BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        AB 394|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
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                                    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  








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            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.








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          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  







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          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  







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          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







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          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  







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          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  







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          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


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