Future of much-hyped Palcohol is uncertain

Powdered alcohol product's label approval revoked

“Imagine a Margarita on a counter. And then imagine if you could snap your fingers and it would turn into powder. That's Palcohol....without the magic.”

That’s how the company behind the powdered alcohol, which turns water into rum, vodka, margaritas and more describes its new product, Palcohol. Mark Phillips is the man behind the new pouched-alcohol and according to a company spokesperson, thought up the idea while hiking and wanting to enjoy a cocktail,  without lugging heavy liquid in containers.

Earlier this month, news of the product’s federal approval spread like wildfire on the internet and social media sites, only to be quickly followed by news that approval was given in “error.” 

Lawmakers across the country were quick to take a stance on the product while the news media covered the potential dangers and concerns surrounding Palcohol.

So, with a federal approval and then a surrendered approval, will Palcohol ever make it to a store shelf near you?

The answer is maybe. The answer is possibly. The answer could be no. E.W. Scripps reporters talked to beverage experts across the country to find out the likelihood of people across the country turning water into their favorite alcoholic drink.

Approval process
The Alcohol and Tobacco Tax and Trade Bureau (TTB), regulates beer, wine and spirit labeling, formulation, packaging and taxation. In order for Palcohol to hit store shelves in the U.S., it would have to receive several different approvals from TTB, not the FDA, as has been reported in some online articles.

TTB is under the Department of the Treasury. The bureau develops regulations ensuring tax and trade compliance with the Federal Alcohol Administration Act and the Internal Revenue Code.

According to Robert Lehrman, an attorney at Lehrman Beverage Law, PLLC, the first step the company behind Palcohol would have to complete is obtaining a distillery license. This typically takes six months, around 100 pieces of paper and a background check. The company behind Palcohol has completed this step.

The next step is to receive formula approval.

“Anything that is funky or unusual needs formula approval,” Lehrman said. “It’s about classification. Is it vodka or is it like vodka?” For this, companies usually need to provide recipe and ingredient lists, he said. Lehrman concentrates on the federal regulation of alcohol beverages.

Phillips has received seven different formula approvals from the federal government: Powderita, Cosmopolitan, Lemon Drop, V (vodka), R (rum), R, V.

The third step is label approval. For Palcohol, this is where the approval process hit a snag. According to Lehrman’s law firm, label approval, on average, takes 30 days and there are 150,000 label approvals per year. Label approvals are made public by TTB after 48 hours. You can search public label approvals here.

Where Palcohol stands
Palcohol received label approval on April 8, 2014.

Lehrman said he was alerted to the approval about 10 days ago. “I thought it was pretty amazing,” he said. “I had never heard of such a thing getting approved.” When he searched for the product on Google, the search engine would say: “did you mean alcohol?”

Less than two weeks after the initial label approval, on April 21, 2014, the government pulled  approval, saying it was done in “error.”

“He (Phillips) had completed all federal steps,” Lehrman said.  “If he wanted to be a bad ass, he could have thumbed his nose at the government and said ‘I’ll see you in court, I have the approval.’ ”

Lehrman said taking the government to court over the issue would have been dangerous, but legally Phillips could have done so. Instead, Phillips gave the labels back to the government and is now re-submitting.

The issue at hand, according to Lehrman: how Palcohol will be measured for tax purposes. The labels submitted used weight to measure the powder, and alcohol is typically measured by volume.

“This is not something to be cavalier about,” Lehrman said. “Effectively, (not having label approval) means he cannot sell in the U.S.”

In Lehrman’s experience, when the government asks for label approval back it is a collaborative process. But, with this product, Lehrman said he thinks it could be different.

“Even if the government thinks it makes all the rules it could be very difficult for them to approve it anyway. They know it is going to be big news. It’s controversial and lawmakers are speaking out about it.”

With a one-ounce package of Palcohol and five ounces of liquid, a beverage that is equal to “a standard mixed drink” can be created, according to the company’s website.

The powdered alcohol is gluten free and along with alcohol, the cocktail versions contain natural flavorings and Sucralose, a sweetener. Each serving of the powder contains 80 calories, according to the Palcohol website.

See how other popular drinks compare in calorie content below or click here.

Currently the product is patent-pending.

A patent can be very valuable to a company, Dan Christopherson, a patent attorney at Lehrman Beverage Law, PLLC., said. “It tells competitors, ‘go ahead and compete, but we think it’s a proprietary product. If you are going to reverse engineer our product, you might attain some liability.’ ”

Patents are given for a variety of reasons, including a company having a new way to create a product or for a product having a novel feature.

