BILL ANALYSIS                                                                                                                                                                                                    






                                                       Bill No:  AB  
          933
          
                 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                       Senator Roderick D. Wright, Chair
                           2013-2014 Regular Session
                                 Staff Analysis



          AB 933  Author:  Skinner
          As Amended:  June 19, 2013
          Hearing Date:  June 25, 2013
          Consultant:  Art Terzakis


                                     SUBJECT  
             Alcoholic Beverages: Distilled Spirits Manufacturers:  
                                    tastings

                                   DESCRIPTION
           
          AB 933 grants licensed distilled spirits manufacturers and  
          licensed brandy manufacturers the privilege to conduct  
          consumer tastings on their licensed premises and to charge  
          for those tastings.  Specifically, this measure:

          1)Finds and declares that a tasting of distilled spirits or  
            brandy is a presentation of samples of alcoholic  
            beverages representing one or more manufacturers to a  
            group of consumers for the purpose of acquainting the  
            tasters with the characteristics of the distilled spirits  
            or brandy tasted.

          2)Stipulates that tastings of "distilled spirits" on the  
            licensee's premises shall be subject to the following  
            conditions:

             a)   Tastings must not exceed  of an ounce and must be  
               limited to no more than four tastes per individual per  
               day.

             b)   Tastings must include the products that are  
               authorized to be produced or bottled by or for the  
               licensee.





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             c)   Prohibits individuals under 21 years of age from  
               serving tastings.

             d)   Prohibits single tastings in the form of a cocktail  
               or mixed drink.

             e)   Permits the distilled spirits licensee to charge  
               for such tastings.

          3)Adds a new Section of law to the ABC Act authorizing a  
            licensed "brandy" manufacturer to conduct tastings of  
            brandy produced or bottled by, or produced or bottled  
            for, the licensee, on or off the licensee's premises for  
            events sponsored by a nonprofit organization, as defined,  
            and only if persons attending the event are affiliated  
            with the sponsor.  (This provision mirrors existing ABC  
            law relative to authorization granted to distilled  
            spirits manufacturers.)

          4)Also, makes it explicit that no brandy shall be sold or  
            solicited for sale at the event and mandates that the  
            sponsoring organization obtain a permit for such an event  
            from the ABC.  Additionally, grants brandy manufacturers  
            the privilege of conducting tastings on their licensed  
            premises and charging for those tastings subject to the  
            same conditions afforded distilled spirits manufacturers  
            as referenced in item # 2 (a-e) above.

          5)Includes "boiler plate" findings and declarations  
            relative to the necessity of requiring a separation  
            between the three-tiers of the alcoholic beverage  
            industry in order to prevent suppliers from dominating  
            local markets through vertical integration and to prevent  
            excessive sales of alcoholic beverages produced by overly  
            aggressive marketing techniques. 

          6)Makes minor technical and code maintenance changes to  
            existing provisions of the ABC Act (Section 23363.1 of  
            the Business & Professions Code). 

                                   EXISTING LAW

           The enactment of the 21st Amendment to the U.S.  
          Constitution in 1933 repealed the 18th Amendment and ended  
          the era of Prohibition.  Accordingly, states were granted  
          the authority to establish alcoholic beverage laws and  




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          administrative structures to regulate the sale and  
          distribution of alcoholic beverages.  

          Existing law establishes the Department of Alcoholic  
          Beverage Control (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. 

          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.  

          Existing law (Business and Professions Code Section  
          23363.1) 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  




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          distilled spirits shall be sold or solicited for sale in  
          that portion of the premises where the distilled tasting is  
          being conducted.  
           
          Existing law also 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  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.  

          Additionally, existing law authorizes beer manufacturers  
          and wholesalers to offer beer samples (not to exceed 8  
          ounces per person, per day) to individuals of legal  
          drinking age at on-sale retail licensed premises under  
          specified conditions.

          Furthermore, existing law permits a licensed winegrower,  
          manufacturer, importer, or wholesaler to provide samples of  
          the alcoholic beverages which are authorized to be sold by  
          the licensee in accordance with rules prescribed by the  
          ABC.  A retail licensee, however, is not authorized to  
          provide any free samples of alcoholic beverages.  Moreover,  
          ABC regulations provide that samples of alcoholic beverages  
          may only be given away to licensees or employees of  
          licensees who are in a position to purchase the product or  
          who are in need of additional information about the  
          product, as specified.

          Existing law permits a licensed winegrower or brandy  
          manufacturer to be issued an off-sale general license.   
          Existing law also permits wineries to sell their products  
          to consumers on their licensed premises and directly to  
          licensed, on-sale and off-sale retailers (e.g., restaurants  
          and liquor stores).  Additionally, existing law provides  
          for a brewpub-restaurant license, issued to a bona fide  
          public eating place, which authorizes the sale of beer,  
          wine, and distilled spirits for consumption on the premises  
          and the sale of beer produced by the brewpub-restaurant  
          licensee for consumption on the premises.  The license also  
          authorizes the sale of beer produced by the licensed  
          brewpub-restaurant licensee to a licensed beer and wine  




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          wholesaler.  The brewpub-restaurant licensee must purchase  
          all beer, wine, or distilled spirits for sale on the  
          licensed premises from a licensed wholesaler or winegrower,  
          except for the beer produced by the brewpub-restaurant  
          licensee on the licensed premises.  Additionally, the law  
          also requires the brewpub-restaurant licensee to offer for  
          sale on the licensed premises other commercially available  
          beers available from licensed wholesalers.  

