BILL ANALYSIS Ó SB 39 Page 1 SENATE THIRD READING SB 39 (Padilla) As Amended June 7, 2011 Majority vote SENATE VOTE :24-14 GOVERNMENTAL ORGANIZATION 14-0APPROPRIATIONS 11-5 ----------------------------------------------------------------- |Ayes:|Hall, Nestande, Atkins, |Ayes:|Fuentes, Blumenfield, | | |Block, Blumenfield, | |Bradford, Charles | | |Chesbro, Cook, Galgiani, | |Calderon, Campos, Gatto, | | |Gatto, Hill, Ma, Perea, | |Hall, Hill, Lara, | | |V. Manuel Pérez, Torres | |Mitchell, Solorio | | | | | | |-----+--------------------------+-----+--------------------------| | | |Nays:|Harkey, Donnelly, | | | | |Nielsen, Norby, Wagner | ----------------------------------------------------------------- SUMMARY : Prohibits the importation, production, manufacture, distribution, or sale of beer to which caffeine has been directly added as a separate ingredient at retail locations in California, as defined. Specifically, this bill : 1)Provides that beer to which caffeine has been directly added as a separate ingredient shall not be imported into this state, produced, manufactured, or distributed within this state, or sold by a licensed retailer within this state. 2)Provides that the Department of Alcoholic Beverage Control (ABC) may require licensees to submit product formulas as it determines to be necessary to implement and enforce this law, as specified. FISCAL EFFECT : According to the Assembly Appropriations Committee, ABC investigations are primarily complaint driven. Therefore any enforcement of this legislation would be through complaints. ABC does not anticipate a high volume of complaints about caffeinated beer. Therefore, the costs associated with ABC investigating complaints, reviewing product formulas, and possibly having products tested, would be minor and absorbable within existing resources. SB 39 Page 2 COMMENTS : Federal response to caffeinated alcoholic beverages : On November 12, 2009, the Food and Drug Administration (FDA) notified nearly 30 manufacturers of certain alcoholic beverages containing added caffeine of its intent to look into the safety and legality of their products. The list of manufacturers was provided to FDA in a letter from the co-chairs of the National Association of Attorneys General Youth Access to Alcohol Committee. The FDA requested that the companies produce evidence of their rationale, with supporting data and information, for concluding that the use of caffeine in their product is Generally Recognized As Safe (GRAS) or prior sanctioned. For a substance to be GRAS there must be evidence of its safety at the levels used and a basis to conclude that this evidence is generally known and accepted by qualified experts. FDA informed each company that if it determined that the use of caffeine in each alcoholic beverage is not GRAS or prior sanctioned, FDA would take appropriate action to ensure that the products are removed from the marketplace. FDA's action was not directed at products that are flavored with coffee. The beverages that were the subject of FDA's request for information are characterized by the intentional addition of caffeine to alcoholic beverages by the manufacturer. FDA stated that "a decision regarding the use of caffeine in alcoholic beverages could take some time." More recently, in a letter dated November 17, 2010, the FDA advised four companies (New Century Brewing Company, Boston, MA - product known as "Moonshot;" Phusion Projects, LLC., Chicago, IL - product known as "Four Loko;" Charge Beverage Corporation, Lake Oswego, OR - product known as "Core High Gravity HG Green," "Core High Gravity HG Orange," "Lemon Lime Core Spiked;" and, United Brands Company, La Mesa, CA - product known as "Joose" and "Max") that it had reviewed the regulatory status of their products, each of which contained caffeine that had been directly added to an alcoholic beverage and packaged in combined caffeine and alcohol form. The FDA letter warned the companies that as it was used in their products, caffeine is an unsafe food additive, and therefore the products are adulterated, unsafe, and illegal under the Federal Food, Drug, and Cosmetic (FFDC) Act and mislabeled under the SB 39 Page 3 Federal Alcohol Administration (FAA) Act. The companies were given a specific time-frame to submit detailed steps that would be taken to correct the situation and assure that similar violations would not occur. The Tobacco Trade and Tax Bureau (TTB) also issued letters to the same four companies and asked them to submit detailed steps that would be taken to correct any violations of the FAA Act. In November 2010, Phusion Projects, the creators of Four Loko, announced before receiving the warning letter from the FDA that they would be reformulating their malt beverage and would remove