‘Legislators understand the logic behind updating the law’

The KOMBUCHA Act​ (‘Keeping Our Manufacturers from Being Unfairly taxed while Championing Health Act’ H.R. 2124 / S. 892), which would amend the internal revenue code to ensure kombucha is exempt from excise taxes and other regulations imposed on alcoholic beverages, has been reintroduced to Congress​  by Rep. Earl Blumenauer (D-OR-3) and Sen. Ron Wyden (D-OR).

GT explained: I have spoken with legislators and this act has been received incredibly well; they understand the logic behind updating the law to allow businesses and a health product to continue to thrive.

“It’s a slow and steady journey, and there’s more than one way to get this passed, so you can piggyback it onto something else or make it independent, but I don’t know that at this stage we’ve exactly identified the path of least resistance, so we’re staying open minded.”

He added: “This act ​[which includes a definition of kombucha – see below] will eliminate some of the fear and uncertainty, particularly for small kombucha brewers, because when something is not defined in law it creates opportunities for plaintiff’s counsel to come in and start suing everyone.”

GT’s Classic Kombucha: ‘Right now, a product like Classic can only be distributed by beer distributors’

DivineGrape_GT's classic kombucha

Picture: GT’s Living Foods

GT’s Living Foods​ offers three kombucha product lines:  

  • GT’s Synergy Raw Kombucha: Under 0.5%ABV
  • GT’s Classic Kombucha: 0.5%+ABV (marketed to over 21s)
  • GT’s Hard Kombucha: 3%ABV (marketed to over 21s)

GT’s Classic Kombucha is the original brew GT began bottling in the 1990s, which like many traditional kombucha products skirts the 0.5% threshold and can contain up to around 1.25%. If the KOMBUCHA Act passes, it would no longer have to be marketed effectively as an alcoholic product, and would not be subject to excise taxes, he said.

“We would probably reassess the brand and product positioning as it would not have to have this age restriction. One of the main reasons we want this act to pass is that right now, a product like Classic can only be distributed by beer distributors, who rarely have refrigeration.”

If GT’s Classic Kombucha is no longer effectively classified as beer, he said, “it could have a much broader distribution opportunity.”

As the Classic line skirted the 0.5% threshold, he added: “We had to become a licensed brewer and pay tax not only to the feds but also state tax. It also means that we can only sell to distributors that are licensed to sell beer, and they can’t sell across state lines.”

Preserving the integrity of the kombucha category

However, the bigger issue for GT’s​ is preserving the integrity of the kombucha category, which he argues has been compromised in part by pressure to keep alcohol levels consistently below 0.5% throughout the shelf-life, prompting firms to deploy a variety of techniques from heat pasteurization to kill off residual yeast, to micro-filtration to remove yeast and prevent secondary fermentation in the bottle, to spinning cone technology to remove alcohol.

If you take away the things that make kombucha special – its rawness, its vinegary flavor, its natural effervescence, its visible strands of the culture, the way it’s made with an authentic kombucha SCOBY ​​[symbiotic culture of bacteria and yeast] – then we have to ask ourselves, what are you actually making?” ​​added GT, who started his company, now the market leader in a multi-million dollar category​, ​​in his mother’s kitchen as a teenager in the 1990s.

He also welcomed the long-awaited code of practice​ from trade association Kombucha Brewers International (KBI), which​ defines what kombucha is​ and how it is made, and encourages the use of on-pack terminology it claims provides consumers with more clarity about ingredients or manufacturing processes, such as ‘added probiotics,’ ‘pasteurized,’ ‘sterile filtered​​’ [if the filter is less than .45 microns], ‘carbonated,’ or ‘dealcoholized’ ​​(although it allows flexibility in the exact wording used).

“The most important thing to me is to present this information to consumers about all the different kombuchas that are out there and let them decide which version they want​,”​ he said.

What is kombucha and why does it contain alcohol?

To make traditional kombucha, firms typically brew tea, add sugar, and then ferment the mixture with a kombucha culture or ‘SCOBY’ (symbiotic culture of bacteria and yeast). The yeast converts some of the sugars to alcohol, most of which is consumed by the bacteria and converted into acetic acid (explaining the slightly vinegary taste) and other organic acids.

Keeping the alcohol level under 0.5% throughout the shelf-life has been a challenge for the industry from its inception, with firms using a variety of techniques such as heat pasteurization; micro-filtration; spinning cone technology to remove alcohol; or other approaches such as altering the shape of fermentation vessels​​.

However, some purists take issue with some of these approaches, arguing that ‘authentic’ kombucha is a raw, ‘living’ product that should be manufactured in a particular way, prompting a protracted debate over standards of identity​​ in the category.

The TTB (Alcohol and Tobacco Tax and Trade Bureau) took a close interest in the alcohol levels in kombucha in 2010, prompting a high-profile withdrawal of products in Whole Foods. However, since then the pressure to address the alcohol compliance issue has been driven by lawsuits, with multiple brands in the space being sued by competitors or by consumers.

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