BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 394| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 394 Author: Mark Stone (D) and Alejo (D) Amended: 6/15/15 in Senate Vote: 21 SENATE GOVERNMENTAL ORG. COMMITTEE: 13-0, 6/9/15 AYES: Hall, Berryhill, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Runner, Vidak SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 78-0, 4/23/15 (Consent) - See last page for vote SUBJECT: Alcoholic beverage control: wine labels: Monterey County SOURCE: Monterey County Vintners & Growers Association DIGEST: This bill requires any wine bottled on or after January 1, 2019 and labeled with an American Vitcultural Area (AVA) that is located entirely within the County of Monterey to bear the designation "Monterey County" on the label. ANALYSIS: Existing law: 1)Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to regulate the licensing, enforcement, and administration of the alcoholic beverage AB 394 Page 2 control laws. 2)Requires any wine bottled on or after January 1, 2014 and labeled with an AVA located entirely within a County of the 19th class (Sonoma County) to bear the designation "Sonoma County" on the label, as specified. 3)Requires that, when the word "Napa" (or any federally recognized viticultural region within Napa County) appears on a brand label, at least 75% 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 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% of the grapes used to make the wine are from Sonoma County, as specified. 6)Requires all wines produced within the current Paso Robles appellation to be labeled with the designation "Paso Robles." 7)Requires all wines produced within the current Lodi appellation to be labeled with the designation "Lodi." 8)Stipulates that every person who, with intent to defraud, either falsely makes, alters, forges, or counterfeits the label for any wine or uses the label or bottle of any wine belonging to another, without his or her consent, is guilty of a misdemeanor. This bill: 1)Requires any wine bottled on or after January 1, 2019 and labeled with an AVA that is located entirely within the County of Monterey to bear the designation "Monterey County" on the label in a type size as specified. AB 394 Page 3 2)Stipulates that the requirement in item #1 above shall not apply to any wine labeled with a vitcultural area appellation of origin established pursuant to specified federal regulations when the name of the appellation is "Monterey." 3)Authorizes the Department of ABC to suspend or revoke the license of any person who violates the provisions of this bill. Background Federal Law. 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 American Viticultural Area (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 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 March 2015, there were 230 recognized AVAs nationwide - 134 of which are located in California. The California viticultural areas recognized by the TTB include, among others, Alexander Valley, Anderson Valley, Antelope Valley, Arroyo Seco, Carmel Valley, Central Coast, Chalk Hill, Clarksburg, Cucamonga Valley, Fair AB 394 Page 4 Play, Howell Mountain, Livermore Valley, Lodi, Los Carneros, Malibu Coast, Mendocino, Napa Valley, North Coast, Paso Robles, Rockpile, Russian River Valley, Rutherford, Santa Cruz Mountains, Santa Lucia Highlands, Sierra Foothills, Sonoma Valley, Sonoma Coast, Spring Mountain, Stags Leap, Temecula Valley, Trinity Lakes, and Wild Horse Valley. In certain circumstances, wine labels must bear an appellation of origin. For example, a label must bear an appellation of origin if the label states either the grape type ("varietal") used in the wine or the year in which the grapes were harvested ("vintage"). Recognized varietals include, among others, Cabernet Sauvignon, Pinot Noir, Merlot, Zinfandel, Malbec, Sauvignon Blanc, Chardonnay, Riesling, Pinot Grigio, Syrah, Souzao, Primitivo, and Zinfandel. The regulations mandate that the appellation appear in direct conjunction with and in lettering substantially as conspicuous as the varietal or other class or type designation. 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% 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% 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% 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% of the wine must derive from grapes grown in the indicated area. Thus, the appellation of origin "Napa Valley" signifies that at least 85% of the wine in the bottle was made from grapes grown anywhere in Napa Valley. The regulations do not require disclosure of the place of origin of the remaining portion of the wine. Federal regulations require the wine label to bear a "brand name." The regulations provide that, in general, "a brand name of viticultural significance may not be used unless the wine meets the appellation of origin requirements for the geographic area named." This prohibition is subject to an exception. If a brand name was in use before July 7, 1986, it is considered AB 394 Page 5 grandfathered. Grandfathered brand names of viticultural significance may be used for wines that do not meet the appellation of origin requirements for the geographic area named, provided the wine is labeled with a true appellation of origin consisting of a county or viticultural area (if the brand name refers to a geographic area smaller than a state) or a state or lesser appellation (if the brand name refers to a state). Federal regulations require that the name and address of