BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 779
          Author:   Bocanegra (D), et al.
          Amended:  6/11/13 in Senate
          Vote:     21


           SENATE GOVERNMENTAL ORGANIZATION COMMITTEE  :  10-0, 6/25/13
          AYES:  Wright, Nielsen, Berryhill, Calderon, Cannella, De León,  
            Galgiani, Hernandez, Lieu, Padilla
          NO VOTE RECORDED:  Correa

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  72-0, 5/24/13 - See last page for vote


           SUBJECT  :    Alcoholic beverages

           SOURCE  :     Author


           DIGEST  :    This bill adds a new provision to the Alcoholic  
          Beverage Control Act (ABC Act) that grants beer manufacturers  
          producing more than 60,000 barrels of beer per year the  
          privilege of also manufacturing "cider or perry" at their  
          licensed premises and to sell the product to any licensee  
          authorized to sell wine.  

           ANALYSIS  :    

          Existing law:

          1.Establishes the Department of Alcoholic Beverage Control (ABC)  
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            and grants it exclusive authority to administer the provisions  
            of the ABC 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.Authorizes a licensed beer manufacturer, at the licensed  
            premises of production, to sell to consumers for consumption  
            off the premises beer that is produced and bottled by, or  
            produced and packaged for, that manufacturer.

          3.Grants licensed beer manufacturers the privilege of (a)  
            selling beer to any person holding a license authorizing the  
            sale of beer; (b) selling 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; and, (c)  
            selling 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.

          4.Provides that licensed beer manufacturers and holders of  
            out-of-state beer manufacturer's certificates may be issued  
            and may hold retail package off-sale beer and wine licenses.   
            Stipulates that alcoholic beverages produced or sold at or  
            from the off-sale premises which are not produced and bottled  
            by, or produced and packaged for, the beer manufacturer must  
            be purchased by the beer manufacturer only from a licensed  
            wholesaler.

          5.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).  This is known as the "tied-house" law.

          6.Defines an "on-sale" license as authorizing the sale of all  
            types of alcoholic beverages: namely, beer, wine and distilled  
            spirits, for consumption on the premises (such as at a  
            restaurant or bar).  An "off-sale" license authorizes the sale  
            of all types of alcoholic beverages for consumption off the  

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            premises in original, sealed containers.  

          This bill adds a new provision to the ABC Act that grants  beer  
          manufacturers producing more than 60,000 barrels of beer per  
          year the privilege of also manufacturing "cider or perry" at  
          their licensed premises and to sell the product to any licensee  
          authorized to sell wine.  Specifically, this bill:

          1.Authorizes a licensed beer manufacturer that produces more  
            than 60,000 barrels of beer a 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.

          2.Specifies that "cider" and "perry" have the meanings provided  
            in Section 4.21(e)(5) of Title 27 of the Code of Federal  
            Regulations.  [Cider and perry are fruit wines derived wholly  
            (except for sugar, water, or added alcohol) from apples or  
            pears.]

          3.Makes minor technical and code maintenance changes to existing  
            provisions of law. 

           Background
           
           Cider  .  Cider is a fermented alcoholic beverage made from fruit  
          juice, most commonly and traditionally apple juice.  Cider  
          varies in alcohol content from 2% ABV (alcohol by volume) to  
          8.5% or more in traditional English ciders. In some regions,  
          such as Germany and the United States, cider may be called  
          "apple wine."  Cider is often stronger than beer, and is  
          frequently over 6% alcohol by volume - common   eating apples  
          are generally 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 thus can only be manufactured by a  
          holder of a Type 02 ABC license (Winegrower).  Existing law  
          explicitly limits an alcoholic beverage manufacturer to only one  
          licensed type of beverage per manufacturing site.

          Industry studies show that volume sales of cider in the U.S.  
          grew by 20% in 2011.  This growth was largely attributed to the  

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          popularity of craft beer in the U.S. 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 go.  Some craft breweries  
          have also begun to add a cider offering to complement their  
          craft beer portfolio.  Cider volume sales are projected to grow  
          well over 10% during the next 3-4 years.  More sales have also  
          resulted in greater product offerings by manufacturers.  For  
          example, in 2011, the Boston Beer Company, maker of Samuel  
          Adams, entered the cider market with its Angry Orchard brand.   
          In February 2012, MillerCoors' Tenth and Blake craft-imported  
          unit purchased Crispin Cider Company of Minneapolis and the  
          brand volume more than doubled.  In May 2012, Anheuser-Busch  
          InBev (A-B) also made a play with Michelob Ultra Light Cider, a  
          low-calorie entrant, which accounted for 350,000 cases.  This  
          year, A-B expanded its presence with the launch of Stella Artois  
          Cidre.  Constellation has also entered the market through its  
          Crown Imports division, which began importing Carlsberg-owned  
          Somersby Apple Cider into the U.S. last year.  Mike's Hard  
          Lemonade Co, in April launched Smashed Apple Cider.  The U.S.  
          market's top cider brand by sales, Woodchuck, produced by the  
          Vermont Hard Cider Co., grew 25% last year. 
             
           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.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes


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           SUPPORT  :   (Verified  8/9/13)

          Anheuser-Busch InBev
          California Chamber of Commerce
          California Manufacturers & Technology Association

          ARGUMENTS IN SUPPORT  :    According to the author's office, cider  
          is the nation's fastest-growing beverage category yet it makes  
          up only a very small portion (less than 1%) of total U.S.  
          alcoholic beverage sales and thus has the potential for greater  
          growth.  

          The author's office references the fact that existing ABC law  
          establishes a number of licensure categories for alcoholic  
          beverage manufacturers.  For example, breweries 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 may have the capacity, technology and  
          workforce to produce more than one type of alcoholic beverage  
          (e.g., beer and cider) yet the law limits that licensed  
          manufacturer to only one type of alcoholic beverage per licensed  
          manufacturing site.  

          The author's office states that this bill is intended to  
          simplify the licensure process for alcoholic beverage  
          manufacturers who can produce more than one beverage type by  
          allowing the holder of a Type 01 license to produce not only  
          beer but also cider and perry.  The author's office believes  
          that the growth of the cider market in California will occur at  
          bars and restaurants in light of the fact that they have more  
          open taps for various craft beers and also because they've shown  
          a willingness to expand their alcoholic beverage offerings.  

           ASSEMBLY FLOOR  :  72-0, 5/24/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bradford, Brown, Buchanan,  
            Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,  
            Hagman, Hall, Harkey, Roger Hernández, Jones, Jones-Sawyer,  
            Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor,  
            Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,  
            Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel  
            Pérez, Quirk, Quirk-Silva, Rendon, Salas, Stone, Ting, Wagner,  

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            Weber, Wieckowski, Williams, Yamada, John A. Pérez
          NO VOTE RECORDED:  Bonta, Grove, Holden, Skinner, Waldron, Wilk,  
            Vacancy, Vacancy


          MW:nl  8/12/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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