An Internet Troll Gives Nonalcoholic Spirits Startups the Spins
Credit to Author: Louise Matsakis| Date: Mon, 28 Feb 2022 12:00:00 +0000
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In the summer of 2020, Lauren Chitwood and her two cofounders, Abbey Ferguson and Lexie Lancaster Larsen, discovered their new company had a problem. A few months earlier, the trio had officially launched Spiritless, a nonalcoholic beverage brand based in Louisville, Kentucky. Its first product was Kentucky 74, a spirit with notes of caramel and vanilla that’s meant to resemble bourbon. “All of a sudden we realized, and we didn’t know who, but somebody had grabbed and purchased Kentucky74.com,” says Chitwood.
At first, the URL only led to a blank page. But before long it began rerouting to the website of another nonalcoholic spirits brand called ArKay Beverages. Chitwood says she was familiar with ArKay from market research but was surprised and confused that it would choose to aggressively come after such a new business. “Anybody who knew about Spiritless was a shock to us at that point, to be honest,” Chitwood says.
She would later find out that the Kentucky 74 domain was only one part of an elaborate effort seemingly orchestrated by ArKay’s founder, Reynald Grattagliano, to sabotage other brands in the fast-growing nonalcoholic spirits industry. Over the course of more than two years, multiple founders of nonalcoholic beverage companies have accused Grattagliano of buying up copycat domain names, sending out false press releases, and launching misleading ecommerce sites. The efforts appear designed to discredit his competitors or confuse customers into thinking they were somehow connected to ArKay.
“I was quite strangely fascinated by what was going on,” says Ben Branson, the founder of Seedlip, another nonalcoholic spirits company that was targeted by Grattagliano. “He thinks that everybody has copied ArKay.” One of the first times Branson noticed Grattagliano’s activity was in 2019, when a website appeared online under the domain name BenBranson.com. It featured a picture of Julius Caesar alongside a paragraph accusing Branson of spending “two meticulous years” ripping off ArKay.
In response to detailed questions from WIRED about these allegations, Grattagliano accused his competitors of publishing “fake news” because they don’t acknowledge that ArKay predated them. “My competitors are upset at ArKay, because they cannot accept the facts that Arkay is the creator of the alcohol-free spirits category and concept,” he wrote. “ArKay is not discrediting its competitors, Arkay is just putting the record straight.”
ArKay was founded in 2011, several years before the current generation of nonalcoholic spirits brands that have flooded the market. But newer companies insist they took no inspiration from the company. Instead, they were responding to the changing tastes of consumers.
Over the past few years, whether for health reasons or to avoid a hangover, some millennials have begun drinking less booze. In response, more alcohol-free bars and beverage stores have started popping up. The market for no-alcohol beer, wine, and spirits grew in volume by 8 percent between 2016 and 2020, according to the research firm IWSR Drinks Market Analysis. During the same time period, the alcohol-free spirits category alone expanded by almost 300 percent in terms of both volume and value.
Some alcohol-free beverage brands have begun attracting investments from major spirits companies, including a few of ArKay’s targets. The multinational giant Diageo, for example, owns a majority stake in Seedlip and a minority stake in another brand called Ritual Zero Proof. “It’s still almost like the Wild West. Everyone's really trying a lot of things. A lot of people are jumping on the bandwagon,” says Duane Stanford, the editor and publisher of the industry publication Beverage Digest.
Chitwood says she and her business partners got the idea for Spiritless a few years ago while they were running a marketing agency that worked with traditional alcohol brands. When they threw events, people would often ask if there were any nonalcoholic options available that were more interesting than, say, soda or juice. “That really was the aha moment for us,” she says.
The three cofounders were living in the heart of bourbon country and decided that their first product would honor their state’s signature potable. Kentucky 74 launched in spring of 2020, just a few months before Chitwood says she and her cofounders discovered the Kentucky74.com website. Afterward, they bought every domain they could think of related to Spiritless, hoping to prevent ArKay from getting to them first.
“But ultimately, we probably let it lie for a few months. It didn’t feel like he was doing much,” says Chitwood. Then Grattagliano appeared to take actions that were harder to ignore.
ArKay began sending out press releases thanking other nonalcoholic beverage brands for entering the market. “It does feel great to see that the idea of alcohol-free spirits is now a trend that is expanding worldwide,” read one. Another syndicated by the Associated Press said that Grattagliano was a visionary leader with “similarities” to Elon Musk. Sometimes the releases linked to websites about ArKay’s competitors, like BenBranson.com.
The press releases were mostly trolling at first, but as the months went on they escalated to include elaborate fabrications. In one, ArKay claimed it had reached a deal to acquire Seedlip and Ritual. A spokesman for Diageo says the company “was never considering selling Seedlip, nor a stake in Ritual, to ArKay.”
“It’s like me putting out a press release that I've joined the Beatles and claiming credit for ‘Hey Jude,’” says Marcus Sakey, a founding partner of Ritual. “It doesn't mean I can sing.”
In September of 2021, another press release confusingly announced that Kentucky 74 was launching a new product called ArKay. It listed Kentucky 74’s official business website as Kentucky74.com—the imposter domain Spiritless had found the previous year. A follow-up press release said ArKay had taken “full control” of Kentucky 74. Grattagliano says he holds the trademark for Kentucky 74; records show that he appears to have successfully registered it in Mexico in 2021, more than a year after Spiritless launched the product. Spiritless, meanwhile, holds the Kentucky 74 trademark in Canada and international markets. The United States Patent and Trademark Office listed applications from both as “pending” as of late February 2022.
