 20 years ago, it has hovered at this level for
the last 10 years or so.4 The statistics indicate a need to do something to curtail this
tendency that according to anti-drunk driving websites and groups like
alcoholalert.com. Basically, this is an issue of consumer protection and what goes too far
in doing so. The issues brought up in the comments section mostly concern the potential
costs, especially on smaller wineries, of having to print all the proposed information on
the label. According to some small bottlers, the proposed rule could actually help cause a
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http://www.alcoholalert.com/
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market failure if it is not implemented with some aide to smaller breweries and liquor
producers. Comments included the following:5

Any new labeling requirements, particularly mandatory ingredient labeling,


would be too costly and place them [small producers] at a distinct disadvantage
because larger producers are better equipped to comply. Small producers
described such costs as follows:

Cost of new labeling equipment or costs to upgrade current equipment.

Production costs due to installation of new equipment.

Costs of label redesign and new label stocks.

Costs of laboratory testing or laboratory services.

Consumer activist groups believe this is a problem that can be remedied, at least
partially, by taking action. According to the Consumer Federation of America, Providing
consumers more information about alcohol content would help consumers make
responsible drinking decisions and would help them follow the Dietary Guidelines
advice on moderate alcohol consumption and potential benefits include reduced alcohol
abuse, reduced drunk driving, and a reduction in the many diseases attributable to
excessive alcohol intake6
The question is not the magnitude of the problem, but rather the ability of this
proposal to accomplish anything to stem it. Would consumers benefit from this added
information? And do the costs placed on businesses to add the proposed information
outweigh the benefits of consumers having this extra information? There is no way to tell

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the financial impact of this proposal on consumers because it is not known if they would
even use it and how it would affect their decisions. The Brewers Association estimated
that the aggregate average costs of new mandatory labeling requirements for
respondents by size ranged from $35,530 per brewer for smaller brewers to $1.5 million
per brewer for larger brewers.7 Based on comments however, it seems that smaller
bottlers of wine and beer would be disproportionately affected by the costs. Whether you
view this as a viable way to help solve these problems affects if you feel this issue should
be left alone. If you feel consumers would make the same poor decisions to take part in
activities like driving after drinking then putting this strain on producers is worthless.
Research should be done to figure out what effect added information does to consumer
decision making.
Those primarily affected by the rules outlined in the proposal are the main players
in the economy: those who produce and those who consume what is produced. In this
case, the producer comes in the form of those who make alcoholic beverages, whether it
is mega-brewers like Samuel Adams or microbrewers or large wine-makers like Kendal
Jackson or small privately owned vineyards. The consumer in this case is represented by
any person above the age of twenty-one who has bought alcohol in the past or is planning
on buying alcohol in the future.
As the largest interest group invested in this proposal (there are over 200 million
in the U.S.)8, the of-age consumer will be recognizing most of the benefits that will
result upon ratification. By instituting a system of mandatory labeling, TTB is making a
concerted effort to protect the best interests of the consumer. The dangerous properties of

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Federal Register/ Vol. 72, No. 146/ Tuesday, July 31, 2007/ Proposed Rules/ p. 41872
http://www.census.gov/ipc/www/idb/

alcohol consumption have created a large amount of support for the proposal from many
health organizations around the United States. Such institutions as the American Society
of Addiction Medicine and the American Medical Association (AMA) are primarily
concerned with publics health, safety and well-being. Since alcohol abuse ranks as the
third leading cause of preventable death in the United States,9 regulating the alcohol
industry for the benefit of the consumer is a top priority for these organizations. This
proposal intends to reduce the amount of alcohol related injuries and deaths by providing
consumers with more information about the substance they are ingesting. The Center for
Science in the Public Interest (CSPI) commented:

Alcohol can be harmful when consumed in excess and even addictive for a
substantial number of consumers. For that reason, labeling should provide clear
information that allows consumers to measure and moderate their drinking.10

At the most basic level, the alcohol content statement will provide consumers
with information that will allow them to differentiate between the alcoholic potency of
two drinks by reading the alcohol by volume, a percentage of how much alcohol is
included in an alcoholic beverage. An inexperienced drinker might read the label
containing the alcohol by volume and determine that whiskey or rum (about 40% ABV)
is too strong for him, and that what he actually is looking for is beer (4%-7% ABV).
What might be taken for granted by most alcohol consumers may cause confusion for an
inexperienced drinker. In this scenario without the mandatory labeling rules, it would be