          Existing law 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 premises in original, sealed  
          containers.  
                                    BACKGROUND
           
           Purpose of AB 933:   The author's office points out that  
          existing law permits distilleries to provide their  
          customers with complementary tastings of the products they  
          manufacture however the law precludes them from charging  
          for those tastings.  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).  The author's office maintains that the  
          ability to charge for tastings is also aligned with  
          existing privileges afforded the wine and beer industry.
          Additionally, the author's office emphasizes that this  
          measure is carefully crafted to give distilled spirits and  
          brandy manufacturers a marketing tool to educate current  
          and future consumers while taking into consideration  
          California's three-tier system.

          The sponsor of this measure, the California Artisanal  
          Distillers Guild, states that California currently has  
          approximately 32 small business distilleries producing  
          common brands such as 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.

           Arguments in Opposition:   Opponents have expressed concern  




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          about the expansion of the tastings exemption in tied-house  
          law and the unprecedented authorization for the sale and  
          consumption of distilled spirits and brandy outside of a  
          properly licensed, on-sale establishment even if this  
          measure limits such consumption to a manufacturer's  
          licensed business location.

                            PRIOR/RELATED LEGISLATION
           
           AB 1424 (Committee on Governmental Organization), 2013-14  
          Session.   Would permit winegrowers and beer manufacturers  
          to describe the "composition" of their products, in  
          addition to other characteristics already permitted, when  
          engaging in tastings or instructional events for their  
          licensees or employees.  (Pending on Senate floor)
           
          AB 949 (Quirk), 2013-14 Session.   Would authorize licensed  
          distilled spirits manufacturers to charge consumers for  
          tastings and would impose additional conditions on the  
          provision of tastings by the licensee, including limiting  
          the size and number of tastes.  Also, would provide that a  
          distilled spirits manufacturer's license authorizes the  
          licensee to serve and sell food, general merchandise, and  
          nonalcoholic beverages for consumption on or off the  
          premises. (Held in Assembly Rules Committee)
           
          SB 1068 (Hancock), 2009-10 Session.   Would have added a new  
          provision to the ABC Act authorizing a licensed distiller  
          that distills fewer than 50,000 gallons of spirits annually  
          to self-distribute to consumers and licensed retailers  
          (restaurants, liquor stores).  (Held in this Committee at  
          author's request) 

           AB 605 (Portantino), Chapter 230, Statutes of 2010.   Among  
          other things, authorized 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.
           SB 639 (Calderon), 2009-10 Session.   Would have created a  
          new on-sale tasting license to allow off-sale retail  
          licensees to furnish tastes of alcoholic beverages to  
          consumers, as specified.  (Died on Senate Appropriations  
          Suspense File)  
          
          AB 2293 (De Leon), Chapter 638, Statutes of 2008.  Added a  




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          new provision to the ABC Act authorizing distilled spirits  
          manufacturers and winegrowers to provide their product  
          offerings directly to consumers (free of charge) during  
          invitation-only events on premises for which a caterer's  
          permit authorization has been issued.  

          SB 995 (Maldonado), 2007-08 Session.   Would have permitted  
          winegrowers, distilled spirits manufacturers, distilled  
          spirits rectifiers general, or distilled spirits importers  
          general, out-of-state distilled spirits shippers, and  
          authorized agents of any of the above to instruct consumers  
          on the premises of an off-sale licensee regarding wine and  
          distilled spirits, respectively, as provided.  Also, would  
          have allowed the instruction to include the furnishing of  
          tastings under specified conditions.  (Held in this  
          Committee at author's request.)
           
          AB 2613 (Plescia), 2007-08 Session.   Would have authorized  
          winegrowers, distilled spirits manufacturers, as well as  
          rectifiers, importers and shippers of these beverages to  
          offer tastings of wine or distilled spirits at off-sale  
          retail licensed premises (grocery stores and liquor stores)  
          in a segregated area.  Also, would have required  
          verification of age at            entrance to the  
          segregated area and placed limits on tastings (one-quarter  
          ounce of spirits and one ounce of wine) and limited  
          tastings to three per person each day.  (Held in Assembly  
          Appropriations Committee)
           
          SB 1548 (Murray), Chapter 670, Statutes of 2006.    
          Authorized beer manufacturers and wholesalers to offer beer  
          samples (not to exceed 8 ounces per person, per day) to  
          individuals of legal drinking age at on-sale retail  
          licensed premises under specified conditions.  
           
          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.  

           SUPPORT:   As of June 21, 2013:

          California Artisanal Distillers Guild
          California Farm Bureau Federation

           OPPOSE:   As of June 21, 2013:




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          California Council on Alcohol Problems

           FISCAL COMMITTEE:   Senate Appropriations Committee

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