Four Loko Frenzy: Phusion Projects Responds to FDA, FTC and Media

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1 Four Loko Frenzy: Phusion Projects Responds to FDA, FTC and Media Company Background

2 Jeff Wright, Jaisen Freeman and Chris Hunter formed Phusion Projects, LLC, an alcoholic beverage company, in Recent Ohio State University graduates at the time, the three friends tapped into a market they were familiar with based on a popular drinking trend: mixing energy drinks with alcohol. 1 After a few failed trial runs with alcoholic energy drinks, Phusion Projects released a finalized product in 2008 that consisted of taurine, guarana and caffeine packaged in colorful fluid- ounce can that contained 12% alcohol. Named Four Loko because it s a loko blend of fruit flavors, 2 the products sold for around $3 a piece and were shelved next to beers. In 2009, Four Loko sales increased by 2,680% in a 12- month period. 3 According to Information Resources Inc. in November of 2010, in the last year, Four Loko s top three flavors have sold an aggregate of $97 million, making them the #3, #5 and #18 SKUs overall in the progressive adult beverage category. 4 The small company was unprepared for the volume of success that came with Four Loko. The pre- mixed drink, known to intoxicate the consumer while keeping them awake, quickly became associated with binge drinking among underage consumers. With nicknames such as liquid cocaine and blackout in a can, 5 it wasn t long before the government and the media blamed Four Loko for over a dozen deaths. From August 2010 to November 2010, several incidences involving Four Loko resulted in Phusion Projects being scrutinized by state officials, government agencies, media and concerned universities and parents. Scientific Background Alcohol + Caffeine, Not a New Concept Caffeine has made its way into alcohol for over a hundred years. Take for example popular cocktails such as cola mixed with rum or Irish whiskey mixed with coffee. The safety of combining caffeine with alcohol, however, gained much attention in the 2000s with the release of alcoholic energy drinks such as Four Loko. Basic definitions of caffeine, energy drinks and alcoholic energy drinks provide for a better understanding of Four Loko. Caffeine Caffeine is a stimulant of the central nervous system that is found in coffee beans, tea leaves, cocoa beans and kola nuts. 6 Behavioral effects of caffeine vary by dosage. A dosage of milligrams of coffee may enhance skill performance, increase alertness and increase energy. 7 A dosage of milligrams may lead to anxiety, nervousness and insomnia. 8 A standard 6- ounce cup of coffee contains around 100 milligrams of caffeine. A 12- ounce can of Coca Cola contains 34.5 milligrams of caffeine. 2

3 Energy drinks Energy drinks are beverages that intend to provide energy by combining caffeine with simple sugars, amino acids, herbs and vitamins. 9 A typical energy drink contains milligrams of caffeine. 10 Energy drinks were first introduced in the United States in 1997, and sales grew an estimated 50% per year in the mid- 2000s. 11 Energy drinks are popular among consumers between the ages of 18 and 34. Currently, the energy drink industry in the U.S. is a multibillion- dollar industry. 12 Alcoholic energy drinks Alcoholic energy drinks, also referred to as malt beverages, gained popularity in the U.S. during the 2000s. In 2010, the United States Food and Drug Administration (FDA) outlawed alcoholic energy drinks after determining that caffeine was an unsafe food additive. 13 Most alcoholic energy drinks were packaged in a can and contained between 6-12% alcohol with caffeine and a variety of other ingredients. 14 MillerCoors and Anheuser- Busch dominated the market along with smaller producers such as Phusion Projects, the makers of Four Loko. 15 Four Loko Phusion Projects released the alcoholic energy drink Four Loko in From 2008 until November 2010, Four Loko contained 12% alcohol and 156 milligrams of caffeine in a 23- ounce can priced around $3. 16 Four Loko also contained taurine, an amino acid that increases energy. The Institute of Food Technologists stated that a combination of caffeine and taurine gives consumers an energy buzz. 17 The United States Federal Trade Commission (FTC) determined that one can of Four Loko contains as much as alcohol as four or five beers, and the consumption of a single can of Four Loko on a single occasion constitutes binge drinking. 18 Binge drinking, according to the FTC, is defined as men drinking at least five standard alcoholic drinks in four hours and women drinking at least four alcoholic drinks in four hours. 19 Safety Concerns The popularity of alcoholic energy drinks prompted substantial research concerning the combination of caffeine and alcohol. A handful of studies addressed the safety of combining alcohol and caffeine while also taking into account external factors that influence the safety of alcoholic energy drinks. Consistent concerns highlighted in the research include the adverse effects of alcohol and caffeine and the high- risk behavior associated with alcoholic energy drinks. Adverse Effects Simply stated, caffeine is a stimulant, and alcohol is a depressant. Studies show that when caffeine is combined with alcohol, the caffeine counteracts some, but not all, of alcohol s effects on the central nervous system. 20 A study called "Clubgoers and Their Trendy Cocktails: Implications of Mixing Caffeine Into Alcohol on Information Processing and Subjective Reports of Intoxication" tested how alcohol and caffeine, combined and separately, can affect one s ability to process 3