MSNBC.com
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very easy for the inexperienced drinker to consume more than he can handle and either
get hurt or hurt someone else as a consequence.
For the more experienced drinker, the alcohol content statement will make it
easier for consumers to identify where their limits are. If a consumer knows the alcohol
content in one drink, he should be able to determine how many of that drink he can have
before his drinking becomes abusing. The alcohol by volume also serves as a warning,
letting consumers know that drinking certain beverages may influence their decision
making process faster and more intensely than others. This allows consumers to plan
their nights accordingly with what they will be drinking; creating a safer environment for
themselves and the people they are with.
The serving facts panel will include the serving size; the number of servings per
container; the number of calories per serving; and the number, in grams per serving, of
carbohydrates, fat, and protein.11 Similar to the alcohol content statement, the serving
facts will provide the consumer with more information about the nutrients acquiring from
the beverage. This is very beneficial knowledge in an age when 280,000 adult deaths in
the United States each year are attributable to obesity. 12 Many believe that because of
the prevalence of obesity as a significant health threat, information about the content of
all foods and beverages should be presented to consumers in a standardized, clear
format.13 Unbeknownst to most drinkers, alcohol provides a significant portion of
[daily] calories (3% to 5%)14 for moderate drinkers. Providing calorie information on
alcohol beverage labels would encourage consumers to consider the health risks

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Federal Register/ Vol. 72, No. 146/ Tuesday, July 31, 2007/ Proposed Rules/ p. 41873
http://www.wrongdiagnosis.com/ (Obesity)
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associated with drinking alcohol, which in turn could lead to decisions that would help
consumers maintain their weight within a healthy range.15
Because every action has an equal and opposite reaction, there has to be some
party that must deal with the consequences that rival the benefits being received by the
consumer. The term mandatory in this proposal is dictating something that must be
done or changed or created by the producers in the alcoholic beverage industry. In this
case, TTB is requesting that all alcoholic beverage producers be required to provide the
consumer with additional information about their product, including an alcohol content
statement, which is to be expressed as a percentage of alcohol by volume. Currently,
such labels are only required in rare circumstances of exceptionally high alcohol content,
such as for wines with an alcohol content of over 14 percent alcohol by volume, leaving
such statements optional for wines with alcohol content below [14 percent].16
Until the proposal is ratified, the labels will remain optional for those alcoholic
beverages with alcohol by volume at the lower end of the spectrum, which includes most
wine and malt beverages. While neither labels for alcohol content or serving facts is
mandatory, some products have voluntarily given this information to their consumers.
For example, Red Hooks India Pale Ale prints on the bottle that their beer contains 6.5%
ABV (IPA). On the other hand, Coors Keystone Light prints the serving facts of the
beverage on the can, stating that the beverage contains 104 calories, 5.0 grams of
carbohydrates, 0.7 grams of protein, and 0.0 grams of fat, but does not give the alcohol
content to the consumer (Keystone).

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For the sake of analyzing the costs of this proposal, one should look at the
production of alcoholic beverages in the U.S. at two extremes: the mega-brewers (Coors,
Anheuser-Busch) and the small privately owned microbreweries (or wineries). While
they are actually quite different in size and stature, TTB is treating both of these entities
equally as producers, and will therefore have to follow the same set of mandates required
by the proposal. Both will be required to add a label containing the alcohol content
statement as well as a label containing the serving facts, and both will have to deal with
the complications that arise due to this process. However, the disparity between the
revenue of the two types of producers puts the smaller producers at an extreme
competitive disadvantage.
The financial costs associated with the proposal include money spent on new
labeling equipment or upgraded labeling equipment, the cost of installation plus the cost
of ceasing production for installation, label redesign costs, laboratory fees for equipment
and lab space where research and testing can take place, and increased production and
administration costs. The costs of labeling are very high and significantly increase
smaller brewers costs of doing business.17 In fact, a survey given to the members of the
Brewers Association revealed that:

Additional labeling costs would cause about 27 percent of survey respondents to


cease bottling operations, and that mandatory ingredient and calorie labeling
would force approximately 29 percent to withdraw from interstate sales.18

