Roughly around 1637 Rene Descartes espoused the philosophical maxim, “I think; therefore I am.” Mr. Descartes’ first principle of philosophy was a principle of certainty. Pursuant to this principle, he could not doubt that he existed. Not bad that he had found certainty in his first philosophical principle.
Three-hundred and eighty-six years later, the liquor world has managed to turn Mr. Descartes’ absolute principle of certainty on its head. Enter Blue Cloud Distribution (Blue Cloud), Pepsi Co’s liquor distribution arm, whose entrance into the market has caused upheaval and threatens Mr. Descartes’ first principle of certainty.
The liquor world operates in three separate tiers, the manufacturing, wholesaler, and retailer tier. Blue Cloud operates in the wholesale tier and maintains a TTB federal basic permit demonstrating as such, and is licensed in numerous states as a wholesaler. So, we are good, I am licensed as a wholesaler; therefore I am.
However, the liquor world has begun to attack this precept. Pepsi Co although not licensed as a manufacturer of product, nor actually manufacturing a product, is somehow considered the manufacturer of a product by some. This side of the liquor industry has replaced Mr. Descartes’ principle with a new one. “I think; therefore, it is.”
So, what exactly caused some in the liquor industry to stray from Mr. Descartes?
It’s Pepsi’s relationship with Boston Beer Company. Pepsi licenses its intellectual property to Boston Beer for a Hard Mountain Dew, which is a malt-based beverage. Boston Beer manufacturers the product and sells the product into the market as the manufacturer. Blue Cloud, the Pepsi liquor distribution arm, distributes Hard Mountain Dew. For some in the liquor industry, this is too hard to take!
They believe Pepsi is acting as a manufacturer of a product, and then distributing its own product, which causes it to operate illegally in two separate tiers.
It is getting back to that new philosophical maxim, “I think; therefore, it is.”
Problematically, by straying from Mr. Descartes they don’t find legal certainty, but rather a lack of it.
The federal government and the states require that to be a manufacturer, one must manufacture the product or have it contract manufactured. The owner of the intellectual property is not the manufacturer of the product, it is the owner of the intellectual property. Simple enough one would assume, but certainty often times plays no role in the liquor industry.
Blue Cloud faces headwinds from the Anti-Descartesians, who believe that Pepsi is manufacturing and wholesaling at the same time. Numerous state agencies denied Blue Cloud a license to distribute alcohol based on this theory. The wholesale tier has not exactly rolled out the red carpet for Blue Cloud, and instead of welcoming one of their brethren, has protested their presence in the marketplace.
But there is a saying that “If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.” And yes, that is true, but the quack and the duck strut must come from the real thing.
The danger we get into with the Blue Cloud dilemma is we don’t like the result, the strict principles of what defines something becomes malleable based on the situation. What resistant state regulators and certain industry members espouse is a view that does not reflect proper legal norms. If owning IP makes one a manufacturer, then an entity never involved either physically or legally in the manufacturing process is considered a manufacturer. It redefines what is a manufacturer, even though no legal code confirms this view.
The “I think; therefore, it is crowd” becomes the word on the legal standard, and legal certainty gets replaced with an ever-evolving concept of redefinition based on what we think the law is versus what the law actually is.
One could hope this all comes to pass and that legal principles remain certain. Mr. Descartes worked hard to achieve certainty nearly four-hundred years ago, sadly an obsessed Anti-Blue Cloud crowd is looking to tear certainty down!