Why Does the Government Care So Much About My Booze’s ABV?

Tax collectors, big business, a dead teetotaling British Prime Minister and actual mobsters from the 1930s are all conspiring to control how you get drunk

I am raising a glass to my long-gone Glaswegian Grandad — in it is a healthy measure of single-malt whisky, which on first sip has set my brain pleasantly rocking on its keel — and I’m toasting his two iron rules for life. The first of these was that all first-born males in the family should, like him, be called Christopher. The legacy of this has been a small clone army of Chris-cousins and a great deal of confusion at family gatherings. 

For a man who liked to be precise about things, his second rule makes way more sense: “Scotch is a drink, not a people.” Hearing anyone use the Sassenach malaprop “Scotch” when they really meant “Scottish” or “Scots” was the one thing guaranteed to drive him up the wall. It was usually English or American people who committed this cardinal blunder of confusing a thousand years of nationhood with a very specific type of distilled beverage, but occasionally even fellow cultural Caledonians would get it wrong too — and since long before I was old enough even to smell the stuff, he’d impressed on me that this grave whisky-based error should never, ever be allowed to pass.

Well, slàinte mhath, grandad — here’s to you, to Christophers everywhere and to Celtic lexical correctitude. And, as my first sip of toasty Laphroaig Select Scotch sears its way down my esophagus, I’m lucky enough to have a locked-down liquor expert on a Google Hangout to explain exactly — or rather precisely — what it is I’m tasting. 

“It’s nice and dense; there’s that little bit of dried fruit, like dried cherries, dried blackberries — kind of like trail mix,” says Josh Peters, L.A.-based connoisseur behind the blog The Whiskey Jug. He’s channeling what’s currently going on with my tongue and throat to a tee. “And then that nice, iodine-y, almost like charred-plastic kind of peat that Laphroaig typically gets.” Yep, nailed it: It tastes very much like an abandoned golf course (in a good way). “But then,” he goes on, like a clairvoyant now convening fully with the spirit plane, “there are usually some good honey and Graham cracker type of notes.” Ah, that’s a shame… Totally wide of the mark here, I’m afraid. What I’m in fact getting is Honey Nut Cheerios. Still, it’s close enough to be a supremely impressive flavor seance.

While I do love it, and there are few things I savor more in life than pleasantly scorched tonsils, I’ve always suspected whiskey is more a set of rules than a drink. One of its most arbitrary edicts is the word itself: “Whisky,” without the “e,” is the British spelling, which by convention applies to Scotch; “whiskey” with an “e” means it’s the American or Irish version (which is why it’s annoyingly being spelt both ways here). Some of the other immutable laws that define it: To be legally entitled to be called Scotch, a whisky must have been aged on Scottish soil for at least three years; to be known as “bourbon,” it must be distilled from at least 51 percent corn, in the U.S. or its territories; all American whiskeys, including bourbon and rye, have to be aged in brand new, charred oak casks; and, crucially, all whiskies everywhere, whether they’re made in Kentucky, the Hebrides or Tokyo, must be bottled at 40 percent alcohol by volume (ABV) at least.

As Peters points out, this magic number of 40 percent ABV — corresponding to “80 proof” in the weirdly archaic U.S. proof system — is the defining standard for most forms of hard liquor. “That proof has been around for a very, very long time,” he says, a minimum bar that applies to vodka, Cognac, gin and rum, too (although in the U.K. and Europe, for non-whiskey spirits, the minimum ABV is 37.5 percent). “With whiskey, even old bottles from the early 1900s were never bottled less than that.” Like so much of booze-industry lore, it’s accepted by everyone — consumers, bar owners and producers alike — as a commandment so written in stone it barely ever gets commented on.

“That’s actually a very interesting question,” muses Peters when I point this out. “How did we come to a general consensus around 40 percent?” 

He is able to explain away many of the oddities of how whiskey came to be defined in law (and do check out his fantastically well-informed blog post on that) — and, from the Whiskey Rebellion in Pennsylvania in 1794 to the Federal Alcohol Administration Act of 1935, they’re mostly to do with controlling which drinks can be taxed where, by whom and at what level. But he says the exact reasons behind the 40 percent ABV threshold remain subject to debate and shrouded by history. Peters thinks it was most likely to have been a settlement, gradually arrived at, between the need to find a reliable measurement by which governments could grade their liquor taxes and the very subjective demands of taste: “In order to find that sweet spot of a product that everybody would want to drink, probably 40 percent became a consensus, and then eventually it got put into law.”  

