Consumer Deception and Geographic Brand Names – KONA BREWING CO.

In the past few years the alcohol beverage industry has seen numerous consumer protection lawsuits centered around allegedly deceptive advertising statements on alcohol beverage brands, such as “Handcrafted” for Tito’s vodka.  We previously blogged about this in the context of safe harbor defenses to such claims based on COLA approval.

We may be seeing a new front in these consumer protection lawsuits related to geographic brand names with a case filed on February 28, 2017 in the U.S. District Court for the Northern District of California against Craft Brew Alliance, Inc., owner of the KONA BREWING CO. brand of beer.

In 2010, Craft Brew Alliance, which is partially owned by brewing giant Anheuser-Busch InBev, acquired the KONA BREWING CO. brand which was started in the Hawaiian city of Kona in 1994.  After acquiring the brand, Craft Brew Alliance began contract brewing KONA BREWING CO. beer throughout the mainland U.S. to increase its distribution.  Obviously the brand name directly references the Hawaiian city of Kona and brand imagery, advertising and promotion all rely heavily on association with Kona and Hawaii.  The class action lawsuit alleges that the brand name and Hawaiian brand imagery are deceptive and misleading to consumers who believe the beer originates from Kona, when in fact it now does not.  A copy of the complaint may be found HERE.

Adopting a geographic brand name can be a risky proposition for this very reason.  Parties often adopt geographic brand names because they hope to associate the product with the positive imagery of the location in the minds of consumers.  Oftentimes the products also originate from, or are associated with the place identified, further re-enforcing that association in the minds of consumers.  This is not a problem when the branded goods actually originate from the place identified in the brand name, but what happens in a case such as this where the brand is acquired and is no longer exclusively associated with the place in the name?  Does it matter that KONA BREWING CO. beer is still brewed in Kona in small amounts even though the majority is brewed elsewhere?  Would it be more deceptive if there were no longer any physical connection of the product with Kona?  Is it more egregious because the beer was originally brewed in Kona and now it is brewed elsewhere?  Is this fair to consumers?  Is it fair to Kona and its citizens to have a mainland company using the name of their city to profit with little connection to Kona or Hawaii?

All very interesting questions, no doubt, and we will see if any of them are answered in this litigation (or whether the case is settled for a payment to the class plaintiffs with no admission of wrongdoing by the brewer).  The standard in any of these cases is will consumers be deceived or misled in some way.  If this can be proven by the plaintiffs, then Craft Brew Alliance may have a serious problem. The above questions will no doubt come into play during the pendency of this suit, so it will certainly be an interesting case should it proceed to a decision.