Top 10 spirits industry feuds

From multi-million pound trademark lawsuits to light-hearted marketing feuds, the spirits industry is often sparking with tension as companies jostle for dominance.

This is our selection of the biggest spirits industry feuds of recent years

One story which has repeatedly made headlines in recent months was Diageo’s tussle with former United Spirits chairman, Vijay Mallya, which has now been resolved – at least for now – following a US$75 million payout.

Elsewhere in the world, debate over a Google search advertising feature erupted between Jack Daniel’s and Sazerac, while Tito’s Handmade Vodka was brought before the courts for a series of class actions over its label.

The outcome of some feuds in our roundup remains to be seen, including Pernod Ricard’s decades-long legal battle with Bacardi over permission to renew its Havana Club trademark in the US.

Click through the following pages to discover our pick of the top 10 biggest spirits industry feuds of recent times.

Diageo and Vijay Mallya

After completing the acquisition of a 55% controlling stake in United Spirits Limited (USL) in July 2014, Diageo launched an internal enquiry into USL’s finances when the company revealed a net sales loss of £445 million in fiscal year 2013/14. The investigation revealed a number of transactions had been “diverted” to other subsidiaries belonging to UB Holdings, in which Mallya was a shareholder. USL’s board of directors issued a vote of no confidence in the billionaire chairman and called on shareholders to remove him from his position. Initially he refused to voluntarily step down, and finally resigned from his position as chairman and non-executive director of United Spirits after Diageo agreed to pay him US$75 million. Payment of the funds is subject to Mallya’s compliance with certain terms, including his agreement to not pursue any claims against Diageo. The firm has also agreed that Mallya will have “no personal liability” to the group in relation to the findings of the former investigation into USL’s accounts. Diageo said the move “brings to an end the uncertainty relating to the governance of USL”, while Mallya asserts the agreement reached with the company “secures” his “family legacy”.

Tito’s Handmade Vodka

Tito’s Handmade Vodka producer Fifth Generation has been hit by a number of class actions over its label claims in recent years. Five out of six lawsuits against Tito’s Handmade Vodka that alleged the brand misled consumers with false labelling were thrown out last September. However, a New York federal judge has refused to throw out the remaining proposed class action that claims the brand’s label could lead consumers to believe the product is created in small batches. US district judge Brenda K Sannes said “a reasonable consumer could be misled by the label”, and rejected Fifth Generation’s argument that approval by US Alcohol and Tobacco Tax and Trade Bureau (TTB) creates a ‘safe harbour’. Earlier in 2015, Beam Suntory claimed victory in a lawsuit alleging its Jim Beam Bourbon brand misleads consumers by marketing itself as “handcrafted”, three months after winning a similar case over Maker’s Mark.

Pernod Ricard and Bacardi

In January this year, the US Office of Foreign Assets Control (OFAC) and the US Patent & Trademark Office (PTO) granted French drinks group Pernod Ricard permission to renew its Havana Club trademark in the US, following a decades-long legal battle with Bacardi. Due to a trade embargo between US and Cuba, which has been in place since 1961 when the Cuban revolution led to communism, Pernod Ricard has been unable to launch Cuba-made Havana Club in the US. Bacardi has been selling its own brand of Havana Club rum, made in Puerto Rico, in the US since the mid-1990s. The group acquired the US rights from Havana Club’s founders, the Arechabala family, which fled Cuba during the revolution. The Cuban government seized the family’s rum-making facilities and personal assets during the revolution, without compensation. Bacardi and Pernod have since been locked in a long-running legal battle, with the French firm attempting to block Bermuda-based Bacardi’s rights to the trademark. The decision to allow Pernod Ricard and the Cuban government to renew their Havana Club trademark in the US is currently being scrutinised by lawmakers. 

Jack Daniel’s and Sazerac

In December last year, Jack Daniel’s settled a lawsuit with Sazerac which alleged the Tennessee whiskey producer had infringed the trademark of its Fireball Cinnamon Whisky brand in a Google advert for Tennessee Fire. The case alleged Jack Daniel’s used a Google search advertising feature to redirect customers searching for Sazerac’s Fireball Cinnamon Whisky brand to its own spiced variant. Sazerac voluntarily dismissed its lawsuit, and the conditions of the settlement were not available at court.

