Censoring Cocaine Will Cost Redux, But Change Might Open New Markets

Pulling its Cocaine energy beverage from stores and re-launching it under the name Censored will cause a "massive financial hardship" for Redux Beverages, but the change could eventually increase the product's distribution, the firm said.

Las Vegas-based Redux began recalling Cocaine on May 7 in response to federal and state pressure.

Clegg Ivey, a partner in the firm, said Redux had no choice but to conduct a recall in order to continue operating and re-launch the product.

"If the FDA and attorneys general of various states say, 'Stop distributing this product or else you will face civil and criminal liability,' we are not going to keep distributing the product," Ivey said.

He said the firm plans soon to reintroduce the product under the name Censored but he declined to state when the re-launch will start.

Redux may lose about $1 million in sales due to the recall, which is expected to last no more than two weeks, according to Ivey.

He said the company also expects to experience financial losses due to costs from the recall and from re-labeling and changing the art on its cans.

However, Redux believes the name change could expand its reach into new markets.

"We had always planned to expand our sales and we feel that one possible upside of changing the name, as ironic as it sounds, is that there were outlets, retail and other outlets, that had made the decision not to carry out drink because of its controversial name. Now that we are going to switch the name to something that isn't controversial ... no one should have any moral qualms about the name of the drink," Ivey said.

"It's fairly possible that our new product will actually be carried in a much broader range of retail establishments leading to hopefully increased sales on our part."

He described the new name as "edgy and interesting and funny" noting that it does not have "anything to do with an illegal narcotic."

Ivey said disease claims for the ingredient inositol FDA cited in an April 4 warning letter will not be included in the product's new labeling (¹ (Also see "FDA Cocaine Crackdown A “Long Overdue” Positive Development – Industry" - Pink Sheet, 16 Apr, 2007.), p. 13).

"We've completely eliminated any mention of that ingredient or anything that says what the ingredient might do, we're just not going to do that again. We let the FDA know that really early on within a week of them having issued the warning letter," he said.

Redux also removed from its Web site the claims FDA cited, according to Ivey.

"There were two lines of argument in the FDA letter in our discussions. One was that we were making claims that our product would treat or cure a disease," he explained.

The agency also asserted the company's marketing strategy communicates a negative message to consumers, according to Ivey.

"The rest of the FDA's focus ... was just their contention that they felt that we were marketing our product to be a substitute for an illegal street drug," Ivey said.

Redux also had to replace its current slogan, "The Legal Alternative."

"It was in those discussions about those two things, that we came to believe that literally nothing short of getting rid of that slogan and changing the name was going to mollify" FDA, Ivey said.

Following the FDA warning letter, officials in Connecticut and Illinois issued orders to stop sales of Cocaine in those states while a state judge issued a ruling to halt distribution in Texas.

According to Ivey, in a hearing set for May 16, the Texas attorney general's office will seek a permanent injunction to block sales of Redux's branded product in the state.

Ivey said the firm expects changing the product's name will weaken the attorney general's argument and Redux will be allowed to market its re-branded product in Texas.

- Robert W. Mitchell ([email protected])