BILL ANALYSIS Ó
AB 774
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
AB 774
Levine - As Amended April 6, 2015
SUBJECT: Alcoholic beverages: beer manufacturers: farmers'
market: tasting: nonprofit corporation: donated beer
SUMMARY: Allows a permitted licensed beer manufacturer to
conduct instructional tastings on the subject of beer at a
certified farmers' market (CFM), under specified conditions.
Specifically, this bill:
1) Provides that a "certified farmers' market beer sales
permit" shall also authorize an instructional tasting event on
the subject of beer at a CFM, including any permitted community
event area adjacent to, and operated in conjunction with, a CFM,
located within the county or an adjacent county of the physical
location of the licensed beer manufacturer.
2) Provides that an instructional tasting event is subject to
the authorization and managerial control of the operator of the
CFM. The licensee, a member of the licensee's family who is 21
years of age or older, or an employee of the licensee may
conduct the instructional tasting event.
3) States that at all times during an instructional tasting
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event, the instructional tasting event area shall be separated
from the remainder of the market by a wall, rope, cable, cord,
chain, fence, or other permanent or temporary barrier.
4) Provides that only one licensed beer manufacturer may
conduct an instructional tasting event during the operational
hours of any one CFM. The licensee shall not pour more than
eight ounces of beer per person per day.
5) States that the licensee shall not permit any consumer to
leave the instructional tasting area with an open container of
beer.
6) Existing law authorizes specified nonprofit corporations
that have not been issued a license authorizing the sale of wine
to receive and possess wine donated to that nonprofit
corporation, if the nonprofit corporation has submitted a
license application to sell wine with the Department of
Alcoholic Beverage Control (ABC). This bill would additionally
authorize those nonprofit corporations to receive and possess
beer under the same circumstances.
7) Existing law authorizes ABC to issue a special temporary
on-sale or off-sale wine license to a nonprofit corporation that
is exempt from payment of income taxes, subject to specified
requirements and limitations. This bill would extend this
authorization to issue a special temporary on-sale or off-sale
license to sell beer.
8) Makes clarifying changes.
EXISTING LAW:
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1) Establishes ABC and grants it exclusive authority to
administer the provisions of the Alcoholic Beverage Control Act
(ABC Act) in accordance with laws enacted by the Legislature.
This involves licensing individuals and businesses associated
with the manufacture, importation and sale of alcoholic
beverages in this state and the collection of license fees for
this purpose.
2) Authorizes a licensed winegrower or a licensed beer
manufacturer to apply to ABC for a CFM sales permit, which
allows, among others, the licensee to sell wine or beer at a
certified farmers' market, under specified conditions, and
requires the licensee to pay a fee of $50 for the permit.
3) Requires certified farmers ' market sales permit issued to a
licensed winegrower, but not a licensed beer manufacturer , to
allow an instructional tasting event on the subject of wine at a
certified farmers' market, under specified conditions. Requires
ABC to notify the local entity and applicable law enforcement
agency where the CFM or community event is to be held of the
issuance of the permit.
4) Authorizes a licensed beer manufacturer to apply to ABC for
a CFM beer sales permit that allows the licensee to sell
packaged beer at a farmers' market, including any area outside
the footprint of the farmers' market, under specified
conditions.
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5) Authorizes specified nonprofit corporations that have not
been issued a license authorizing the sale of wine to receive
and possess wine donated to that nonprofit corporation, if the
nonprofit corporation has submitted a license application to
sell wine with ABC.
6) Authorizes ABC to issue a special temporary on-sale or
off-sale wine license to a nonprofit corporation that is exempt
from payment of income taxes, subject to specified requirements
and limitations.
7) Authorizes beer manufacturers and wholesalers to offer beer
samples (not to exceed eight ounces per person, per day) to
individuals of legal drinking age at on-sale retail licensed
premises under specified conditions.
8) Prohibits any licensee from giving any premium, gift, or
free goods in connection with the sale or distribution of any
alcoholic beverage, except as specifically authorized. The ABC
Act provides that a violation of any of its provisions for which
another penalty or punishment is not specifically provided is a
misdemeanor.
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FISCAL EFFECT: Unknown
COMMENTS:
Purpose of the bill . The author's office points out that very
few craft brewers sell beer at CFMs, in part, because consumers
are accustomed to sampling beer before making a purchase. The
author's office states that this bill will provide an important
market access opportunity for small brewers to build their
brands and be a competitive force in the marketplace. In
addition, consumers will benefit from the direct interaction
with brewers.
According to the author, this bill simply allows tastings where
brewers are already selling their products at CFMs. In recent
years, craft brewing in California has experienced exponential
growth. This bill seeks to foster a relationship between local
brewers and those purchasing their products. AB 774 would
greatly help local brewers educate consumers and build their
brands at CFMs.