Stolichnaya Vodka and Federal Treasury Enterprise Sojuzplodoimport (FTE)

In January US appeals court the Second Circuit revived a lawsuit brought forward by state-run Russian company FTE that claims it owns trademark rights to Stolichnaya Vodka. It follows a 12-year-long dispute over who inherited the vodka brand when the Soviet Union collapsed – either the Russian Federation and FTE or the privatised “successor” to the Soviet firm that sold Stoli during the Cold War. In 2004, FTE sued the successor companies and US Stoli distributors, but a trial judge decided in 2014 that the company lacked standing to sue in the US court, and the Russian government’s transfer of trademark rights to FTE was invalid under Russian law. However, this decision was overturned after the panel deemed the decision was not one for US courts to make. SPI Group has said it will “aggressively” defend its rights to the Stolichnaya Vodka trademark.

Experience Hendrix LLC and Leon Hendrix/Tiger Paw Distributors

Experience Hendrix LLC is suing Tiger Paw Distributors and Leon Hendrix – brother to the late Jimi Hendrix – arguing the pair’s Purple Haze Liqueur, which launched in April 2015, infringes the rock star’s trademark. Experience Hendrix filed the suit on 1 March, claiming the marketing behind the brand is “tasteless”, due to the fact “drugs and alcohol have been connected to Jimi Hendrix’s untimely death”. Both Leon Hendrix and Tiger Paw Distributors labelled the lawsuit claims “completely false”, adding that they “lack muster”. Additionally, Kevin Chiaramonte, Paul Freundlich Associates (PFA), representing Leon Hendrix, told The Spirits Business Hendrix and his company filed a suit against Experience Hendrix last year for making claims he and his companies have “no rights” to operate in Jimi Hendrix products. Tiger Paw’s lawyer said the company is “looking forward to prevailing in court in the coming months”.

Compass Box and EU regulations

Not quite a feud, but the aftermath of the SWA alerting Compass Box to a breach of EU law on their website certainly prompted industry-wide discussion. In October, Compass Box Whisky Co published and subsequently removed the full recipes for its This Is Not A Luxury Whisky and Flaming Heart expressions on its website – including details of the distilleries involved, the cask types, the ages and their proportions in the final blend. The SWA maintains it did not tell Compass Box to remove details, but highlighted that the company did not comply with European labelling laws following a complaint from a brand owner. Following the breach, Compass Box launched a ‘transparency’ campaign calling for Scotch producers to have the “freedom but not the obligation” to publish the age of all components included in their whiskies. However, David Frost, chief executive of the SWA, said the body is “ready to work to encourage change to existing laws” and is open for discussions with Compass Box representatives.

Captain Morgan and Bacardi

Captain Morgan challenged Bacardi’s dominance in the white rum market with a £1m advertising campaign for its own Captain Morgan White rum, which featured the tagline “White Rum Has A New Captain”. The battle continued three months on when Bacardi launched a campaign hitting back at Captain Morgan by inviting spiced rum drinkers to “bench the captain”. Highlighting the results of an “independent national taste test”, where consumers were found to prefer Bacardi Oakheart Spiced Rum to Captain Morgan Original Spiced Rum by a “significant margin”, the campaign featured combative slogans, such as “Bench the Captain” and “The Best Part of Gameday, Isn’t Always the Game”. Fabio di Giammarco, global vice president of Bacardi rums, said: “It’s now our time to showcase our leadership in the category. We attribute our success to the affirmative feedback received from our consumers and proudly claim our title today as the better tasting spiced rum over Captain Morgan Original Spiced Rum.”

The Absolut Company and Happy Hearts Wine LLC

Last year, Pernod Ricard filed a US$2 million lawsuit against a New York company for alleged trademark counterfeiting of its Kahlua brand. The Absolut Company – a subsidiary of the French drinks group – discovered the existence of a product called Kahfua when its producer filed a Certificate of Label Approval. Absolut argued that Kahfua’s label contains fonts, colours and a design that is similar to its Kahlua brand. In addition, Kahlua describes itself as a “rum and coffee liqueur” on the bottle, while Kahfua claims it is a “coffee expresso liqueur”. The importer of Kahfua, Brooklyn-based Happy Hearts Wine LLC, agreed to temporarily stop using the label after the company filed an injunction request.

Balcones Distillery and Chip Tate

In December 2014 Chip Tate had his remaining 27% stake in the Texan craft whiskey distillery bought out by its board of directors for an undisclosed sum. Tate, who founded Balcones in 2008, left the company following a very public disagreement with PE Investors – a private equity firm that bought a majority stake in Balcones in February 2013. While the board accused Tate of trying to derail Balcones’ expansion through his “unconscionable and reprehensible” behaviour, Tate said he had personal differences with PE leader Greg Allen, while the firm was displeased with his expansion cost predictions. His position as president of Balcones was taken over by the company’s chief operating officer Keith Bellinger. Tate is not legally permitted to work in distilling until March 2016.