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An owner of a small winery commented on the proposal, stating that it would cost on
the order of $20,000 a year [] to test every one of [his] 9 wines.19 Since these costs
cant be absorbed by the small producers, they are passed on to the consumer in the form
of increased prices to purchase small market alcohol. Meanwhile, multi-billion dollar a
year mega-brewers like Coors Brewing Company are able to absorb the costs easily due
to their high product sales. In fact, these corporations change their label every few years
anyway to give their product a fresh look, so they have the proper equipment and design
teams ready.
Other costs incorporated with mandatory labeling are a loss of aesthetics. Wine
enthusiasts believe that wine is more than just a drink, but it can be a work of art, and that
tagging a label onto their works of art somewhat demystifies and defaces that product.20
The label requirements clutter the appearance of the bottle and can drastically change
the design. This limits the amount of space designers have to work with in an attempt to
create a label that fits the drink, effectively restricting the creativity that is usually a
staple of the smaller alcohol beverage producers.
Contributing to these costs is the idea shared by many small producers and wine
enthusiasts, that there is no overwhelming benefit of the proposal, claiming that the
labels required contains useless information.21 They believe that new information
being required is not revolutionary and that most consumers of alcoholic beverages who
might benefit from the labels will actually find it nonfunctional. On the other hand, the
mega-brewers will be virtually unaffected by the ratification of this statute, and may even
see the new requirements as an opportunity to benefit. For instance, complying with
19

Comment TTB-2007-0062-0038
Comment TTB-2007-0062-0030
21
Comment TTB-2007-0062-0030
20

these requirements may advance the image of the companies, as they appear to be
looking out for the best interests of their consumers by providing them with information
that will keep them safer and healthier. In essence, this proposal could really help out the
public relations department of the mega-brewers in the United States.
The Alcohol and Tobacco Tax and Trade Bureaus proposed rule concerning the
labeling and advertising of wines, distilled spirits and malt beverages garnered the
attention of market participants. Public commentary is extensive and pregnant with
compelling arguments representing producers and consumers. Collectively, producers
generally opposed the rule, while many consumers tend to favor the proposed labelingmany with differing preferences. Producers frequently cited the financial burden
associated with labeling, whereas consumers commonly defended the proposal,
welcoming any relevant information to be featured on the label. Further examination of
alcoholic beverage producers and consumers, and their respective interests, reveals a
complex problem with several solutions. As its duty includes facilitating negotiations,
TTB will consider concerns submitted by both parties during the approval process.
Accordingly, a final rule on this proposal is contingent upon developing regulatory
measures mutually beneficial for producers and consumers. In order to suggest feasible
improvements and submit appropriate recommendations for the agencys proposal, it is
imperative to recognize the existing state of nutrition labeling on alcoholic beverages,
understand the TTB proposal, consider comments from both producers and consumers
collected from the public forum, and analyze the consequences of implementation for the
producer and the consumer within the context of the proposed rule, which could thereby
afford reasonably sound solutions to a concerned market.

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Take a walk to the nearest liquor store and the venture back to the freezer.
Naturally, the vendor is stocked with beer formulated by mega-brewers, such as SAB
Miller or Molson Coors. Those with a dietary concern will peruse the label. A glimpse at
a nearby can of Keystone Light, a widely distributed brand, reveals a very brief
Nutrition Facts-like label indicating one can, or one serving, contains 104 Calories,
5.0 Grams of Carbohydrates, 0.7 grams of Protein, 0.0 grams of Fat (Keystone Light).
Continue past the freezer and have a look at the wine aisles. The widely carried
Australian Merlot, Yellow Tail, merely displays the percentage of alcohol by volume,
13.5%, but lacks the nutrition data as provided by Keystone Light (Yellow Tail).
Around the corner, lays the liquor shelf. A popular brand of whiskey, Seagrams 7,
features the amount per container, 1.75 liters, along with percentage of alcohol by volume
40%, 80 Proof (Seagram 7). All of the products bear the ubiquitous Government
Warning label alerting pregnant women and those who may engage in the operation of
heavy machinery to abstain from consumption
The abovementioned beverages neither require a uniform nutritional facts label
nor provide consistent, standard nutritional information found on most food and
beverages, such as a box of a Cheerios or a can of Coca-Cola; interesting, considering the
interest groups in association with the developing obesity epidemic, such as Center for
Science in the Public Interest, forcing major food distributors like Altria and General
Mills to list and avoid using trans-fats in manufacturing. Producers maintain that alcohol
expressed by content is succinct, clear, accurate, neutral, easy to understand and
compare,22 suggesting that additional information is misleading. While the informed
consumer may realize 12 fluid ounces of regular beer, 5 fluid ounces of wine, or 1.5 fluid
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ounces of 80-proof distilled spirits is the standard serving containing 0.6 fluid ounces
pure alcohol, they may not know to translate this information into calories, let alone
carbohydrates, fats or proteins.23 Of the three beverages referenced, wines and distilled
spirits are required by the Federal Alcohol Administration Act to label alcohol by volume,
but malt beverages are only required to label if the laws of the state impose similar
requirements.24 As TTB is the entity responsible for enforcing the measures stipulated by
the FAA Act, it has received gaining, widespread demands from consumer interest groups
to amend current rule and mandate uniform nutrition fact standards for alcohol
manufacturers, enabling the consumer to make a more informed decision, while
considering alcoholic beverages and daily caloric intake.
To satisfy TTBs proposed rule, wineries, distillers and brewers must conduct lab
work in order to determine the count of the macronutrients. This could amount to
roughly $250 per formulation.25 TTB recognized additional compliance costs associated
with the proposed rule, which includes new labeling equipment, production disruption,
redesigning labels.26 Though mega-brewers could easily absorb costs, small brewers and
wineries will sustain lower profit margins because of their significantly lower output.
Additionally, producers suggest such a label demands more scarce landscape of the
container already home to the FDA mandatory Government Warning Label, leaving
less room for branding. Needless to say, many producers- particularly small-batch, are
distressed by the impending financial loss of new labeling, and contend that TTB cost
projections are inaccurate.