4 information. The results showed that caffeine, when combined with alcohol, counteracted the effects of alcohol on interference but had no effect on the degree to which alcohol increased errors. 21 Additionally, the study found that those who consumed caffeine with alcohol perceived themselves to be less intoxicated than those who consumed alcohol alone. 22 Another study called Energy Drink Ingestion on Alcohol Intoxication examined the specific effects alcoholic energy drinks have on the central nervous system. The researcher found that the alcoholic energy drink caused some intoxication symptoms to be less intense, such as one s perception of headache, weakness and dry mouth. 23 Alcohol s effect on motor coordination, visual reaction time and breath alcohol concentration, however, did not change. 24 The FDA cited similar safety concerns about the combination, stating that, Caffeine can mask some of the sensory cues individuals might normally rely on to determine their level of intoxication. 25 High- Risk Drinking A study called "Caffeinated Cocktails: Energy Drink Consumption, High- risk Drinking, and Alcohol- related Consequences among College Students examined the consumption of alcoholic energy drinks on college campuses and how this consumption is related to high- risk behavior and alcohol- related consequences. The study found that nearly 25% of college students admitted to drinking alcoholic energy drinks. 26 It assessed the likelihood of alcohol- related consequences by comparing those who drank alcohol alone to those who drank alcoholic energy drinks. The results showed that those who consumed alcoholic energy drinks had dramatically higher rates of serious alcohol- related consequences, 27 such as serious injury, sexual assault, drunk driving and death. 28 Additionally, the study concluded that the association between alcoholic energy drinks and alcohol- related consequences may be due to a misperception of intoxication. 29 The United States Food and Drug Administration (FDA) identified the intended use of the product to be a serious danger as well. This was explained in a warning letter to Phusion Projects when the FDA stated: The scientific data and information that support a GRAS determination must consider the conditions under which the substance is safe for the use for which it is marketed. Reports in the scientific literature have raised concerns regarding the formulation and packaging of pre- mixed products containing added caffeine and alcohol. For example, these products presented as fruity soft drinks in colorful single- serving packages, seemingly target the young adult user. Furthermore, the marketing of the caffeinated versions of this class of alcoholic beverage appears to be specifically directed to young adults. FDA is concerned that the young adults to whom these pre- mixed, added caffeine and alcohol products are marketed are especially vulnerable to the adverse behavioral effects associated with consuming caffeine added to alcohol, a concern reflected in publicly available literature. 30 4

5 Currently, no scientific literature supports the safety of alcoholic energy drinks. Chronology September 25, 2009: The National Association of Attorneys General Youth Access to Alcohol Committee wrote a letter to the FDA that expressed concern about the safety of alcoholic energy drinks. 31 The letter claimed the combination of caffeine and alcohol is unsafe and requested such products be removed from the marketplace. 32 November 12, 2009: The FDA sent a letter to 29 companies, including Phusion Projects that requested the rationale for using caffeine in their alcoholic products. 33 The FDA called the companies to submit GRAS notices, which were to prove such products are generally recognized as safe. 34 May 24, 2010: In Syracuse, New York, Chelsea Kuss, an 18- year- old female, and Victoria Deverso, a 17- year- old female, skipped school to meet friends at a nearby beach. Kuss admitted to drinking four cans of Four Loko before driving her and Deverso home that afternoon. 35 With a blood alcohol level of.13, Kuss crashed into another car, killing Deverso and badly injuring another driver, Peggy Blume. 36 Blume suffered a medical- induced coma. Kuss claimed she blacked out after drinking Four Loko and didn't remember the car wreck. 37 June 25, 2010: Phusion Projects submitted a GRAS notice to the FDA. 38 August 2010: Nicole Lynn Celestino, an 18- year- old female from Long Island, New York died after drinking one can of Four Loko. 39 Celestino went into cardiac arrest with a blood alcohol level of.05, below the legal limit of August 2, 2010: In St. Petersburg, Florida a 20- year- old male named Demetrius Jordan ran a red light and crashed into another car, killing a father and three sons. 41 Jordan admitted to mixing liquor with Four Loko before the wreck, and a Four Loko can was found behind the driver s seat of his car. 42 Jordan also admitted to smoking pot before the wreck. 43 August 13, 2010: Janice Rivera, a 20- year- old female from Florida, lost her hand in a car accident. Rivera claimed her friend that wrecked the car consumed four cans of Four Loko but did not seem intoxicated. 44 Rivera sued Phusion Projects, alleging Four Loko masks the effects of alcohol. 45 5