“The moment where it struck me is when someone sent me a [release] that had been syndicated on Yahoo,” says Larsen, one of the cofounders of Spiritless. “I was like, ‘What the heck, why is this guy talking about us?’”
Around the same time, yet another press release announced the launch of NOLOalcohol, a new ecommerce marketplace for alcohol-free spirits. It had supposedly been founded by Sylvie Grattagliano, Reynald’s wife. (He says the couple is in the process of divorcing.)
The now-defunct site included products from a range of brands, but if you tried to add any of them to your cart, it would say they were out of stock—and invite you to try one of ArKay’s instead. Lancaster says that as the campaign intensified, she and her cofounders heard from several customers who thought they had bought Kentucky 74 but wound up never receiving anything, or receiving bottles that didn’t look right.
A week after NOLOalcohol launched, Grattagliano announced that a nonprofit corporation he had started, called the American Alcohol Free Spirits Association, would start to “hold brands accountable” for introducing nonalcoholic drinks that actually contained some alcohol. (Many of these brands are .5 percent alcohol by volume or less rather than literally alcohol-free; the Food and Drug Administration considers this to be a “trace amount,” and views them as nonalcoholic beverages.) The AAFSA soon announced investigations into Ritual Zero Proof and Seedlip, the latter of which it accused of “IMPERSONATING REYNALD GRATTAGLIANO AND STEAL AWAY HIS IDEA.” Branson says he did not impersonate Grattagliano or steal his idea.
“It’s like me putting out a press release that I've joined the Beatles and claiming credit for ‘Hey Jude.’”
Marcus Sakey, Ritual Zero Proof
The AAFSA website currently lists Reyland Grattagliano as its sole founder. One of its only members appears to be an ecommerce site called Drinksalikes.com, which sells knockoff versions of Kentucky 74, ArKay, Seedlip, and Ritual Zero Proof, claiming on each product page that it is “not connected in any way” with any of the brands. The About page for Drinksalike.com includes a product photo of ArKay’s alcohol-free vodka and says, “Arkay started in our kitchen lab more than a decade ago.” Grattagliano acknowledged the site was his project but says, “So far we don’t promote it.”
Grattagliano may have come up with the concept for the AAFSA from his own experiences. In 2019, a trade group called the Scotch Whisky Association said it was investigating ArKay over how the company had labeled its nonalcoholic version of whisky, arguing that it could mislead consumers and damage the reputation of the category. ArKay later said it had changed its product descriptions to emphasize that they weren’t actually made using the liquor.
Grattagliano has previously been accused of registering domain names associated with his competitors. In the late ’90s, when he was working in the perfume industry, Grattagliano and the businesses he ran were sued by at least two competitors for trademark infringement, according to public court records. One of the affected brands was Calvin Klein, which accused Grattagliano of creating a knockoff of its Ck One fragrance line. (He later agreed to stop producing it.)
The other was Jean Philippe Fragrances, which settled with Grattagliano—who has also gone by the name Reynald Katz—after accusing him of purposely buying up domain names that infringed on its trademarks, including jeanphilippefrangrances.com and jeanphilippe.com.
Purchasing domains with other people’s trademarks in them is known as cybersquatting and is almost as old as the internet itself. In 1999, Congress outlawed the practice. But Grattagliano says he grabbed domains that correspond with other companies’ products before the trademarks were registered in the first place. “Many competitors are so much focused on destroying me that they forgot to register their trademarks and domain names,” says Grattagliano. “Therefore my job is to protect my business by securing trademark and domain names.”
Evidence suggests the ArKay founder bought not only Kentucky74.com but also SpiritlessKentucky74.com, ritualzeroproof.com.mx, and a number of other websites related to nonalcoholic spirit brands. All of those sites direct visitors to purchase ArKay products, and many list a mailing address in Jalisco, Mexico, where ArKay has an office, according to data from ICANN, the nonprofit that helps manage domains on the global internet.
Mark Livings, cofounder and CEO of the nonalcoholic beverage brand Lyre’s, says his legal team successfully petitioned to take control of a domain that ArKay had registered in Mexico using his company’s trademark. “To be frank, it was a completely unnecessary expense and a nuisance,” says Livings. “It strikes me as highly infantile behavior.”
Several founders of other nonalcoholic spirits brands told WIRED that they, too, have gotten lawyers involved, but they declined to go into specifics. Chitwood says that Spiritless applied to register its trademarks and IP in every market it intends to do business in and is in the process of refuting Grattagliano’s claims to the Kentucky 74 trademark.
At one point, Branson from Seedlip says that he tried reaching out to Grattagliano on LinkedIn, to see if they could resolve the situation amicably. He says that Grattagliano responded by saying that if he wanted to keep buying domains, he would, because Seedlip had copied his company. “It’s just unhelpful noise. I’ve never had any anger about it. It’s just like, why?” says Branson.
More than anything, the other founders argue that Grattagliano’s alleged behavior paints a false picture of their industry, which they all described as collaborative and friendly. “We all started talking, and everyone is just livid, because there’s so much good that’s happening in this space,” says Chitwood. “The chaos that he is trying to create knows no boundaries or brands.”