Tabasco hot sauce maker sues Stoli over lookalike label on new pepper vodka
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- McIlhenny sues Louisiana Spirits and Stoli Group for alleged Tabasco trade dress copy.
- Tabasco seeks injunction, triple damages and disgorgement of vodka profits.
- Fifth Third urges separate Chapter 11 trustees, accuses Stoli of misusing cash collateral.
There’s been another wrinkle or two in the ongoing Kentucky Owl/Stoli bankruptcy, and things are getting spicy.
The parent company of Tabasco, McIhenny Co., is accusing Louisiana Spirits, a subsidiary of Stoli Group, of trademark infringement for copying the label of the world-famous hot sauce for their new release of a hot pepper-flavored vodka.
According to the lawsuit, Stoli approached Tabasco about developing a product together in 2024 under both their trademarks, but Tabasco turned down the plan. Then, in December 2025, Stoli announced plans to launch a pepper sauce-based vodka in a bottle with “trade dress” similar to Tabasco’s and to the potential Tabasco-Stoli mock-ups.
“In other words, when told ‘No’ by McIlhenny, Defendants took the Tabasco trade dress and, without authorization, used it to create the infringing trade dress to market and drive the sale of the defendants’ product in a manner likely to cause confusion among consumers about the source, sponsorship and/or affiliation between it and McIlhenny, and to dilute the ability to of the famous Tabasco Trade Dress to identify McIlhenny exclusively,” the lawsuit said.
Tabasco wants Stoli Group and Louisiana Spirits to be barred from using the packaging and labels and is seeking triple damages and any profits made off the vodka.
According to the lawsuits, McIlhenny’s licensing partner Absolut, a Stoli competitor, is launching within the next few weeks its own pepper-flavored vodka product that uses elements of Tabasco’s trade dress.
Kentucky Owl/Stoli Group bankruptcy
Meanwhile, in another filing in the bankruptcy case, secured creditor Fifth Third Bank has filed an emergency motion for the appointment of separate Chapter 11 trustees for Kentucky Owl and Stoli Group. It’s an alternative to the motions filed by Stoli and by the unsecured creditors to convert the 14-month bankruptcy case from reorganization to Chapter 7 liquidation.
The bank is seeking a hearing no later than Jan. 26, the day a hearing is set on the conversion motions filed last week..
The bank argues its plan would allow all the creditors to recover significantly more money with “an orderly wind-down” of assets before an eventual liquidation under Chapter 7.
Stoli Group and Kentucky Owl filed for bankruptcy in November 2024; Fifth Third previously objected to a plan to pay off more than $78 million in debt with 35,000 barrels of bourbon, saying they would be left on the hook for $60 million.
The federal bankruptcy judge agreed that plan couldn’t work because of the steep decline in the bourbon barrel market.
Since then, Fifth Third said, the bank has been working with Stoli and Kentucky Owl on an amended plan. But “those efforts apparently failed with the debtors filed their motion to convert” on Jan. 14. The filing “represents gross mismanagement under the circumstances,” the bank said, since the bank offered a better plan than liquidation a week ago.
The bank also alleges that Stoli Group has been repeatedly misusing cash collateral permitted under the reorganization “to benefit non-debtor affiliates Louisiana Spirits and S.P.I. Spirits (Cyprus) Limited” and failed to market and sell Kentucky Owl’s inventory even though a manager had been hired to market the barrels.
Kentucky Owl and Stoli Group’s bankruptcy case is one of several major financial stumbles in the spirits in the last year and a half.
Troubled whiskey brand Uncle Nearest in Tennessee is in receivership, as is the Garrard County Distillery in Kentucky.
Luca Mariano Distillery in Danville also is in bankruptcy and up for sale.
Amid President Trump’s ongoing trade war, exports are down. Meanwhile, domestic sales also have dropped.
In response, major distillers have cut back: A year ago, Jack Daniel’s parent Brown-Forman have announced layoffs while Jim Beam revealed it is idling its homeplace distillery in Clermont for all of 2026.
Through August, bourbon production was down 28% to its lowest eight-month level since 2018.
This story was originally published January 22, 2026 at 11:40 AM.