It’s a theory perfectly borne out by at least one version of whisky history, which blames the worldwide 40 percent standard on Britain’s teetotaling prime minister during World War I, David Lloyd George. Amid howls of protest from whisky-makers, Lloyd George drove Scotch’s alcohol content down to two-fifths from its typical Edwardian level of around 50 percent, because he was worried about military personnel and factory workers’ ability to function during the day. 

According to this account from “The Whisky Professor,” the disgruntled distillers emerged from the war to find that Lloyd George had actually done them a favor: At 40 percent, their traditional complex of flavors and aromas just about remained intact, while it also allowed them to swallow the tax burdens imposed by a war-ravaged government and keep prices just about low enough to sell their grog to a mass market. 

“Forty percent might have been a compromise, but it helped to preserve whisky’s integrity,” observes the professor, for reasons to do with the delicate art of distilling. “The lower the strength goes, the greater the risk that you lose the more delicate (volatile) top notes. This is more clearly seen in gin and rum, where citric aromas virtually disappear when the bottling strength falls below 40 percent ABV.” 

Burdens of Proof

In general, then, that’s why history has mandated that traditional liquor be made at skull-pounding strengths — so it tastes at least a little like the stuff it’s made from. And all those inscrutable laws about protected names and mandatory ingredients, while they might seem romantically obscure, do actually serve a purpose. Trading regulations that tie a drink’s name to a particular standard or a place, such as “Cognac, Armagnac or Champagne,” says Peters, are important. “They’re helpful to consumers because then they know what they’re getting.” But quaint rules of definition are just the tip of the ice-bucket when it comes to the liquor world’s bizarre thirst for regulations — unbeknown to most of us as consumers, it turns out the supply side of Happy Hour is awash with stifling curbs, brakes and constraints. Much of this market restriction is weirdly backwards-looking; some of it is deeply sinister.   

“It felt like kind of a racket — like a terrible industry to be an innovator in,” says Helena Price Hambrecht. She’s talking about the challenges of setting up Haus, the California aperitif business she founded with her husband, Woody Hambrecht, and explaining how they’ve managed to create something that’s surprisingly unique in the U.S. wine-and-spirits space: An aperitif-producing operation that’s willing and able to sell its wares online, directly to its customers. “When we were launching, most people in the liquor industry thought we were crazy — they were like, ‘What makes you think people would buy this online? What makes you think you can’t go through the three-tier system?’” she recalls. 

But in a world that’s under quarantine, with many millions stuck indoors and perhaps in more urgent need of alcohol than usual, suddenly, for Haus, demand for deliveries and e-commerce “is skyrocketing.” In a matter of weeks their business has gone from pioneering platform to lockdown lifeline. “It’s so wild to see this new reality where people can only buy online, for the most part,” she says. “It’s bonkers.”

Helena’s background is as a Silicon Valley creative, well used to disrupting archaic business practices, while as a third-generation wine-maker, Woody knows the more hospitable terrain of reds, whites and rosés inside-out. But to make any headway at all in the spirit trade, they had to navigate a daunting array of barricades, brickbats and bastards. By far the most menacing obstacle was what’s known in the booze business as the aforementioned “three-tier system” — for the most part, producers (tier 1) are expected to go through huge, monolithic distributor companies such as Southern Glazer’s or Young’s (tier 2), in order to sell their products into bars, hotels and other customers in the hospitality sector (tier 3). 

In this unhappy love triangle, which has been in place since Prohibition, it’s the middle tier, the distributors, that controls the market. As Helena explains it: “You have to go through it if you’re in the liquor space — and for the most part, you choose to go through it, even if you’re a wine or a beer, because that’s the way that the game has been played forever, and the idea of bypassing distribution and going exclusively direct is unheard of.”

And it’s not just troublemaker independents who stand aghast at the industry’s decades of stagnation. “It’s protectionist, is what it is,” says a business insider who’s spent over a decade in the alcohol business, has worked for some of the world’s largest spirits corporations and who didn’t want to be named for fairly obvious reasons — so let’s call him Jack. “There are four distributors in the U.S. who control over 70 percent of beer, wine and spirits,” he says. “It has to touch one of their trucks to be delivered anywhere in the U.S. These are $10 billion turnover businesses.” 

It seems they really do owe their stranglehold on the market to Prohibition, and specifically — albeit at several steps’ remove — to the shadow infrastructure that was built up by the gangster networks of the 1920s and early 1930s. When the Twenty-First Amendment repealed Prohibition in December 1933, says Jack, “the same vans and trucks that had been delivering alcohol during Prohibition suddenly stuck a sign on their sides saying ‘[Recently Incorporated Legal Distribution Company].’” The hooch-running mobsters of the era “were already running a very well-organized business; it was just illegal. And now it was legal.”