6 September 17, 2010: Jason Keiran, a 20- year- old Florida State University student died after drinking three cans of Four Loko and accidently shooting himself in the head. The parents went on to sue Four Loko, claiming the beverage made their son act bizarre and erratic. 46 Time Magazine wrote: Jason Keiran, a sophomore at Florida State, spent the day of his death drinking - he is reported to have had at least three oz. cans of Four Loko (equaling as much as alcohol as is contained in a dozen glasses of wine) as well as additional beers. He reportedly told friends that he felt fine because of the caffeine, but his blood alcohol content was more than 2.5 times the legal limit of.08 in Florida when he put a friend s.22- caliber pistol to his head and fired. 47 ABC News reported that the three cans of Four Loko that Keiran drank were equivalent to 18 light beers and 6 cups of coffee. 48 October 3, 2010: In an antigay attack in the Bronx, New York, a group of seven young men forced a 30- year old gay man to drink ten cans of Four Loko. 49 October 9, 2010: At a college party in Roslyn, Washington, nine Central Washington University students were hospitalized after drinking Four Loko. 50 In addition, some students were mixing other liquors with Four Loko. Blood alcohol contents of the students ranged from.123 to.335, with a blood alcohol level of.30 considered lethal in the state of Washington. 51 Chief Steve Rittereiser of the Central Washington University Police said: Although initially some students claimed they had been roofied, which is a slang term for the use of Rohypnol, toxicology reports showed no Rohypnol in their blood or urine, and none were present in any of the students that were hospitalized. However, what emerged from our investigation is really something quite different and perhaps even more disturbing. Some students admitted to drinking vodka, rum,beer and other alcohol in conjunction with a caffeinated malt liquor or alcoholic energy drink called Four Loko. 52 Ritteresier went on to explain findings from extensive interviews he conducted. He concluded that all nine of the students hospitalized drank Four Loko, and some of the students hospitalized drank only Four Loko. 53 Ritteresier, along with Chief Scott Ferguson of Cle Elum Police Department and Washington State Attorney General Rob McKenna, targeted Four Loko and brought into question the safety of the product. This incident, and McKenna s public attack on Four Loko, marked the beginning of widespread, negative news coverage. October 15, 2010: Ramapo College in New Jersey banned Four Loko on campus due to an incident at the beginning of the semester. 54 It was reported 23 students were 6

7 hospitalized due to alcohol poisoning. 55 It was later reported that only six of the students drank Four Loko. 56 October 20, 2010: A 19- year- old Temple University student visited the Temple University Hospital after having chest pains from drinking Four Loko. 57 Dr. Robert McNamara, Temple University s Chairman of the Department of Emergency Medicine 58, treated the student and said, He had chest pains, he was sweaty, short of breath. 59 Dr. McNamara reported that the student had no signs of an unhealthy heart and experienced symptoms similar to people whom overdose on cocaine. 60 October 25, 2010: Washington State Attorney General Rob McKenna wrote a letter to the FDA that urged action to be taken against the Four Loko drink. 61 McKenna cited some of the dangerous incidences involving Four Loko and made claims that Four Loko was packaged to look like a non- alcoholic drink. 62 McKenna described the product as liquid cocaine and claimed it was sweeping college campuses. 63 October 29, 2010: Utah banned the sale of Four Loko. 64 November 3, 2010: Oklahoma Alcohol Beverages Law Enforcements prevented Four Loko from being sold or transported into the state after December 3, November 5, 2010: Michigan banned the sale of Four Loko. 66 Nida Samona, Michigan Liquor Control Commission Chairwoman, said: The commission s concern for health, safety and welfare of Michigan citizens and the fact that there is not enough research to validate these products are safe for consumption has made me believe that until further research is done by the FDA, they should no longer be on Michigan shelves. 67 Coverage of the ban in Michigan brought attention to a sexual assault case involving Four Loko. The Los Angeles Times reported that a month earlier, a 16- year- old female in Melvindale, Michigan admitted to drinking Four Loko before she was sexually assaulted. 68 November 7, 2010: Courtney Spurry, a 21- year- old female of Easton, Maryland, drove her car into a utility pole and died after drinking two cans of Four Loko. 69 Spurry attended at a party on the Eastern Shore of Maryland before the car accident. 70 Spurry s friend Abby Sherwood said, She was not the same person. She could not remember people s names. She was passed out within 30 minutes of having the alcoholic beverage. 71 November 10, 2010: Washington s Liquor Control Board placed an emergency ban on Four Loko that took effect on November 18, Washington Governor Chris Gregorie proposed the ban with the concern that Four Loko appealed to underage 7