caffeine from the product. Two manufacturers are still awaiting approval or have not applied for permits to sell their reformulated drinks. In addition, two companies have decided to stop making their malt beverages altogether. Flavored malt beverages : Flavored malt beverages (FMBs) are considered to be malt-based beverages, similar to beer, and for the most part are regulated and marketed like beer products. Because they are deemed to be malt-based beverages they are taxed by most states, including California, and the federal government as beer. The current tax rate on beer is $0.20 per gallon, while the current tax rate on distilled spirits under 100 proof is $3.30 per gallon. A TTB regulation permits the addition of flavors and other non-beverage materials containing alcohol to beers and malt beverages. Malt beverages that contain no more than 6% alcohol by volume may derive no more than 49% of their alcohol content from flavors and other non-beverage materials. If a malt beverage contains more than 6% alcohol by volume, not more than 1.5% of the volume of the finished product may consist of alcohol derived from flavors and other non-beverage ingredients containing alcohol. Purpose of the bill : According to the author, caffeinated alcoholic drinks have certainly made headlines over the past year including a highly publicized incident at Central Washington University involving approximately 10 students who were hospitalized after drinking a product called "Four Loko" at a party. Some states (e.g., New York, Massachusetts, Michigan, Kansas, Utah, Oklahoma, and Washington) have even taken steps to ban the products. According to the author, combining alcohol with caffeine and other stimulants does not ameliorate alcohol's negative effects SB 39 Page 4 on one's motor coordination and visual reaction times. Recent science has revealed that adding caffeine and other stimulants to alcohol is harmful because these additives impair one's ability to judge their own level of intoxication as well as the ability to judge the level of intoxication in someone else. This results in increased alcohol consumption and can lead drinkers to wrongly conclude that they are capable of engaging in risky and potentially dangerous activities, like operating a motor vehicle or engaging in risky sexual behavior. The author emphasizes that there is no general consensus among health professionals and the scientific research community that the use of caffeine in alcoholic beverages has been demonstrated to be safe. Alcoholic energy drinks are known for hiding true impairment. Alcohol is a depressant, and the high amounts of caffeine in these drinks counteract the exhaustion of the alcohol but they do not counteract the impairment. This can lead to a person not feeling they are impaired as they truly are, and tragedy can result. Proponents also contend that "manufacturers of these products appear to be targeting underage people through youth-orientated media marketing. In support : Writing in support, the Alameda County Board of Supervisors states, "There are currently a number of caffeinated malt beverage products on the market that are targeted in packaging and advertising to young people and these products impair the ability of a person to judge their own level of intoxication or to judge the intoxication of someone else. SB 39 will help reduce the rates of alcohol-related traffic accidents, violence, sexual assaults, and suicides, particularly among young people." Also writing in support, the County Alcohol and Drug Program Administrators Association of California (Association) states, "The beverages are often flavored with fruit, and typically come in large, flashy cans that use graphic images to promote partying and heavy drinking." The Association also writes, "Underage drinking remains one of the most pressing public health concerns for the State - it costs the citizens of California an estimated $7.3 billion each year in medical care, work loss, and pain and suffering stemming from alcohol related youth violence, traffic accidents, property crime and other SB 39 Page 5 injuries." The California Police Chiefs Association and the California Narcotic Officers Association note that, "These products typically come in large, flashy 24 oz. cans with graphic images and consuming one can has been compared to drinking 5 cans of beer and one cup of coffee." The California Council on Alcohol Problems (CCAP) submitted a letter supporting the overall concept of banning such products; however, they believe that this bill does not go far enough to protect California youth. CCAP would like to see the bill amended to include other stimulants (e.g., guarana, ginseng and taurine). Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531 FN: 0001564