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Evidently, both producers and consumers are genuinely concerned with labeling
of alcoholic beverages. Therefore, it is reasonable to consider concerns of policy
expressed by the producer. TTB requested comments addressing the regulatory proposals
specified. The TTB on-line public forum represents a rough sample of opinion within the
market. Of the 85 whom opined, 55 opposed the rule and 30 were favored the rule.
Comments ranged from vehement opposition to staunch support. Naturally, producers
generally opposed the rule while consumers and representatives of interest groups tended
to support the measure. Analysis of specific public comments submitted by the producer
and the consumer will reveal real problems to address and resolve.
Primarily, the producers have issues with costs incurred by this proposal, such as
laboratory testing and re-labeling. Additionally, wineries and breweries were distressed
by the urgency of the proposal, and quite displeased by another government label
encroaching on the precious real estate of the container. The Brewers Association
projected new labeling regulations would cost $35,530 for smaller breweries, and $1.5
million for larger brewers.27 A number of small batch producers addressed the financial
burden imposed. A commenter, identified as a small batch producer, applied the $250
TTB estimate to his one-hundred batch production of special fruit wine, and concluded
that his winery would sustain a cost of $0.21 per bottle; he suggests being exempt from
this rule, as he produces less than 5,000 gallons per label type.28 Although it appears the
laboratory costs incurred by testing is negligible, consider another small winery that
produces nine varieties, which would cost $2,250 after re-working 18 labels; on a yearly
basis, this amounts to $100 additional cost per year, per label, reaching a grand total of

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Comment TTB-2007-0062-0077

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$20,000 per year.29 Another commenter cited the costs associated with the proposed rule,
claiming that a cursory analysis of printing costs for 10,000 cases of wine, or 120,000
bottles, for labels that cost $4 per bottle, amounts to roughly $4,800.30 While TTB
provided a rough estimate for laboratory testing of the actual formulation, it did not
provide an accurate amount for re-tooling equipment or new labeling. Another small
batch producer notes that a three year grace period insufficiently provides the time for his
small winery to mobilize, leaving him no choice to but to purge inventory and hire a label
designer to charge at least $35 in set-up fees, and revise each of his 16 labels to satisfy
regulation.31 Comments also dedicated attention to the fight for the real estate of the
container, he time constraint set by the rule, and the cost of labeling small batch
productions. Compromises addressing these issues should be entertained.
Those distressed by the addition of another label on the product container may be
perceived as snooty, but a particular argument presents a valid point. The general
population rarely consumes celebratory bubblies like Cristal or Dom Perignon. If poured
at a celebration, some might not care what it contains because the drink is not consumed
on regular basis. Therefore, if the proposed rule is implemented, wines and spirits above
the price of $50 should require a nutrition contents label, printed in linear format and
placed on the bottom of the bottle, or where the producer may see fit. For the more
frequently purchased beverages, such as Bud Light or a Kendal Jackson Merlot, nutrition
information should be presented in a linear format. Requiring producers to list the
information in a linear format is the least invasive presentation and allows the producer to
maintain the integrity of the brand container.
29

Comment TTB-2007-0062-0038
Comment TTB-2007-0062-0030
31
Comment TTB-2007-0062-0045
30

