BILL ANALYSIS Ó AB 394 Page 1 Date of Hearing: April 8, 2015 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Adam Gray, Chair AB 394 (Mark Stone) - As Amended March 19, 2015 SUBJECT: Alcoholic beverage control: wine labels: Monterey County SUMMARY: Requires any wine bottled on or after January 1, 2019, labeled with an American Viticultural Area (AVA) established pursuant to federal law that is located entirely within the County of Monterey (County) to bear the designation "Monterey County" on the label. Specifically, this bill: 1) Requires any wine bottled on or after January 1, 2019, labeled with an AVA established pursuant to the Code of Federal Regulations, that is located entirely within the County of Monterey shall bear the designation "Monterey County" on the label in a type size not smaller than two millimeters on containers of more than 187 milliliters or smaller than one millimeter on containers of 187 milliliters or less. 2) Authorizes ABC to suspend or revoke the license of any person who violates the above-mentioned provision. 3) Specifies that the provision shall not apply to any wine labeled with a viticultural area appellation of origin AB 394 Page 2 established under Federal Regulations when the name of the appellation is "Monterey." EXISTING LAW: 1) Provides for specified labeling requirements for containers of alcoholic beverages sold within this state. 2) Existing provisions of the Act, known as "tied-house" restrictions, generally prohibit a winegrower from having an ownership interest in an on-sale alcoholic beverage license, with limited exceptions. Among other exemptions, existing law exempts from the tied-house restrictions any licensed winegrower who meets specified conditions, including that the winegrower, or his or her officer, director, or agent, enters into an undertaking, approved by the ABC, that makes specified statements regarding the sale or furnishing of wine by the winegrower, or any officer, director, or agent of the winegrower. 3) Requires that, when the word "Napa" (or any federally recognized viticultural region within Napa County) appears on a brand label, at least 75 percent of the grapes used to make that wine must be from Napa County. 4) Requires wines produced within the "Napa Valley" to be labeled as being derived from that valley, if the wine label indicates that they are produced within a separate viticultural AB 394 Page 3 area within the Napa Valley, in order to preserve consumer identification and understanding. 5) Prohibits the sale of wine produced, bottled, or labeled after December 31, 2008, in this state that identifies, in a brand name or otherwise, on any label, packaging material, or advertising, the name "Sonoma," unless at least 75 percent of the grapes used to make the wine are from Sonoma County, as specified. 6) Requires all wines produced or bottled within the current Paso Robles appellation to be labeled with the designation "Paso Robles." 7) Requires all wines produced or bottled within the current Lodi appellation to be labeled with the designation "Lodi." 8) Requires, beginning on or after January 1, 2014, that any wine labeled with an AVA located entirely within a County of the 19th class (Sonoma County) must display the designation "Sonoma County" on the label, as specified. AB 394 Page 4 FISCAL EFFECT: Unknown COMMENTS: Background : The Federal Alcohol Administration Act establishes broad federal regulatory authority over the interstate trade in alcohol beverage products. The Secretary of the Treasury, through the Alcohol and Tobacco Tax and Trade Bureau (TTB), administers an extensive code of regulations governing, among other things, the contents of wine labels, including brand names, the name and address of the bottling winery, and indications of the wine's origin, as well as the use of such information in advertising. Under federal regulations, an "appellation of origin" is a geographic designation referring to the place where the grapes used to make a specified percentage of the wine were grown. For American wines, an appellation of origin includes the names of states (e.g., "California") and counties identified with the word "county" (e.g., "Napa County," "Monterey County," "Sonoma County," "Eldorado County," etc.) as well as all designated American "viticultural areas." An AVA is a grape growing region distinguishable by geographical area features, as recognized by the TTB pursuant to specified criteria and procedures. These criteria and procedures, and a complete list of AVAs, are set forth in Part 9 of Title 27 of the Code of Federal Regulations. In brief, TTB may recognize an AVA area if it is AB 394 Page 5 locally or nationally known for grape growing, has particular and definable boundaries, and has geographic features distinguishing it as a grape-growing area. As of 2014, there were more than 220 recognized AVAs nationwide - 135 of which are located in California. The 