8 drinkers. Gregorie said, It s no different than the kind of appeal that Joe Camel had to our kids when it came to cigarettes. 72 November 12: Mary Alice Brancato of Warminster, Pennsylvania came forward about an incident a year earlier when her husband consumed one and a half cans of Four Loko. She claimed her husband began hallucinating and having nightmarish delusions. 73 Brancato said, Next thing I knew, he was having convulsions making gurgling sounds as if someone were choking him and then he stopped breathing. 74 Brancato s husband survived after receiving CPR from his son and going to the hospital. 75 November 14, 2010: Valeria Rodriguez, a 14- year- old female from Arlington, Texas died in a drunk driving accident. 76 Before the accident, Rodriguez s 14- year- old boyfriend and his 16- year- old friend purchased and consumed five cans of Four Loko. 77 Local authorities arrested the convenience store clerk that sold Four Loko to the teenagers. 78 November 14, 2010: Phusion Projects agreed to stop sending Four Loko into the state of New York per Governor David Patterson s request. 79 November 15, 2010: Lanae Cummins, an 18- year- old female from Mesa, Arizona, told the police she was playing a drinking game with Four Loko before she crashed her car. 80 Cummins was arrested on suspicion of driving under the influence after she drove into a large tree that fell on a house. 81 November 16, 2010: Phusion Projects announced their plan to reformulate the Four Loko beverage by removing caffeine, guarana and taurine. In an official statement from Phusion Projects, the three co- founders said, We have repeatedly contended and still believe, as do many people throughout the country that the combination of alcohol and caffeine is safe. 82 In regards to their decision to reformulate Four Loko, they went on to say, By taking this action today, we are demonstrating leadership, cooperation and responsible corporate citizenship. 83 The company was left liable for $30 million worth of unsellable Four Loko products. 84 November 17, 2010: The FDA sent a warning letter to Phusion Projects and three other companies that stated caffeine in alcoholic beverages is an unsafe food additive. 85 The letter went on to cite scientific evidence that supported the danger in combining alcohol and caffeine. The FDA stated if the violation continues then such products will be seized. 86 The letter also said: FDA is aware that on November 16, Phusion Projects, LLC, the maker of Four Loko, announced its intention to remove caffeine and other stimulants from its drinks. FDA views this announcement as a positive step. 87 8

9 November 24, 2010: The FDA released an update, stating progress was being made in enforcing the removal of caffeine from these beverages. 88 December 15, 2010: Phusion Projects announced that the Alcohol and Tobacco Tax and Trade Bureau approved the reformulated Four Loko, which no longer contained caffeine, guarana and taurine. 89 Phusion Projects began shipping the new product to the states that approved the alcoholic beverage. 90 January 22, 2011: In Huntington Beach, California, Aaron Saenz, a 15- year- old male, and Chelsea Taylor, a 16- year- old female, were found dead in an apartment with an empty can of Four Loko and traces of drug use. 91 March 2011: New York Senator Jeffrey Klein called for restricted sale of the reformulated Four Loko in the state of New York. 92 Although the reformulated product no longer contained dangerous combinations, Senator Klein did not approve of the product. In a letter to Phusion Projects, Senator Klein claimed that the Four Loko packaging was deceptive and that marketing strategies were directed to teenagers. 93 March 21, 2011: Michael Mustica, a 22- year- old male from New Jersey, sued Phusion Projects. Mustica claimed he suffered permanent heart arrhythmia after drinking two and half cans of Four Loko a year earlier. Andrew D Arcy, Mustica s attorney, stated, "He was a victim of people who tried to make money off a product without worrying about the health consequences." 94 October 3, 2011: The FTC announced a complaint against Four Loko that stated the product was deceptively advertised through its labeling and packaging. 95 Specifically, the FTC alleged that Phusion Projects falsely claimed Four Loko was equivalent to one beer solely through the marketing and packaging of the product. 96 Phusion Projects, or the product label, never explicitly stated Four Loko was equivalent to one beer. David Vladeck, Director of the FTC s Bureau of Consumer Protection, explained these allegations when he said: Deception about alcohol content is dangerous to consumers, and it s a serious concern for the FTC. Four Loko contains as much alcohol as four or five beers, but it s marketed as a single- serving beverage. 97 October 3, 2011: Phusion Projects announced that they reached an agreement with the FTC to develop new cans for all of their products. 98 Phusion Projects stated the new cans will include more label information about the alcohol content of the drink and how it compares to other alcoholic beverages. 9

10 Media Responds to Four Loko Terminology and Headlines As the incidents involving Four Loko spread nationwide, the media coverage did as well. The nation s most prominent and widespread news sources covered Four Loko, including The New York Times, CNN, ABC News, The Washington Post and Time Magazine. An overwhelming majority of this media coverage portrayed Four Loko in a negative light. The story headlines and terminology used to describe Four Loko indicate the media s negative attitude toward the product. When describing Four Loko, numerous media outlets used the terms blackout in a can and liquid cocaine. An advanced Yahoo! search displayed the popularity of these exact phrases in the body of articles that featured Four Loko in the headline. Specifically, 562 articles contained blackout in a can and 246 articles contained liquid cocaine. Another similar Yahoo! search produced 156 results of headlines containing blackout in a can from articles covering Four Loko, as seen below. Washington state bans blackout in a can and other drinks CNN Boozy energy drink Four Loko aka Blackout in a Can banned from N.J. college New York Daily News Four Loko: Is New Party Brew Liquid Cocaine? CBS News "'Blackout in a Can': Alcoholic Energy Drinks Keep Wreaking Havoc." TIME Magazine 99 The use of this terminology from far- reaching news outlets indicated an overall negative portrayal of Four Loko. Four Loko was also featured in many headlines in which the product was linked to an accident or a death. Below are headlines from the incidents cited above in the Chronology section: "Woman Who Lost Hand in Crash Sues Four Loko." "Four Loko Lawsuit: Did Caffeinated Alcohol Cause Death?" "Student Illnesses at Party Blamed on Four Loko." "Four Loko Sends Students to Hospital." "Maryland Family Blames Four Loko Alcoholic Energy Drink For Daughter's Driving Death." "Four Loko Caused Death of 21- year- old Maryland Woman, Victim's Friends Tell Local Television Station." "'Four Loko' Blamed For Halluciongenic Frenzy." "Four Loko Energy Drink: Teen's Death Again Spotlights Danger" "Four Loko Gave Me Permanent Heart Damage, 22- year- old Michael Mustica Claims in Lawsuit." 10

