Spanish wine maker Gik and controversy over its blue wine is a lesson to brand owners they need to be aware of the broader regulatory landscape in their industry.
In 2015 a Spanish start-up sparked curiosity amongst wine drinkers when they released Gik Live, an indigo coloured wine, to disrupt the stuffy world of European wine culture.
However Gik was recently fined by Spain’s Agriculture Ministry for labelling Gik Live as wine because the drink contains additives that are responsible for its distinctive colour.
EU wine regulations only allow certain types of alcoholic beverages derived from the fermentation of fresh grapes to be labelled as wine. As a result, Gik has now been forced to rebrand and to market Gik Blue as containing 99 per cent wine.
The case is a reminder to businesses that they need to be aware of the regulatory environment they inhabit before they embark on their branding strategy.
These regulations sit alongside protection for geographical indications (GIs) which ensure that only products that satisfy certain characteristics are labelled as being from a specific region (think champagne versus sparkling wine).
Like privately registered trade marks that act as a badge of origin, compliance with labelling requirements can allow brand owners to take advantage of the secondary meaning that consumers give to particular words and signs.
Labelling requirements allow consumers to be confident in the quality of the products that they are purchasing and also play an important role in preserving traditional production methods. However, they have been criticised for stifling the growth of innovators seeking to disrupt industries dominated by established producers.
Gik invested heavily in the development of their wine and collaborated with chemical engineers at the University of the Basque Country to formulate a wine that was capable of being blended with plant based dyes and pigments.
But it appears that the potential for their brand to compete as a contemporary alternative to recognised wines was limited by a lack of understanding of industry regulations.
Similar regulations were introduced in Australia in response to treaties with the EU which required domestic wine makers to phase out references to Champagne and Port on Australian wines.
Proponents of wine labelling regulations argue that they prevent recent entrants from taking advantage of the reputation created by centuries of European wine production. Despite this, requiring goods to comply with labelling requirements can limit the potential for distinctive brands to grow rather than providing a broader social benefit.
Gik’s experiences demonstrate that brand owners not only need to consider the threat of competing brands when labelling their products but the broader regulatory landscape within their industry.
Ultimately a lack of awareness of the public interest that these regulations seek to protect may risk a start-up’s investment in what would otherwise be an innovative brand.