BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 933
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          Date of Hearing:   April 24, 2013

                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
                              Hall III, Isadore, Chair
               AB 933 (Skinner and Hall) - As Amended:  April 17, 2013
           
          SUBJECT  :   Distilled spirits manufacturers: licenses: tastings.

           SUMMARY  :   Allows a licensed distilled spirits and brandy  
          manufacturer to conduct and charge consumers for tastings on its  
          licensed premises, as defined.  Specifically,  this bill  :  

          1)  Revises the conditions upon which a distilled spirits  
          manufacturer may conduct tastings, authorize a licensed  
          distilled spirits manufacturer to charge consumers for tastings  
          on its licensed premises, and would impose additional conditions  
          on the provision of tastings by the licensee on the licensed  
          premises. 

          2)  Provides that distilled spirits tastings may be conducted by  
          the licensee off the licensee's premises only for an event  
          sponsored by a nonprofit organization. A distilled spirits  
          manufacturer shall not sell or solicit sales of distilled  
          spirits at such event. The sponsoring organization shall first  
          obtain a permit form Department of Alcoholic Beverage Control  
          (ABC).

          3)  Includes in these conditions that tastings of distilled  
          spirits shall not exceed an unspecified amount and be limited to  
          an unspecified number of tastes to be provided to an individual  
          per day.  Tastings shall only include the products that are  
          authorized to be sold by the licensee.  In addition, a person  
          under 21 years of age shall not serve tastes of distilled  
          spirits.

          4)  Permits a distilled spirits manufacturer, under specified  
          conditions, for tastings conducted at a licensee's premises, to  
          display or provide to individuals a listing of the names,  
          addresses, telephone numbers, e-mail addresses, or Internet Web  
          site addresses, of two or more unaffiliated off-sale retailers  
          selling their products.

          5)  Extends the authorization to conduct tastings, as described  
          above, to brandy manufacturers. 









                                                                  AB 933
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           EXISTING LAW  :

          1)  Establishes ABC 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)  Permits a licensed distilled spirits manufacturer to conduct  
          tastings of distilled spirits produced or bottled by, or  
          produced or bottled for, the licensee, on or off the licensee's  
          premises.  Tastings conducted by the licensee off the licensee's  
          premises must be for an event sponsored by a nonprofit  
          organization, as defined, and only if persons attending the  
          event are affiliated with the sponsor.  Existing law also makes  
          it explicit that no distilled spirits shall be sold or solicited  
          for sale in that portion of the premises where the distilled  
          tasting is being conducted.   

          3)  Authorizes ABC to issue to the holder of an "off-sale"  
          retail license an "instructional tasting license" for the  
          purpose of furnishing tastings of alcoholic beverages to  
          consumers, subject to certain limitations.

          4)  Permits an on-sale retail licensee of wine or distilled  
          spirits to conduct "instructional" consumer tastings on the  
          licensed retail premise provided the following conditions are  
          met: (1) no more than a quarter ounce of distilled spirits is  
          offered in one tasting; (2) no more than one ounce of wine is  
          offered in one tasting; and, (3) no more than three tastings are  
          offered to an individual in one day.  An instruction may include  
          the history, nature, values and characteristics of the product  
          being offered, and the methods of presenting and serving the  
          product.  

          5)  Authorizes beer manufacturers and wholesalers to offer beer  
          samples (not to exceed eight ounces per person, per day) to  
          individuals of legal drinking age at on-sale retail licensed  
          premises under specified conditions.

          6)  Authorizes licensed winegrowers to conduct wine tastings  
          featuring their products either on or off the winegrower's  
          premises, as provided for in rules and regulations adopted by  
          ABC.








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          7)  Existing law, until January 1, 2014, permits a manufacturer,  
          winegrower, rectifier, or distiller, distilled spirits  
          manufacturer's agent or any authorized agent of that person to  
          provide, free of charge, entertainment, food, and distilled  
          spirits, wine, or nonalcoholic beverages to consumers over 21  
          years of age at an invitation-only event in connection with the  
          sale or distribution of wine or distilled spirits, as specified.  


          8)  Provides the listing of the names, addresses, telephone  
          numbers, or email addresses, or Internet Web site addresses, of  
          2 or more unaffiliated off-sale retailers selling beer, wine, or  
          distilled spirits and operating and licensed as bona fide public  
          eating places selling the beer, wine, or distilled spirits  
          produced, distributed, or imported by a nonretail industry  
          member in response to a direct inquiry from a consumer, as  
          specified, does not constitute a thing of value or prohibited  
          inducement to the listed off-sale retailer, if specified  
          conditions are met.  Includes similar provisions applicable to  
          on-sale licensed premises, as defined.

           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  








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          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.

          Numerous exceptions to these restrictions have been enacted  
          through the years in those specific instances where the  
          Legislature determined that the public's interests were  
          protected.  Generally, the business community is interested in  
          removing unnecessary business regulations and creating  
          conditions that facilitate investment and expansion  
          opportunities for companies that have some degree of ownership  
          in multiple segments of the industry.  However, the Legislature  
          traditionally does not grant exemptions that favor the products  
          of the entity seeking the exemption, or exemptions that unfairly  
          compromise the role of the distributors. 
           
