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