Is Watered Down Beer Actionable? Anheuser-Busch Class Action Lawsuits Argue Brewer Used Sophisticated Manufacturing Process to Dilute Beer and Strengthen Profits

Anheuser-Busch Class Action Lawsuits Argue Brewer Used Sophisticated Manufacturing Process to Dilute Beer and Strengthen Profits

April 12, 2013

Anheuser-Busch Companies, LLC (AB) faces a number of new class action lawsuits alleging that it intentionally waters down its beer to foment profits. AB is facing nearly identical suits in California, Colorado, Ohio, Missouri, New Jersey, Pennsylvania and Texas. [1] The lawsuits each allege that AB has a corporate policy of watering down its products to reduce the percentage of alcohol by volume (ABV), thereby inflating profits and victimizing consumers. The allegations implicate AB’s flagship brand, Budweiser, as well as malt beverages sold under nine additional labels.

The factual allegations in each case are similar. For example, in the California case, Giampaoli v. Anheuser-Busch Companies, plaintiffs and putative class representatives allege that they purchased Budweiser beer labeled as containing 5 percent ABV. However, the beer allegedly contained less alcohol than advertised due to a “uniform corporate policy of overstating the alcohol contents of its products.” The plaintiffs claim that they took the stated alcohol content into account and relied on it when deciding to purchase Budweiser. Because of the alleged mislabeling, the suit claims, the product had “less value than what [plaintiffs] paid,” causing plaintiffs damages and unjustly enriching the manufacturer. Plaintiffs assert that the alleged mislabeling violates the Missouri Merchandising Practices Act (because the beer was produced in Missouri), various California business practices and consumer protection statutes, and the Magnuson-Moss Warranty Act.

The lawsuits attempt to use AB’s expertise against it. For example, the suits note that, following the 2008 merger between Anheuser-Busch and InBev, AB began using an inline alcohol measuring instruments known as Anton Paar meters to “precisely identify and control the exact alcohol content of malt beverages to within hundredths of a percent.” Rather than using these tools to produce accurately labeled beer, the suit claims, AB utilized its sophisticated manufacturing process to water down its beer, thus producing more units at lower costs and victimizing its customers. Plaintiffs characterize this as an intentional plot to increase profits and defraud consumers. Plaintiffs also argue that “[t]here are no impediments — economic, practical, or legal — to [AB’s] accurately labeling its products to reflect their true alcohol content.” To the contrary, plaintiffs assert that AB could use its expertise to ensure that the alcohol content matched the label or that the label matched the alcohol content, but instead chose to unjustly enrich itself at its customers’ expense. Plaintiffs’ attorney Josh Boxer has stated that the allegations in the complaints came from “former employees at the company’s 13 U.S. breweries, some in high-level plant positions.”

Although AB has not yet officially responded to any of the complaints, Peter Kraemer, Anheuser-Busch InBev’s vice president of brewing and supply, has stated that the allegations are “completely false” and insisted that AB’s “beers are in full compliance with all alcohol labeling laws.” Additionally, AB took out a full-page advertisement in 10 major U.S. newspapers featuring a can of “Budweiser”-labeled drinking water that the company regularly donates to disaster relief efforts and cheekily proclaiming: “They must have tested one of these.”

While plaintiffs’ attorneys’ insist that discovery will bear out their claims, at least two media outlets, National Public Radio and CNN, have commissioned independent testing of AB’s products, which seem to support the brewer. NPR’s testing found that “the alcohol percentages inside the cans were the same as what was stated on the can …. some of them were spot-on. Others deviated, plus or minus, within a hundredth of a percentage.” [2] Additionally, although the CNN testing found that the tested beers contained less alcohol than labeled, the deviation was typically less than 0.1 percent. However, the sample sizes and methodologies of the media tests have not been disclosed.

For now, AB’s legal strategy remains unknown. The company will certainly challenge the propriety of Rule 23 class certification. But even prior to that, it may attempt to argue that the plaintiffs’ various state law claims are preempted by the Alcohol and Tobacco Tax and Trade Bureau (TTB) approval of its labeling (known as a Certification of Label Approval or COLA). TTB’s promulgated regulations provide, in part, that malt beverages containing 0.5 percent or more alcohol by volume may contain 0.3 percent “either above or below” the percentage of alcohol stated on the label. 27 CFR 7.71 (c)(1). Thus, AB could argue that a variance within these tolerance limits is permitted by federal law and preempts conflicting state law claims.

Regardless of how this specific litigation develops, these lawsuits provide some important lessons for the food and beverage industry. First, while the focus on ABV labeling of malt beverages is novel, the focus on food labeling issues continues the recent trend. As such, food and beverage producers should be continually vigilant regarding labeling issues to mitigate the risk of similar suits. Second, food and beverage producers that employ sophisticated production and quality control systems may be susceptible to allegations that they use those systems to intentionally mislabel products. Such allegations — regardless of their ultimate merit — can create immediate public relations challenges, particularly when attributed to former employees familiar with the manufacturers’ technology.

McGuireWoods’ food and beverage lawyers will continue to monitor this litigation as it develops. We have extensive experience advising companies in the food and beverage industry in food labeling and class action litigation. We can assist those who may find themselves threatened with product labeling or class action litigation and can counsel companies about measures they can take to mitigate the risk of similar lawsuits.

1. See, e.g. Giampaoli v. Anheuser-Busch Companies, LLC, 3:13-cv-00828 (U.S. Dist. Ct., N. Dist. Cal., February 22, 2013); Wilson v. Anheuser-Busch Companies, LLC, 1:13-cv-01122-NLH-AMD (U.S. Dist. Ct., Dist. N.J., February 25, 2013). 2. Id.