11 Comparing the Product The media constantly compared Four Loko s alcohol and caffeine content to beer, wine and coffee equivalents. Although the comparisons were intended to give the public a frame of reference, these reports across media outlets were inconsistent. Below are examples of the varied comparisons made to Four Loko. According to the media, one ounce can of Four Loko is equivalent to: At least three beers, a can of Red Bull and a shot of espresso - Fox News 100 As much caffeine as a cup of coffee The New York Times 101 Four beers Los Angeles Times 102 Five beers and four cups of coffee - CNN 103 Caffeine equivalent of two cups of coffee USA Today 104 Five twelve- ounce beers and a cup s worth of coffee CBS News 105 More than twice what s in an equal amount of Budwesier - TIME Magazine 106 On a company fact sheet that described Four Loko, Phusion Projects compared the drink s alcohol equivalents to the same alcohol content as wine and some craft beers, and far less alcohol by volume than hard liquor. 107 Pro Four Loko Media Although negative news stories dominated the media, Phusion Projects felt their product was singled out, and that the bigger problem at hand was binge drinking in general. This view, although not nearly as prevalent, was expressed in a small number of opinion columns from smaller news sources, the majority of which were college newspapers. In fact, Phusion Projects Media Room on the company s official website featured 10 opinion articles written by student- run newspapers at schools such as Auburn University, Central Michigan University, Harvard University and George Washington University. 108 The common opinion held throughout these student- written articles was that banning a product does not solve a problem. In an article called, A Right to Drink What We Want for The GW Hatchet, a student questioned the Four Loko ban when he wrote: Is it because they object to the mixing of energy drinks and alcohol? Well, that'll be a tough thing to prevent. Sure, you could ban Four Loko and similar drinks. But you'll probably have to ban Red Bull, too. Oh, and vodka. And you'll have to ban ever mixing them. 109 These college students, as consumers, also expressed disappointment that the original Four Loko product was banned. Four Loko first gained popularity and attention on college campuses. A student wrote in an editorial article for The Daily Tar Heel, We ve seen it happen in other states, but we were hoping it would never happen here. That s right, it looks as if N.C. might be getting ready to ban alcoholic energy drinks like Four Loko

12 Additionally, a small amount of editorial articles and blog posts defended Four Loko from more well- know sources such as The Huffington Post, The New York Post and The Seattle Weekly blog. Within these sources, the FDA and state legislators were criticized for having too much power. Abby Schachter for The New York Post criticized lawmakers who seek to ban products, such as New York Senator Chuck Schumer and his avid pursuit to ban Four Loko. Schachter claimed these banning efforts do not change people s behaviors, and that Schumer s efforts were for personal gain and positive media attention. 111 Another popular opinion among these sources was that individuals cannot blame a product for their own irresponsible actions. In an editorial article for The Huffington Post, Alex Kadukul wrote: The crusade against Four Loko is wrong. We have every right to drink a deranged caffeinated alcohol cocktail if we want to. It is potent but it does not kill people, as the sensational news stories will have you believe. The few that have "died" from it, thus igniting this controversy, died because they drank it irresponsibly. 112 Other headlines featured in Phusion Project s Media Room defend Four Loko while expressing frustration with the government: State Overreacts to Four Loko The Western Front 113 Legal Bans Good Only for the Lawmaker The New York Post 114 Does the FDA Really Need More Power The Foundry 115 Four Loko Bans Represent Government at its Worst Seattle Weekly 116 Consumer Response The immediate consumer response to the ban of Four Loko was best seen through news articles in November 2010 with headlines claiming students were stocking up on Four Loko before the ban took effect. In November 2010, there were approximately 20 news articles across the nation with headlines that contained Four Loko and stock up. 117 These news reports were seen in Massachusetts, New York, Illinois, Michigan, Vermont, Washington, Florida and Washington D.C. 118 Four of these articles specifically contained college students stock up in the headline. 119 The media focused on the student as the consumer in these news stories. 120 It was reported that students rushed to buy Four Loko at a store near Gonzaga University, and nearly 30 cases were sold in just a few hours. The Washington Post stated that numerous liquor stores near American University and Georgetown University reported a surge in Four Loko sales, some students buying as many as 50 cans at once. 121 Convenience stores around Ohio Sate University also reported a surge in sales as many students began buying cases of Four Loko instead of single cans. 122 The exact overall consumer response, however, is difficult to determine. 12