135 California viticultural areas recognized by the TTB include, among others, Alexander Valley, Anderson Valley, Chalk Hill, Clarksburg, Fair Play, Hames Valley, Lodi, Los Carneros, Monterey, Napa Valley, Paso Robles, Rockpile, Russian River Valley, Santa Lucia Highlands, Sonoma Valley, Spring Mountain, Stags Leap, and Wild Horse Valley. The regulations specify the conditions for use of each type of appellation of origin. A wine qualifies for a state or county appellation of origin if at least 75 percent of the volume derives from grapes grown in the area indicated by the appellation of origin. Thus, under TTB regulations the appellation of origin "California" signifies that at least 75 percent of the wine in the bottle was made from grapes grown anywhere in the state of California. Similarly, the appellation of origin "Napa County" or "Sonoma County" or "Mendocino County" signifies that at least 75 percent of the wine in the bottle was made from grapes grown anywhere in that particular County. To qualify for an appellation of origin consisting of an AVA, at least 85 percent of the wine must derive from grapes grown in the indicated area. The regulations do not require disclosure of the place of origin of the remaining portion of the wine. Purpose of the bill : This bill establishes a "conjunctive labeling" provision in the ABC Act for wines made from grapes grown within recognized winegrowing areas, or American Viticultural Areas, in Monterey County. This provision mirrors existing labeling provisions for Sonoma, Napa, Lodi, and Paso Robles. AB 394 Page 6 According to the author's office, California is a global leader in viticulture and wine grape cultivation, and its many wine-producing regions are known specifically by their local appellation due to their high quality products and labeling requirements. Monterey County wine producers, which are leaders in the California wine industry, provide a variety of jobs in the wine growing and supply chain, and contribute immensely to the County's economy. Monterey County is unique among wine regions because it rates very high in value, quality and awareness. The author's office contends this measure will insure that consumers recognize every bottle of wine produced from Monterey County grapes. In addition, the bill will build brand equity for Monterey County wines and preserve and strengthen the County's position as a recognized world-class wine region while increasing sales of wines produced from the region's grapes. Consistent inclusion of Monterey County on wine labels will strengthen the County's brand over time while strengthening the diversity of AVAs within the County and the quality wines each produces. The bill provides a three-year phase-in period to enable wineries to redesign their labels and get regulatory approval to use the new labels. In support : In support of this measure, the Family Winemakers AB 394 Page 7 of California states "the Monterey appellation is one of the fastest growing premium vineyard and winery regions in California, as well as one of the state's tourism jewels. Wines produced from Monterey are becoming nationally and internationally recognized for their distinctive qualities. As the Monterey wine region continues its growth and development, it is important that smaller, separate sub-appellations benefit from and contribute to the linkage that comes with conjunctive labeling. AB 394 is designed to accommodate the desired specificity of sub-appellation labeling, but link it to the broader Monterey AVA." Prior legislation: AB 1798 (Evans), Chapter 242, Statutes of 2010. Required, beginning on or after January 1, 2014, that any wine labeled with an AVA located entirely within a County of the 19th class (Sonoma County) must display the designation "Sonoma County" on the label, as specified. AB 87 (Blakeslee), Chapter 674, Statutes of 2007. Required all wines produced or bottled from any sub-appellation located within the current Paso Robles appellation to carry the designation "Paso Robles" on the label. SB 1380 (Chesbro) Chapter 879, Statutes of 2006. Prohibited the sale of wine, produced, bottled, or labeled after December 31, 2008, that identifies, in a brand name or otherwise, on any label, packaging material, or advertising, the name "Sonoma", unless at least 75% of the grapes used to make the wine are from Sonoma County, as specified. SB 1293 (Chesbro), Chapter 831, Statutes of 2000. Prohibited the use of the word "Napa" on a brand label unless at least 75% of the grapes used to make that wine came from Napa County. One of the stated purposes of this law was to minimize consumer confusion because consumers assume brand names of wines suggest the origin of the grapes. AB 394 Page 8 REGISTERED SUPPORT / OPPOSITION: Support Family Winemakers of California Monterey County Vintners and Growers Association Opposition None on file Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531