License to Swill

Officially it's called "substandard orange wine," but to small business owners, Premium Blend is a strong shot in the arm

When Genesi Mallay and her husband opened the Lazy Lizard restaurant on Lincoln Road two years ago, the plan was to offer customers the tropical cocktails best suited to Mexican food: margaritas, daiquiris, even the occasional pi*a colada. That was before Mallay collided with Florida's alcoholic bureaucracy.

Because her eatery seats only a few dozen patrons, Mallay didn't come close to qualifying for the hard liquor license automatically afforded restaurants with 200 seats or more. Because the state grants licenses to other applicants by lottery only, she stood less than a one in five chance of receiving a license that way. And because she was a small business owner with barely enough cash to cover the tortillas, she couldn't possibly afford the $40,000 that a private party might ask for his license on the open market.

"The state's basically saying that if you start with a lot of money you have the right to make a lot more money," Mallay huffs. "If you're a little guy, you can forget about hard liquor. It's a totally unfair system."

But revenge has been sweet for Mallay. Intoxicating, even. In fact, for all those merchants who have long desired, but been unable to secure, a hard liquor license, revenge now comes in a dozen spirited flavors. Among them: whiskey, rum, vodka, gin, tequila, and assorted cordials.

Thanks to a product called Premium Blend, some two dozen Dade bistros and watering holes holding only beer-and-wine licenses are now serving traditional cocktails made with "soft" liquor. All with the state's blessing.

The state's licensing division classifies as a hard liquor any distilled product with more than 21 percent alcohol. Premium Blend, which is about 45 percent distilled liquor and 55 percent fermented wine, has an alcoholic content of twenty percent A half the strength of standard liquors A and so is legally considered a wine. "Premium substandard orange wine with natural flavors added," the label reads. Few patrons, however, actually see the label. Instead, they quaff a Premium Blend daiquiri or screwdriver in blissful, if tipsy, ignorance. And because bartenders are free to double the amount of Premium Blend in a drink, devoted boozers can even catch an equivalent 80-proof buzz.

"I wouldn't serve a whiskey sour with the stuff," says David Rutecki, part-owner of South Beach's Society Hill Cafe. "But it works great for kamikazes, sex on the beach, those kinds of shots." Like Mallay, Rutecki could not afford a hard liquor license when he opened his Washington Avenue pub this past May. "Even if you can afford it, you still run the risk of getting shot down by zoning laws or a landlord," he observes. "They've got a great concept, because tons of places on the Beach want to serve drinks, but only a few can get liquor licenses."

The "they" in this case is Orestes and Henry Santos, the Hialeah brothers who launched Premium Blend, Inc., three years ago. Orestes, who graduated from the University of Miami with a master's in business administration, stumbled on the soft liquor concept at an entrepreneur's seminar in 1988. "They were trying to hawk cocktail machines, actually," he recalls. "Along with the machines, they were using this stuff, Wild Cocktail, as an accessory. I took one look at the accessory and said, 'Now this looks interesting.'"

After a dining-room-table consultation with his older brother Henry, Santos decided to investigate further. Wild Cocktail, it turns out, was in the midst of a semipermanent slump. Santos snapped up the concept A and the remaining bottles of ersatz spirits A for a pittance. "They never saw the potential," the 32-year-old Santos says. "What we envisioned was a higher-quality product, one that didn't taste like rubbing alcohol, that would allow all these beer-and-wine outlets to compete with the liquor guy down the road."

His first move was to come up with a substance that tasted good enough to substitute for genuine booze. For this purpose he commissioned a chemist in Lake Alfred to devise Premium Blend's patented formulas. The faux liquor is manufactured 30 miles south of Orlando, at the company's Lake Alfred outpost, by fermenting Florida oranges into wine. The citric acid is then sucked out of the wine, hard liquor is pumped in, and the brew is bottled and tagged with fancy labels identifying the product by an initial A 'W' for whiskey, 'R' for rum, et cetera. (Santos says the "substandard" tag is required because spirits have been added to the wine to enhance its flavor and alcoholic content. The initials are used because it would be illegal to use the name of a hard liquor to describe the wine hybrid; likewise, the company's cordials go by cleverly disguised names, such as Almandine Royale.)