13 Shortly after the ban, Facebook fan pages formed with names such as R.I.P Four Loko, Save Four Loko, and I remember when I had my first Four Loko. 123 Collectively, R.I.P Four Loko on Facebook has 206,172 likes. 124 Additionally, the relationship between the consumer response and the media response is shown in the Google Trends chart displayed in Appendix 4. The Google data compares the amount of Google searches for Four Loko and the amount of news stories about Four Loko. The most amount of Four Loko Google searches and Four Loko news stories both occurred in November of This suggests a relationship between what the news reports, and what the consumer takes interest in. Phusion Projects Responds Phusion Projects communicated through a variety of channels, mostly in dealing with the public concern associated with their product Four Loko. Although Phusion Projects formed in 2005 and Four Loko was released in 2008, the overwhelming majority of press releases and media coverage involving the company began in October of The founders of Phusion Projects and an Edelman public relations representative released official statements and spoke with the media directly. Press Releases First, a portion of the communication responses are press releases and official statements in the Media Room section of the Phusion Projects website. Prior to the incident at Central Washington University, the Media Room consisted of one press release titled, Phusion Projects Unveils Four Loko Lemon Lime dated October 13, Shortly after, however, the Media Room filled up with dozens of press releases and letters regarding the safety of Four Loko. Statement Regarding Incident at Central Washington University The incident at Central Washington University resulted in widespread, negative attention for Four Loko. Phusion Projects defended themselves on the premise that other substances were consumed in combination with Four Loko, claiming it was unacceptable to place the blame on Four Loko alone. Additionally, Phusion Projects stressed three key messages: Consuming caffeine and alcohol together has been done safely for years 126 We market our products responsibly, and only to those of legal drinking age. 127 Making college campuses safe and healthy environments for learning is a goal we share with administrators even those who have chosen to ban our products

14 Statements Regarding Statewide Bans Phusion Projects released five statements in response to statewide bans of Four Loko in Pennsylvania, Michigan, Washington, Oklahoma and New York. 129 In each of these statements, Phusion Projects maintained that the combination of alcohol and caffeine was safe. Additionally, Phusion Projects defended the marketing and packaging of the Four Loko product when they said: In addition, even alcoholic beverages without caffeine come in flavors and brightly colored cans. Today bubble gum, raspberry and blueberry vodkas which have several times the alcohol content of a Four Loko are all on the market. Widely accepted beverages, such as Mike's Hard Lemonade, Twisted Tea and Smirnoff Ice, have similar flavors to our products, and our cans are no brighter or more appealing than the blue, red and green labels of established beer brands like Budweiser and Heineken. 130 Letter to College Presidents and Staff Phusion Projects released a letter concerning the growing popularity of caffeinated alcoholic beverages on college campuses and acknowledged the media coverage and criticism that accompanied it. Phusion Projects explained their part in the situation when they stated: In recent months, our company has grown faster than we ever imagined and, admittedly, we ve been late to the game in publicly addressing some of the criticisms of our products. This is not intentional. It s merely a function of a growing, small business learning how to communicate effectively and openly, while at the same time managing all the other aspects of running a business. 131 In the letter, Phusion Projects also provided information about their products and offered support in helping promote responsible drinking on college campuses. According to PR Newswire, Phusion Projects sent the letter to over 100 different universities. 132 An Open Letter to State and Federal Regulators Phusion Projects expressed the desire to work with regulators and avoid legal action. Additionally, Phusion Projects extended the offer to engage in open discussion about regulations against alcoholic energy drinks. The company made the point that it is only fair to set industry- wide, uniform standards 133 and not single out individual products. Other materials in the media room since October 2010 included: two news releases regarding reformulated products, eleven news releases regarding volunteer and donations done by Phusion Projects, and nine news releases regarding company happenings and partnerships

