BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 394


                                                                    Page  1


          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          394 (Mark Stone and Alejo)


          As Amended  June 15, 2015


          Majority vote


           -------------------------------------------------------------------- 
          |ASSEMBLY:  |78-0  |(April 23,     |SENATE: |39-0  |(July 09, 2015)  |
          |           |      |2015)          |        |      |                 |
          |           |      |               |        |      |                 |
          |           |      |               |        |      |                 |
           -------------------------------------------------------------------- 


          Original Committee Reference:  G.O.


          SUMMARY:  Requires any wine bottled on or after January 1, 2019,  
          and labeled with an American Viticultural Area (AVA) that is  
          located entirely within the County of Monterey to bear the  
          designation "Monterey County" on the label.  Specifically, 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.


          2)Stipulates that the requirement in 1) above, shall not apply  
            to any wine labeled with a viticultural area appellation of  
            origin established pursuant to specified federal regulations  
            when the name of the appellation is "Monterey." 









                                                                     AB 394


                                                                    Page  2



          3)Authorizes Alcoholic Beverage Control (ABC) to suspend or  
            revoke the license of any person who violates the provisions  
            of this bill.


          The Senate amendments:


          1)Authorize the Department of ABC to suspend or revoke the  
            license of any person who violates the provisions of this  
            bill.


          2)Make technical change.  


          3)Add co-authors. 


          EXISTING LAW:  


          1)Establishes ABC and grants it exclusive authority to regulate  
            the licensing, enforcement, and administration of the  
            alcoholic beverage 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  








                                                                     AB 394


                                                                    Page  3


            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.  


          AS PASSED BY THE ASSEMBLY, this bill, on or after January 1,  
          2019, requires any wine bottled and labeled with an AVA,  
          established pursuant to federal law, which is located entirely  
          within Monterey County to include the designation "Monterey  
          County" on the label, unless the federal AVA is "Monterey."


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.  



          COMMENTS:  This bill, as amended in the Senate is consistent  
          with Assembly actions.








                                                                     AB 394


                                                                    Page  4




          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 Code of Federal Regulations Title 27, Part 9.  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 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  








                                                                     AB 394


                                                                    Page  5


          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.  The  
          regulations do not require disclosure of the place of origin of  
          the remaining portion of the wine.


          Purpose of this 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.


          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 bill will insure that  
          consumers recognize every bottle of wine produced from Monterey  
          County grapes.  In addition, this 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  








                                                                     AB 394


                                                                    Page  6


          strengthen the county's brand over time while strengthening the  
          diversity of AVAs within the county and the quality wines each  
          produces.  


          This 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  
          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."


          There is no opposition on file.


          Analysis Prepared by:                                             
                          Eric Johnson / G.O. / (916) 319-2531  FN:  
          0001194