Christopherson said the company will “probably have a hard time getting a very broad patent,” but may be able to obtain a very narrow patent for a “new, non-obvious feature.”

For consumers, a patent could make the product more desirable. “Consumers might be impressed by the fact it is patent-pending,” Christopherson said.

Without a patent, competitors could try to duplicate the product, creating more options for consumers when it comes to choosing a powdered alcohol to buy.

Other attempts
Palcohol is not the first powdered alcohol drink. In Japan, Sato Foods Industries co., ltd., markets a a 3.48-percent alcohol powder.

In the 1970s, the man behind Tang and Pop Rocks patented a way to create powdered alcohol but it was never marketed.

A few years ago, Dutch students developed Booz2Go, a powdered alcohol containing 3% alcohol, according to an article by Reuters.

Liability insurance
Lipsmark, the company behind Palcohol, will need product liability insurance, Patricia Roth, Executive Vice President at XS Brokers Insurance Agency Inc., said. The insurance will be important for the company, because “given today's legal climate, a manufacturer, regardless of any negligence, can be held liable for a loss,” she said.

LINK: http://media2.scrippsnationalnews.com/photo/2014/04/30/Lipsmarklocation_1398883907053_4307152_ver1.0_640_480.jpg “It is difficult to comment on the availability of insurance relative to the Four Loko situation,” Roth said. Four Loko, an alcohol drink once advertised as an alcohol-energy drink, was banned in several states and the company behind the product initiated a product reintroduction in December 2010.


The reintroduction included removing caffeine, taurine and guarana as ingredients. Four Loko is no longer marketed as an energy drink. Most of the controversy surrounding the drink came from the marketing of the product, Roth said.

“After all, insurance is all about risk,” Kim Michael Cullen with Cullen & Hemphill, PLC, based in Florida, said. “If an insurance company feels like the risk of paying claims on a product like this is high – but not too high – they will write coverage, but it will probably be very expensive.  If the risk is perceived to be too high, then they won’t offer coverage at all.”

Other uses
According to the Palcohol website, the powdered alcohol can be used for many things. The company has been contacted by people and businesses interested in looking into the possibilities of using Palcohol in the following ways:

  • An antiseptic by doctors and nurses, especially in more remote areas.
  • Incorporating into a livestock supplement company’s business.
  • Creating an adult ice cream.
  • Windshield washer fluid for cars.
  • Emergency fuel.
  • Hotels in Hawaii to cut down on cost to ship liquid alcohol to them.

State control
If Palcohol receives label approval from the TTB again, the company would then have to deal with individual state laws to be sold in the United States. The federal government doesn’t have power to approve or deny the sale of alcohol products in the states, that is left up to each state and each state has slightly different laws.

“Even if California gives him the finger and New York says no way, he (Phillips) probably can find a state to give him a whirl. Let’s say he gets one state, then we learn, is it priced right, does it taste well, is he even able to produce this at a commercial level,” Lehrman said.

In an email, a company spokesperson for Palcohol said “the product can be sold in all states once the labels are approved unless the states specifically prohibit powdered alcohol.”

“They are trying to put lipstick on a pig,” Lehrman said. “He’s (Phillips) got nothing unless he has label approval, it’s a crucial step. He has to file paperwork in each state. Even if there is no rule, he can be blocked, even if there is not a law. They (state lawmakers) can just sit there and ignore him.”

Lawmakers react
This week, a Minnesota lawmaker introduced new legislation that would ban the sale of powdered alcohol. In Vermont, a similar bill is moving through the legislature and the the head of the state’s Department of Liquor Control said he will work to ban Palcohol.

In California there is already a law on the books regulating “powdered distilled spirits.”

“It goes into great detail about how to properly tax powdered alcohol,” Lehrman said.  “I do not think they would have bothered to write that unless someone would have gotten pretty close to it. The law exists and is enforceable.”

Other countries
One option for Palcohol could be to sell the product to consumers in other countries.

Palcohol “has all of the approvals it needs to be sold elsewhere,” Lehrman said. Phillips would need a distillery permit and formula approval, which he has, in order to make it for export, he added. “For exporting, it just has to be legal where he is shipping to.”

Predicting the future of Palcohol
“Yes it is controversial, yes it is new,” Lehrman said. “But, to the extent they approved it intentionally, and it wasn’t a slip up, I think they have no business withholding approval unless they have a rule they can invoke, and no one knows of a rule, but they can make a rule.”

A Palcohol spokesperson said “Alcohol is a regulated product. We just want a level playing field in discussions about how to regulate Palcohol.”

What do you think? Should Palcohol receive label approval and be allowed to move forward to approach states to sell their product? Take the poll below and let us know what you think.

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