15 Four Loko Web Presence In the midst of widespread media and public attention, the Four Loko brand was under intense scrutiny. Many turned to the product s presence on the web, and were troubled by what they found. It was difficult, however, to differentiate between company- sponsored material and user- generated material. Viral videos, Facebook pages and websites dedicated to Four Loko all raised the same question: are these Phusion Projects marketing tactics? Official and Unofficial Web Presence Phusionprojects.com and Drinkfour.com were the official websites for the product Four Loko. On October 27, 2010 an Edelman representative for Phusion Projects stated: Our company has taken a unique position and made a conscious effort to reject the social media marketing tactics that other companies embrace including many of our competitors. There is no company sponsored Four Loko Facebook page or YouTube channel. 135 Evidence of past Four Loko web content, however, led many to believe that the company did engage in social media before negative, nationwide news coverage. Abe Sauer, a reporter from brandchannel.com, did extensive research on Four Loko s web presence in October of 2010 as the product gained attention. Sauer obtained a screenshot from a since deleted portion of the official drinkfour.com website called Four Shots. 136 Consumers were encouraged to upload pictures of themselves drinking Four Loko. The page read, Alright people, show us your happy- face and you could end up here, immortalized on the Internet, in our Four- Shots archive. 137 Sauer also found a Drink FOUR Facebook group, which was taken down on October 27, A paid marketing representative that was a student at Northwestern University at the time set up the Facebook group. 139 A post from the Drink FOUR Facebook group caused speculation that it may have been linked to the official Four Loko website drinkfour.com. The post read, If you had the chance to sip some Four at either the Pregame or the Dillo Day parties, check out to see if you're famous. Go to 'Four Shots' then to 'four- tour' and check the two albums out." 140 The screenshot of the Four Shots webpage, listed in Appendix 4, contained the caption Northwestern Dillo Day. The Drink Four Facebook page engaged students at a Northwestern University party and encouraged them to share photos, which were then linked to the official Four Loko website. This interconnectivity suggested Phusion Projects intentionally marketed the product on college campuses while also participating in social media. Phusion Projects responded to the speculation that the Four Shots portion of the official website was linked to the Drink FOUR Facebook group: 15

16 Phusion Projects did at one time employ interns that created Facebook pages and the website did have a section entitled 'Four Shots' back in After that time, Phusion made the proactive corporate decision to discontinue using social media marketing tactics. At that point, the affiliation between the company and the interns was severed, and Phusion politely asked all former interns to delete any Facebook groups. Unfortunately, the company is not allowed to delete Facebook pages themselves, and so a few of these remain out of our control. In addition, Phusion also took down the 'Four Shots' web feature and revised the website to comply with our corporate decision. Since that time, we have continued to follow the practice of not engaging in these tactics. 141 Sauer summed up his findings when he said: Our bigger point here while Four Loko's parent website comes across as a concerned parent, statements about drinking responsibly rebutting criticism such as negative media including a Wall Street Journal video and coverage by New York Times and other national media it's disingenuous to claim it's never engaged in social media or other viral marketing aimed at college kids when it employed on- campus marketing reps who set up Facebook pages on behalf of the brand. 142 Videos Four Loko s consumers gave the product a presence on the web by posting YouTube videos and pictures, many of which portray binge drinking and irresponsible behavior. One article on the Four Loko brand stated, The drink owes its success to the numerous YouTube videos and online word of mouth that made it a target to authorities. 143 Four Loko also inspired rap songs, which are seen on YouTube. Among the most popular are Four Loko by Fese which has 180,773 views and portrays dozens of people partying and passed out from drinking Four Loko. 144 Another video called Four Loko (Official Video) has 282,264 views on YouTube and caused controversy as it claimed to be an official product video. 145 Phusion Project denied any connection to the video. Lastly, Gwop Gang produced a rap video called Four Loko that has 2,149,127 views on YouTube. 146 The Four Loko product is visually featured throughout each of these videos. Additionally, hundreds of user- generated YouTube videos show consumers chugging Four Loko. 147 The Four Loko product developed a widespread image that, intentionally or not, promoted binge drinking among young adults. Four Loko s web presence shaped this image as pictures and videos portrayed the product as a cheap and effective way to become intoxicated. Even if Phusion Projects did not promote the product on the Internet, as they claimed, it is still undeniable that Four Loko became a word of mouth and social marketing phenomena. 16

17 Public Relations Representative Speaks On October 25, 2010 a reporter for The Seattle Weekly blogged about the Four Loko incident at Central Washington University. When describing Four Loko, he wrote: A single 23- ounce can will only set you back $3, yet it has the alcoholic equivalent of five or six caffeinated beers. 148 The Edelman representative for Phusion Projects contacted The Seattle Weekly in regards to the story, and claimed the statement that Four Loko has the alcoholic equivalent of five or six caffeinated beers was incorrect. The representative then requested it be removed and replaced with the information Phusion Projects provided. Below is the correspondence between the Edelman representative for Phusion Projects and The Seattle Weekly: Seattle Weekly: We looked at the materials provided, which said a can of Four Loko is 12 percent alcohol by volume. Well, that's almost three times the abv of a can of PBR. And a can of Four Loko, at 23 ounces, is roughly twice the size. So that works out to five or six beers' worth of alcohol per can. But hey, we're always open to a second check of our math. OK, we replied, How many beers would you say a can of Four Loko is equal to? 149 Edelman representative: It depends on the beer- - domestics or the high- end crafts or imports. 150 Seattle Weekly: How about an "average beer"? 151 Edelman representative: What's an average beer? A Bud or a craft /Euro beer with considerably higher alcohol content by volume? 152 Seattle Weekly: Given that your typical Phusion Projects customer isn't likely to be choosing between Four Loko and a Grolsch, this response seemed evasive to the point of silliness. Indeed, the Edelman representative insisted that wine was the better analogy, as if the Four Loko customer might opt for a light Pinot instead. 153 Edelman representative: A can of Four Loko is equal to about 2 glasses of wine. 154 This exchange generated criticism, and The Seattle Weekly reporter accused Phusion Projects of framing the Four Loko product. This was yet another example of the media, and Phusion Projects, attempting to compare Four Loko to other alcoholic beverages. Whether this was an attempt to frame a product or simply provide a frame of reference is unknown. It was, however, another indicator of Phusion Projects ongoing battle with the media. 17