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Small-scale brewers bothered by the compliance date, explained that their current
inventory of labels exceed the three year deadline and require more time to hire design
artists, and purge existing inventories. If small brewers and wineries have historically
purchased labels in bulk, they will have more difficulty using existing inventories, while
mega-brewers tend to maintain lean inventories. Providing small producers an extension
on the proposed deadline would allow the appropriate time to adjust accordingly.
Realizing the frequency of comments pertaining to cost submitted by small-scale
producers, implies that they feel threatened by the proposal. Therefore it is necessary to
consider solutions encouraging fair market conditions that allow small-scale producers to
participate. Exempting such small wineries and brewers from this ruling may be
appropriate. Though a mega-brewer will have less difficulty passing the additional costs
on to the consumer through shear volume, a small brewer cannot. Note the annual case
sales of the three largest wine companies exceed 30,000,000, and note three of the largest
brewers, Molson Coors, Anheuser-Busch and InBev with market capitalizations
amounting to $6.12 Billion, $16.42 billion and $17.56 billion, respectively.32 Bud Light,
an Anheuser-Busch Product, shipped 33.9 million barrels in 2001.33 Now consider a
small-scale brewer, Boulevard Ale Company, a local Kansas City brewer just over
100,000 barrels annually, worth roughly $20 million. A small brewer or small winery,
like Boulevard Ale Company, is neither widely carried nor commonly consumed.
Nevertheless, Boulevard Ale Company should be required to feature the discussed
nutrition facts on a website. The costs of maintaining a website are substantially less than
conducting a lab analysis or re-labeling bottles. On the other hand, at what size do you

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http://winebusiness.com/specialsection/2005/, http://finance.yahoo.com/q/co?s=TAP
http://findarticles.com/p/articles/mi_m3469/is_41_52/ai_79901418

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being regulating the producer? An appropriate metric to employ may be annual


production by barrels. If the brewer or winery produces less than one million batches
annually, it should qualify for exemption, as these small-scale productions are not
consumed as much as beers brewed by mega-brewers. However, if the small-scale
brewer is forced to comply, a tax break could be structured and granted to productions of
1,000,000 batches or less to match the cost labeling. Hopefully, the compromise will
foster an environment allowing small brewers to compete in a fair, adequately regulated
market respecting the interests of the consumer.
Reconciling the preceding criticisms submitted by producers with the advanced
consumer preferences relating to the proposal will suggest improvements for the final
rule. Of the 30 comments recorded in favor of the proposal, every commenter supported
the proposed the rule. In support of consumers, the Bureau of Consumer Protection, the
Bureau of Economics and the Office of Policy Planning at the FTC endorse the full
disclosure of beverage contents, enabling the consumer with the abilityto evaluate
their actual alcohol, calorie, carbohydrate and fat intake.34 As mentioned, consumers
generally favored the TTB proposal information, welcoming additional information to be
featured on the label. Nevertheless, some consumers disagree on information to be
displayed on the label. A comment noted that serving sizes corresponding to the
appropriate beverage would confuse consumers, and requested one, uniform serving that
would measure all drinks.35 A commenter requested the incorporation of sodium content
in malt beverages in addition to protein and fat content.36 Another commenter requested
additional carbohydrate information, specifically the amount of sugars contained in the
34

TTB Proposal
Comment TTB-2007-0062-0064
36
Comment TTB-2007-0062-0054
35

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serving while recommending the label to be presented in linear format, so that small
businesses can adjust accordingly.37 A commenter even demanded a label that would
reveal if the product were made with stuff like egg whites, fish, or animal blood or
fat.38 Though preferences vary, it is clear that an overwhelming majority of the consumer
registering opinions categorically accept the proposed Serving Facts label.
Even though consumer comments voiced real concerns, the information
recommended may be overwhelming, or mislead the consumer. Ultimately, the consumer
will benefit with the proposed serving facts panel. Therefore it is appropriate to
recommend implementation of the proposed rule as stated by the TTB, on large scale
productions (over 1,000,000 batches annually) of alcoholic beverages, to include the
following in a Serving Facts panel: serving size, the number of servings per container,
the number of calories per serving, and the number in grams per serving, or
carbohydrates, fat and protein and allowing, on a voluntary basis, the disclosure of the
number of US fluid ounces of pure alcohol per serving, as part of a statement that
includes alcohol content expressed as a percentage of alcohol by volume.39 Small-scale
producers of alcoholic beverages amounting to less than 1,000,000 batches annually, will
be required to list the abovementioned information on a website. However, once smallscale production exceeds 1,000,000 batches annually for three consecutive years, the
producer will be forced to comply with proposed regulations.

37

Comment TTB-2007-0062-0072
Comment TTB-2007-0062-0079
39
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