That was the framework inherited by subsequent generations of distribution firms, and, according to Jack, it’s a system that’s been jealously held in place by their successors — by corporate lobbyists who press state and federal lawmakers to preserve the status quo, and by distributors themselves, acting as market gatekeepers with the power to hold the booze giants to ransom. “If a major spirit brand were to lobby the U.S. government to get rid of distributors, what’s going to happen?” asks Jack. “Its distributor is going to say, ‘We don’t sell your products any more.’ The producer is going to lose 80 percent of its volume in the biggest drinks market in the world. So nobody can afford to fuck with the status quo.”

“The hilarious thing is that they absolutely hate each other,” Jack continues. “The drinks companies will be thinking, ‘You guys are basically glorified truck drivers with political clout,’ and the distributors will be looking at the big drinks companies going, ‘You guys are all marketing dudes.’” 

Haus, meanwhile, have so far managed to avoid being ensnared in all these dark, dick-swinging machinations by offering low-ABV “grape-based” products. They bottle their aperitifs below 24 percent, which is the federal ceiling for what can be classed as a wine-based beverage, and start with a base of fermented and distilled grapes — it’s this quirk of designation that’s allowed them to ship direct to customers, without having to get involved in the drunken-dinosaur turf war that’s going on all around them.

The Distillery-Industrial Complex

As anyone who’s seen Jurassic Park knows, though, the big beasts aren’t the ones you have to watch out for. In the U.S. some of the regulation comes from federal agencies — the FDA controls labeling on low-strength wines and other alcoholic beverages that come in under 7 percent ABV (though all but a few beer products are excluded from its jurisdiction); the TTB is responsible for boozier booze and enforcing the U.S.-wide mandate that “wines containing more than 24 percent of alcohol by volume are taxed as spirits.” But the majority of taxes and sales restrictions for spirits are applied at state level or below, and in a menagerie of ways.

“If you’re a producer in, say, the Netherlands, you can ship easily to other countries in the EU, and they’ve made that pretty simple,” says Woody Hambrecht. “In the U.S. we need licenses in every state that we ship to. So it’s this incredible nightmare of paperwork.” The sheer weight of red tape involved in doing their own distribution would be more than enough to put off even the most gung-ho start-ups: “There are so many different agencies that you have to manage between state, local and federal for tax reasons. It’s so complicated. It gets down to the level of county in some states, for who collects the different sales tax and at what rate, and then who accepts packages. It’s insane how specific it gets.” For a genuinely independent craft-spirits sector to flourish, says Woody, “I would love to see a greater federal blanket tax,” replacing the psychedelic patchwork quilt that currently exists.

Then there’s the howling anomaly of transparency. While it’s one of the most heavily regulated industries in virtually all other respects, when it comes to declaring its ancillary ingredients, the liquor trade is the Wild West. You can’t market American rye whiskey unless it contains at least 51 percent rye grain, for instance, but when it comes to tweaking the flavors of your spirits, an alarming amount of latitude is given to producers who want to make “interventions” without making them public. Such hidden additives might include allergens like eggs or nuts, or unpalatable derivatives and clarifying agents like fish bladders. “That’s specifically because the FDA [with its labeling directives] isn’t involved in anything over 7 percent — that’s why these consumables aren’t part of the mandatory info,” says Woody. “It’s really pretty crazy. I know for a fact people are adding caramel color and all sorts of other coloring agents that they don’t have to disclose.” 

“It’s weird that they don’t regulate further the transparency of brands,” says Peters — “or that they sometimes actively stop it.” He cites the case of Compass Box, a London-based blender that received a hard slapdown from the Scotch Whisky Association (SWA) in 2015 for listing too much information about what went into its bottles. The SWA told Compass Box that by giving consumers the maturation ages of each of the whiskies that went into its blends, the producer was in breach of EU regulations. (Only the age of the youngest whisky is supposed to be declared on labels. Why? Don’t ask. Age statements are yet another area of arcane stipulations that no one in the whisky world seems able to explain fully.) In response, Compass Box’s founder, John Glaser — a former marketing director for Johnnie Walker — launched a public campaign for more transparency across the Scotch sector. Winningly, he’s also displayed his disdain for the rules-driven thinking that saturates his industry in this lovely bit of quiet heresy on how a true connoisseur should really drink whisky:

“There was basically a gag order on him,” says Peters. “He could tell people what percentage of all the whiskies were in there, and what type of casks they came from. But when it came to their ages they made him pull it off [the packaging]. They came down on him for it, and that was super weird.”