18 Company Founders Speak Alcoholic Energy Drink vs. Caffeinated Alcoholic Beverage In March of 2006, Phusion Projects promoted Four Loko in a Rexam distributor promotion. 155 Chris Hunter, one of the company s co- founders, described Four Loko in the promotion when he said, This is the ideal drink for social, young adults looking for a great- tasting energy boost. 156 Austin Carr, a reporter from Fastcompany.com, interviewed Hunter on November 1, Hunter strayed from labeling Four Loko an alcoholic energy drink when he said: Our drink isn t an energy drink it s a caffeinated alcoholic beverage. It s important we frame it that way because that s the category it s in, and I stress that because some of the scrutiny is about misrepresentations of our brand. We ve never called it an energy drink. 157 Phusion Projects created distance from the term energy drinks again in the company s official profile. The original company profile for Phusion Projects read, In 2005, three college friends from The Ohio State University noticed the growing popularity of mixing alcoholic and energy drinks, like Red Bull and vodka, and decided to create a beverage company of their own." 158 The company profile was then changed to, In 2005, three college friends from The Ohio State University had the entrepreneurial idea to start their own company. 159 Standing By Four Loko In August of 2009, when over 20 attorneys general first brought the danger of Four Loko to the government s attention, The Los Angeles Times contacted Phusion Projects for a comment. Hunter declined to comment beyond, We re letting our products speak for themselves. 160 A year later,when the media spotlight was on Four Loko, Hunter spoke in more detail. Hunter supported responsible drinking while also maintaining that Four Loko was a safe product that was unfairly singled out. In an interview with The New York Times, Hunter stated: Alcohol misuse and abuse and under- age drinking are issues the industry faces and all of us would like to address. The singling out or banning of one product or category is not going to solve that. Consumer education is what s going to do it. 161 Hunter was also asked to comment after the deadly August 2010 car wreck in St. Petersburg, Florida in which the driver admitted to drinking Four Loko. Hunter replied to the Orlando Sentinel and said, This tragedy speaks to the serious, societal concerns regarding the misuse of alcohol in our society: alcohol abuse, drunk driving and underage drinking are problems we would all like to see discussed and solved. After Four Loko was banned in New York in November of 2010, Phusion Projects co- founder Jaisen Freeman maintained that caffeine and alcohol was safe. 18

19 Freeman also expressed that Phusion Projects wants to be known for cooperation, not controversy. Freeman went on to say: We were the first company to take this voluntary step. And we think it shows that we are not turning a deaf ear to what s going on: that a select few have chosen to abuse our products, drink them while underage or break the law and sell them to minors. 162 Freeman also spoke to the media in response to the FTC s claim against Phusion Projects using deceptive marketing. Freeman said, Even though we reached an agreement, we don t share the FTC s perspective and we disagree with their allegations. We don t believe there were any violations. 163 Freeman and Hunter consistently communicated messages that promoted responsible drinking and messages that condoned the government allegations against Four Loko. No Comment Phusion Projects responded to the media with No comment when asked about the lawsuit involving Jason Keiran s parents, the Florida State University student who shot himself after consuming Four Loko. Phusion Projects also declined to comment on Ramapo College s decision to ban Four Loko and Washington state s emergency ban on the product. Up To Date With all FDA and FTC claims settled and reformulated products on the shelf, Phusion Projects is no longer under intense scrutiny. In October of 2011, Phusion Projects partnered with FunnyOrDie.com and launched a media campaign called Everything s Gone Four Loko. 164 The current campaign is based around a fictional News 4 Station and website, in which two anchors report fictional, humorous new stories about everything going Four Loko. 165 The campaign aims to engage audiences across multiple platforms, including the social media outlets Phusion Projects rejected the year before. One of the three cofounders, Chris Hunter, said, We want to show everyone how the news of the world looks through the Four Loko lens. 166 Consumers are encouraged to share their own Four Loko news on the official drinkfour.com website and Facebook page. Abe Sauer from brandcenter.com called the campaign, the brand s latest in an ongoing effort to clean up its image by mocking its image in the media

20 Appendix 1 Original Four Loko label Source: PR Newswire 20

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