          Purpose of the bill  :  According to the author, tastings are a  
          traditional means of allowing responsible adult consumers to  
          sample and learn about the wide variety of alcoholic beverage  
          products available in the marketplace.  There are roughly 32  
          small business distilleries in the state; some common brands  
          produced are Hangar One Vodka and St. James Spirits. These  
          distilleries manufacture a variety of products including but not  
          limited to gin, vodka, rum and bourbon.  California distillers  
          make award-winning products using raw ingredients which are  
          primarily purchased, sourced or grown by California farmers or  
          suppliers.

          The author points out, that currently, distilleries may provide  
          their customers complementary tastings of their products, but  
          may not charge for tastings.  In order to educate consumers  
          about their products, distilleries must hire staff.  The ability  
          to charge for tastings will allow distilleries to provide better  
          customer service to market their product while remaining  
          financially sustainable. The author also points out, that the  
          ability to charge for tastings is also aligned with what the  
          wine and beer industry are allowed to do under the Act.

          According to the author's office, this measure is intended to  
          give adult consumers who enjoy distilled spirits the opportunity  
          to sample new products, in modest quantities, and in a  
          responsible environment (at the distillery).  This measure is  
          carefully crafted to give distilled spirits and brandy  
          manufacturers a marketing tool to educate current and future  








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          consumers while taking into consideration California's  
          three-tier system.
           
          In support  :  According to the bill's sponsor, California  
          Artisanal Distillers Guild, granting artisanal distillers the  
          ability to charge for tastings will induce growth and long-term  
          sustainability for the overall industry.  

           In opposition  :  The California Council on Alcohol Problems,  
          "Beyond the fiscal context of our general opposition to AB 933  
          -- and bills like it, CCAP members are concerned about expanding  
          the tastings exemption to Tied-House and licensure limitations,  
          and most especially allowing such tastings to be sold like an  
          on-sale premise.  This unprecedented authorization for the sell  
          and consumption of distilled spirits outside of a properly  
          licensed, on-sale establishment is deeply troubling, even if  
          this measure limits such consumption to a manufacturer's  
          business location."

           Prior legislation  :  AB 2184 (Hall), Chapter 480, Statutes of  
          2012.  Permits, until January 1, 2016, the appearance of a  
          person employed or engaged by an "authorized licensee," as  
          defined, at a promotional event held at the premises of an  
          off-sale retail licensee for the purpose of providing autographs  
          under specified conditions.

          SB 1022 (Strickland), Chapter 281, Statutes of 2010.  Expands an  
          existing tied-house exception to enable licensed distilled  
          spirits "rectifiers" to donate or sell their products to  
          specified nonprofit entities for the purpose of assisting in  
          fund-raising efforts.

          AB 605 (Portantino) Chapter 230, Statutes of 2010.   Added  
          provisions to the ABC Act authorizing the department to issue to  
          the holder of an "off-sale" retail license an "instructional  
          tasting license" for the purpose of furnishing tastings of  
          alcoholic beverages to consumers, subject to certain  
          limitations.

          AB 2134 (Chesbro) Chapter 149, Statutes of 2010.   Created a new  
          tied-house exception in the ABC Act that allows licensed brewers  
          to conduct and participate in events called "Beer Maker Dinners"  
          for consumers held at an on-sale retail licensed premise.    

          AB 2293 (De Leon), Chapter 638, Statutes of 2008.  Adds a new  








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          provision to the Alcoholic Beverage Control Act (ABC Act) that  
          permits a manufacturer of distilled spirits, winegrower,  
          rectifier, or distiller, or its authorized agent to provide  
          their product, as well as entertainment and food to consumers  
          over 21 years of age during invitation-only events (free of  
          charge), as specified.  The events must occur on premises for  
          which a caterer's permit authorization has been issued.  The  
          bill sunsets on January 1, 2014.

          SB 1548 (Murray), Chapter 670, Statutes of 2006.  Permits a beer  
          manufacturer, a licensed beer and wine importer general, or a  
          licensed beer and wine wholesaler to instruct consumers  
          regarding beer and allows for the furnishing of a tasting at a  
          retail on-sale licensee authorized to sell beer, under specified  
          conditions.

          AB 2285 (Valerie Brown), Chapter 248, Statutes of 1998.  Allows  
          on-sale retail licensees to offer limited tastings of wine or  
          distilled spirits at the licensed establishment.

          SB 993 (Burton) Chapter 544, Statutes of 1997.  Among other  
          things, authorized a licensed distilled spirits manufacturer to  
          conduct tastings of distilled spirits on the licensed premises  
          under specified conditions.  
           
          REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Artisanal Distillers Group
          California Farm Bureau Federation

           Opposition 
           
          California Council on Alcohol Problems
           

          Analysis Prepared by  :    Eric Johnson / G. O. / (916) 319-2531