the "bottling winery" appear on the wine label, accompanied, in certain circumstances, by a phrase such as "bottled by." There is no requirement that the bottling winery be located in the geographic area where the wine was made or the grapes were grown. Federal law also provides that wine may not be sold or shipped in interstate commerce unless it bears a label that TTB has previously approved. A certificate of label approval ("COLA") is obtained by submitting an application to the TTB. The application must include an exact replica of the label as well as other information regarding the wine covered by the label. Purpose of AB 394. This bill establishes a "conjunctive labeling" provision in the ABC Act for all wines made from grapes grown within recognized winegrowing areas, or AVAs, in Monterey County. This bill mirrors existing conjunctive labeling provisions for Napa, Lodi, Paso Robles and Sonoma. Additionally, this bill makes it explicit that the provisions of this act apply only to wines bottled on or after January 1, 2019 to enable wineries to redesign their labels and get regulatory approval to use the new labels. According to the author's office, the purpose of conjunctive labeling is to build an association of quality in an increasingly competitive global wine market for the delivery of Monterey County wines. The author's office states that there are currently eight AVAs contained within the Monterey AVA: Arroyo Seco, Carmel Valley, Chalone, Hames Valley, San Antonio Valley, San Bernabe, San Lucas, and Santa Lucia Highlands. Prior/Related Legislation AB 394 Page 6 AB 1798 (Evans, Chapter 242, Statutes of 2010) required any wine bottled on or after January 1, 2014 and labeled with an AVA located entirely within a County of the 19th class (Sonoma County) to bear the designation "Sonoma County" on the label, as specified. AB 2397 (Aghazarian, Chapter 75, Statutes of 2008) required any wine bottled on or after January 1, 2009 and labeled with a viticultural appellation of origin that is located entirely within the Lodi viticultural area to bear the designation "Lodi" on the label. AB 87 (Blakeslee, Chapter 674, Statutes of 2007) required any wine labeled with a viticultural area appellation of origin established pursuant to federal law, other than the viticultural area "Paso Robles," that is located entirely within the "Paso Robles" viticultural area name to bear the designation "Paso Robles" on the label in conjunction with the area designation of wine. AB 892 (Evans, 2007) would have provided that a wine, as described, is entitled to the appellation of origin "California," or a geographical subdivision thereof, if the wine meets specified criteria, including the requirement that 100% of the wine's volume is derived as specified and described. (Held in this Committee at author's request) SB 1253 (Migden, 2006) would have established "Zinfandel" as the historic wine of California. (Vetoed by Governor - message stated, "Californians should be proud of all our California Grown agricultural products? singling one out in special recognition would be inappropriate.") SB 1380 (Chesbro, Chapter 879, Statutes of 2006) prohibited 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% of the grapes used to make the wine are from Sonoma County, as specified. SB 1293 (Chesbro, Chapter 831, Statutes of 2000) added a provision to the ABC Act for the stated purpose of eliminating consumer confusion with respect to the origin of wine grapes and AB 394 Page 7 protecting the value of the Napa Valley name. Essentially, this measure made it explicit that when the word "Napa" appeared on a brand label, at least 75% of the grapes used to make that wine must be from Napa County. SB 771 (Thompson, Chapter 588, Statutes of 1989) required 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 area within the Napa Valley, in order to preserve consumer identification and understanding. This requirement applied to all wines bottled on or after January 1, 1990. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No SUPPORT: (Verified 6/22/15) Monterey County Vintners & Growers Association (source) Family Winemakers of California Monterey County Board of Supervisors Monterey County Farm Bureau Monterey County Hospital Association OPPOSITION: (Verified 6/22/15) None received ARGUMENTS IN SUPPORT: Writing in support, the Monterey County Vintners & Growers Association emphasizes that consistent representation of Monterey County on labels will: (1) enhance brand equity and loyalty for Monterey County wines; (2) preserve and strengthen the County's position in the world wine market; (3) boost sales of wines produced from Monterey County grapes; (4) increase recognition for every AVA within Monterey County and ensure that consumers understand where they are located; and, (5) enhance California's reputation as a premier international wine region. The Family Winemakers of California (FWC) indicates Monterey County 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 AB 394 Page 8 and internationally recognized for their distinctive qualities. FWC asserts it is important for these smaller, separate AVAs to benefit from and contribute to the affinity with Monterey County labeling, and that AB 394 will accommodate the desired specificity of sub-appellation labeling while linking wine to the broader Monterey AVA. ASSEMBLY FLOOR: 78-0, 4/23/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Campos, Salas Prepared by:Arthur Terzakis / G.O. / (916) 651-1530 6/26/15 14:34:14 **** END ****