For the first few months, Santos ran the show alone. But Henry, 36, soon signed on and began an aggressive marketing campaign. Last year, the brothers say, Premium Blend, Inc. sold 10,000 cases, racked up gross sales of $700,000, and outgrew the North Dade warehouse that now serves as company headquarters. Henry expects sales to double in 1993. The product sells for $69 per case, about ten dollars less than a generic hard liquor.

Fortunately for the brothers Santos, Florida's stingy system of distributing hard liquor licenses has assured them a generous market. Because the state only allows one hard liquor license per 2500 people, few applicants actually receive a license from the state. This year, for instance, only 47 new licenses were doled out in Dade, leaving several hundred applicants with no recourse but to purchase an existing license from a licensee. Prices on this informal market, which is unregulated by the state, have skyrocketed to tens of thousands of dollars. The annual renewal fee runs $1820.

By contrast, beer and wine licenses are issued to almost any applicant, as long as they abide by local zoning ordinances, serve only patrons over 21, and have not committed a felony in the past fifteen years. Those cost $392 per year.

To purists, the notion of sipping a gin and tonic that is, in fact, substandard orange wine with gin flavor and tonic may smack of sacrilege. But Premium Blend's growing throng of devotees say most drinkers never know the difference. "We've never had any trouble," says Luis Alonso, whose North Miami Beach restaurant, Paquito's, runs through 25 cases of Premium Blend every month. "When customers ask what brand of liquor is in our margaritas, we tell them. Otherwise, there's no reason."

Legally, though, neglecting to tell the consumer he's not drinking hard liquor is a no-no. "It's misrepresentation of a product," admonishes Barry Schoenfeld, the Department of State's chief of licensing. "You've got to tell folks what they're drinking."

Orestes Santos says he encourages his customers to be up-front with their patrons. "We even give them tons of promotional material that advertises Premium Blend. Heck, we want our name out there. But you can't police everybody." What's more, he says, most vendors know better than to serve Premium Blend straight. "We encourage clients to serve it only in mixed drinks," he stresses, gingerly sidestepping a direct assessment of his product's taste.

"We're building a base with the beer and wine outlets, because they can use us to compete," Santos says. "But we're not going to stop there. With the new health consciousness and the success of light beers and wine coolers, we see our product as perfect for designated drivers, or the guy who's got a business lunch and wants the taste of liquor without getting plastered. Our dream is that someday people will walk into a liquor place and say, 'Give me a Premium Blend screwdriver.'"

Until then, the plan is to infiltrate bar chains and supermarkets. Already, Premium Blend is being served in tropical drinks at Miami Subs franchises, and the brothers are discussing a deal with Hooters. With distributors in South Carolina and South Dakota, and negotiations under way in Texas and Alabama, they hope to corner the national market.

"I hear people say all the time that we're going to get bought out. People want to buy stock. But the company's not public and it's not for sale," Henry Santos insists. "Besides, in the scope of the liquor business, we're a fly on the wall. Actually, I don't even think we're a fly on the wall yet."

Still, if Premium Blend continues its steady seep into the mainstream, the Santos brothers know they'll receive plenty of attention. Not all of it friendly.

"It may be that the state statutes allow a synthetic liquor to fall through the cracks," says state licensing chief Schoenfeld. "But if the liquor industry feels strongly enough about this stuff they might start to lobby the legislature" to close the statutory loopholes that have allowed Premium Blend to thrive.

And the liquor industry, Schoenfeld warns, can be one mighty force. Several years ago, for instance, lobbyists successfully pressured lawmakers to rewrite the statutes so that low-alcohol hard liquor brews such as Bacardi Breezers could be legally sold by any merchant with a beer and wine license. That includes supermarkets A on whose shelves, ostensibly, Premium Blend will soon appear.

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