BILL ANALYSIS Ó
AB 779
Page 1
Date of Hearing: April 24, 2013
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Hall III, Isadore, Chair
AB 779 (Bocanegra) - As Amended: March 19, 2013
SUBJECT : Alcoholic beverages.
SUMMARY : Authorizes a licensed beer manufacturer that produces
more than 60,000 barrels of beer per year to manufacture cider
or Perry, as defined, at the licensed premises of production and
to sell cider or perry to any licensee authorized to sell wine,
as described.
EXISTING LAW:
1) Establishes the Department of Alcoholic Beverage Control
(ABC) and grants it exclusive authority to administer the
provisions of the Act in accordance with laws enacted by the
Legislature. This involves licensing individuals and businesses
associated with the manufacture, importation and sale of
alcoholic beverages in this state and the collection of license
fees or occupation taxes for this purpose.
2) Specifies that a licensed beer manufacturer may, at the
licensed premises of production, sell to consumers for
consumption off the premises beer which is produced and bottled
by, or produced and packaged for that manufacturer.
3) Provides that a licensed beer manufacturer may also sell
beer to any person holding a license authorizing the sale of
beer and may sell beer to consumers for consumption on the
manufacturer's licensed premises or on premises owned by the
manufacturer which are contiguous to the licensed premises and
which are operated by and for the manufacturer.
4) Provides that a licensed beer manufacturers may also sell
beer and wine, regardless of source, to consumers for
consumption at a bona fide public eating place on the
manufacturer's licensed premises or at a bona fide public eating
place on premises owned by the manufacturer which are contiguous
to the licensed premises and which are operated by and for the
manufacturer.
5) Existing law, known as the "tied-house" law, separates the
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alcoholic beverage industry into three component parts, or
tiers, of manufacturer (including breweries, wineries and
distilleries), wholesaler, and retailer (both on-sale and
off-sale).
FISCAL EFFECT : Unknown.
COMMENTS :
Background : Existing law, known as the "tied-house" law,
separates the alcoholic beverage industry into three component
parts, or tiers, of manufacturer (including breweries, wineries
and distilleries), wholesaler, and retailer (both on-sale and
off-sale).
Tied house refers to a practice in this country prior to
Prohibition and still occurring in England today where a bar or
public house, from whence comes the "house" of tied house, is
tied to the products of a particular manufacturer, either
because the manufacturer owns the house, or the house is
contractually obligated to carry only a particular
manufacturer's products.
The original policy rationale for this body of law was to: a)
promote the state's interest in an orderly market; b) prohibit
the vertical integration and dominance by a single producer in
the marketplace; c) prohibit commercial bribery and protect the
public from predatory marketing practices; and, d) discourage
and/or prevent the intemperate use of alcoholic beverages.
Generally, other than exceptions granted by the Legislature, the
holder of one type of license is not permitted to do business as
another type of licensee within the "three-tier" system.
What is Cider? : Cider is a fermented alcoholic beverage made
from fruit juice, most commonly and traditionally apple juice,
but also the juice of peaches or other fruit. Cider varies in
alcohol content from 2% ABV to 8.5% or more in traditional
English ciders. In some regions, such as Germany and United
States, cider may be called "apple wine". Cider is often
stronger than beer, and is frequently over 6% alcohol by volume.
The common eating apples are unsuitable for cider making, being
low in tannins; specific apple cultivars bred especially for
cider making are preferred.
In California hard ciders are considered wine because they're
fermented from fruit and so they can only be made by a holder of
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a Type 02 ABC license (Winegrower). Existing law limits an
alcohol manufacturer to only one licensed type of beverage per
manufacturing site.
Recent reports state that the volume sales of cider in the
United States grew by 20% in 2011. This growth was largely
attributed to the popularity of craft beer in the US and
consumers' desire to try new flavors and tastes. Familiarity
with the wide variety and tastes of craft beers has allowed
consumers to venture into giving other alcoholic beverages a
try. Some craft breweries have also begun to add a cider
offering to complement their craft beer portfolio. Cider volume
sales are projected to grow at an 11% over the 2011-2016
forecast period. More sales have led to more product offerings
by manufacturers. The Boston Beer Company, maker of Samuel
Adams, has entered the market with its Angry Orchard Cider. And
Anheuser-Busch has launched a low-calorie version called
"Michelob Ultra Light Cider."
In 2011, the category's sales were equivalent to far less than
1% of total beer sales.
What is Perry ? Perry or Pear Cider is an alcoholic drink, made
from pressed pears, especially grown for this purpose.
Traditional Perry making is broadly similar to traditional cider
making, in that the fruit is picked, crushed, and pressed to
extract the juice, which is then fermented using the wild yeasts
found on the fruit's skin. The principal differences between
Perry and cider are that pears must be left for a critical
period to mature after picking, and the pomace must be left to
stand after initial crushing to lose tannins, a process
analogous to wine maceration. After initial fermentation, the
drink undergoes a secondary malolactic fermentation while
maturing.
Perry pears often have higher levels of sugar than cider apples,
including unfermentable sugars such as sorbitol, which can give
the finished drink a residual sweetness. They also have
different tannin content to cider apples, with a predominance of
astringent over bitter flavors.
Purpose of the bill : According to the author, cider makes up
only a very small portion of US alcohol sales and therefore has
the room and potential for rapid growth. The author points out,
that hard cider makes up less than 1 percent of U.S. alcoholic
beverage sales, but it's also the nation's fastest-growing
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beverage category.
In California, existing law establishes a number of licensure
categories for alcohol beverage manufacturers. Breweries, for
example, must possess a Type 01(Beer Manufacturer) license for
the production of beer while wine producers must possess a Type
02 license. In some cases, a beer manufacturer has the capacity
to produce more than one type of beverage. A brewery, for
example, has the technology and workforce to produce both beer
and cider. But existing law limits that manufacturer to only
one type of beverage per manufacturing site.
The author states, this bill would simplify the licensure
process for alcohol beverage manufacturers who can produce more
than one beverage type by allowing the holder of a Type 01
license to produce both cider and Perry. The author believes
that the growth of the cider market in California will occur at
bars and restaurants as they have more open taps for various
craft beers and have shown a willingness to expand their
beverage offerings.
REGISTERED SUPPORT / OPPOSITION :
Support
California Manufacturers & Technology Association
The California Chamber of Commerce
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531