At the time, the SWA maintained their action was in response to a complaint made by another whisky brand, and all they were doing was pointing out a statutory breach — but, whatever the motives in play, the law still came down on the side of obscurantism. “Laws like that exist in pretty much all the whiskey industries, and I’m always curious about that,” says Peters. “What’s the real reason behind why you’d want to keep transparency out of it? That’s always really bothered me.”

Distributed Denial-of-Service Disruption

Haus is another company that’s breaking ranks by publishing its ingredients in full. But in part, that’s because they know their market. “The alcohol industry was built for the Boomer generation,” says Helena, designed to deliver the same familiar taste to a largely brand-loyal, undiscerning mass market. “But now you’ve got these newer generations of drinkers who have standards that they inherited from food and beauty and other products, where they want to know: Is it organic? They care more about what’s in it. And they actually care much less about consistency — they like novelty, they like to try different flavors, they like the varied experience of it.”

Similarly, for Peters, a large part of why Big Booze’s approach seems so (for want of a better cocktail name) old fashioned, comes down to the fact that people “just give a shit now. You talked to your grandparents — very rarely did they care about the ingredients; how it was made; where it was made; what it was made with.” (He’s right — they were often more concerned about getting its name right.) Now, though, says Peters, “when you see one brand is offering up this info, it’s like, ‘Hey, why aren’t you all doing this?’ It really comes down to that right there: We’re more interested in the things that we eat and drink now, and have been increasingly interested over the last 10 years.”

Despite the corporates’ continued brand hegemony, one big signal that the ground has been shifting beneath their feet is the fact that younger generations are increasingly ambivalent about their alcohol consumption. Social scientists have noted that binge drinking has been in steady decline in just about every Western society since the turn of the millennium, and (as we’ve reported on ourselves) teenagers are just not that into their booze anymore. As a result, says Peters, “Low ABV or no-alcohol cocktails and drinks is a big trend right now. I’ve had quite a few of the low- or no-alcohol gin substitutes. I love a good martini, and I’ve made cocktails with them and they taste great.” 

He finds they have at least one drawback, though: “Knowing that there’s very little alcohol in them, I actually find myself going through it much quicker. You end up going through this $45 bottle of flavored water, and by the end of the night you’re thinking: ‘I had like seven cocktails and I’m completely hydrated and sober, and that was a lot of money to go through.’”

A healthy appetite for lower-ABV nights out is welcome news for the likes of Haus, of course. As well as their own orders ticking up even before the lockdown, Woody points to Aperol — the Italian apéritif made from gentian, rhubarb and cinchona: “They’re seeing huge growth in the U.S.; I don’t think it’s that people are looking to stop drinking, they’re just looking to have a better relationship with alcohol.”

Amid worldwide movement restrictions, it seems the regulatory authorities might be developing a better relationship with booze, too. “It’s an industry that’s seen the least innovation of probably most industries,” says Helena. “And it’s been great for them because they could just keep selling the same brands for decades. In many ways, they control what ends up being served at the bar. It’s the reason we’re all still drinking subpar corporate booze in 90 percent of our cocktails.” 

But with the onset of the pandemic, wine and spirit sales are both up nationally by more than 25 percent (beer is up by 14), and to preserve social distancing in the face of demand, many states have temporarily relaxed age-old handling restrictions that up to now have favored the status quo. Maryland and Texas are allowing alcohol deliveries to customers, for example, while California, Nebraska, Vermont, Kentucky, Colorado and the District of Columbia have all let restaurants provide alcohol takeout and delivery orders

Sensing liberation from three-tier indenture, there’s already a strong lobby from alcohol producers to make this free-spirited approach permanent — and if enough people get a taste for it, it might just mean that Prohibition’s long regulatory hangover is at last beginning to clear. Give it a while more, and you never know — the impenetrable blue-chip preferential system might find itself on the rocks. We might even find we’re being presented with the same fine-grained range of choice at the liquor store as we’ve come to expect when buying groceries. 

Invoking the spirit of culinary exploration and discernment that’s come to characterize consumer habits in recent years, from the coffee and craft beer revolutions to the rise of Whole Foods and farmers markets, Woody says: “I would love for people to start incorporating their alcohol consumption into that — looking at it in the same way as they do their food.” 

A connoisseurs’ cornucopia where we could pick out liquor that has the exact ABV and ingredients we want, and where the people who made the stuff wouldn’t be hit with a gratuitous dilution of their profits, either by the tax man or the middlemen. Now wouldn’t that be neat?