Currently, ABC allows beer manufacturers (Types 01 and 23) to
apply for a CFM beer sales permit, which has been designated as
a Type 84. The permit allows for sale of sealed beer containers
to consumers at certified farmers' markets. Permits may only be
issued to breweries for CFMs held in the county where their
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manufacturing facility is located or the adjacent county.
Unfortunately, unlike other products at the market, current law
does not permit a brewery to offer tastings.
In 2014, the Legislature overwhelmingly approved and the
Governor signed AB 2488 (Levine, Chapter 98, Statutes of 2014),
which provided wineries or cider makers the ability to offer
tastings to help educate consumers about the product prior to
purchase. Since the enactment of the bill, sale of wine has
increased at CFMs.
Similar to the effect of AB 2844 on wineries, AB 774 would
greatly help local brewers.
In addition, under existing law, beer manufacturers can donate
beer to a non-profit to be sold at a fundraising event for
consumption on-site. However, they cannot donate beer to a
non-profit for the purposes of being auctioned for consumption
off-site. Craft brewers receive frequent requests from local
and statewide non-profits for beer donations in the form of
"beer baskets" to be sold at a fundraising auction. Craft
brewers cannot satisfy those requests without putting the
non-profit and their own license at risk.
The same non-profits can receive wine donations from wineries to
be auctioned but cannot receive beer for the same purpose. AB
774 seeks to provide some clarity and uniformity in the ABC Act
for beer donations.
Background: According to industry sources, California currently
has more craft breweries (approximately 440) than any other
state in the country. In fact, California has more than twice
as many craft breweries as Colorado - the state with the next
highest number. An average of one in every five craft beers
produced in the United States comes from California. In 2012,
the California craft brewery industry had an annual impact of
$4.7 billion on the state's economy and supported well over
45,000 jobs. Additionally, the state's craft brewery industry
generated over $850 million in federal, state, and local
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revenues in 2012.
CFMs are governed by California Law, under the California
Department of Food and Agriculture (CDFA). These rules are
enforced by County Agriculture Commissioners in the counties in
which the market operates. The markets also fall under the
jurisdiction of the health departments in each county in which a
market operates. According to the California Farm Bureau
Federation, more than 800 certified farmers' markets are held in
California each year. ABC issued 52-Type 79 (wine tastings at
CFMs) licenses in 2014 and so far 31- Type 84 (sell beer at
CFMs) licenses in 2015.
CFMs require products sold within their event boundaries to be
100% grown and produced on the property owned by the farmer or
manufacturer. Products that cannot meet this criterion must be
sold in an area adjacent to the farmers' market called a
'community event' area. While most craft brewers cannot meet
the CFM criteria there may be the rare instance where one does
in fact grow all the ingredients (i.e., grain and hops) on their
own property.
Arguments in support : Proponents emphasize, "Beer, like many
other products, is sold through sampling. Consumers want to
understand the beer, decide if they like it and determine if it
is a good value. The years have demonstrated that beer sales at
farmers' markets would grow if tastings were allowed."
The California Craft Brewers Association writes this bill would
enhance the protections of the Tied-house laws by allowing local
craft brewers to provide educational tastings of their products
at farmers markets. This ability will support buy-local
programs and help to sustain horizontal competition in the
marketplace; a key objective of tied-house laws. This measure
will also allow non-profits to receive beer donations from
breweries to assist them in their fundraising activities
including auctions.
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Arguments in opposition : The California Council on Alcohol
Problems writes, "We are uncomfortable with the idea of
alcoholic beverages being consumed at farmers' markets, and we
don't believe ABC has the resources to properly regulate such
wine tastings events all over the state. As is typical with
these statutorily created, expanded venues for alcohol marketing
and distribution, what begins as a modest new avenue to market
alcohol for one segment of the industry expands into other
segments, while the modest limitations originally included are
slowly eroded over time. Such is the case with wine tastings
events at farmers' markets -- authorized in statute just last
year -- with this subsequent legislation to now include beer
consumption."
Prior legislation : AB 2488 (Levine), Chapter 98, Statutes of
2014. Expanded an existing provision of the ABC Act, which
currently allows a licensed winegrower, under specified
conditions, to sell estate grown wine at certified farmers'
markets (CFMs) to also grant the licensed winegrower the
privilege of conducting limited wine tastings for consumers at
CFMs under certain circumstances.
AB 2004 (Chesbro), Chapter 806, Statutes of 2014. Authorized a
licensed beer manufacturer to apply to ABC for a certified
farmers' market beer sales permit, which allows the licensee to
sell packaged beer at a farmers' market, including any specified
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area, under certain conditions. The bill also allowed a beer
manufacturer to sell beer and wine on their own premises during
private events.
AB 949 (Quirk), 2013-14 Session. Would have authorized licensed
distilled spirits manufacturers to charge consumers for tastings
and would have imposed additional conditions on the provision of
tastings by the licensee, including limiting the size and number
of tastes. Also, would have provided that a distilled spirits
manufacturer's license authorizes the licensee to serve and sell
food, general merchandise, and nonalcoholic beverages for
consumption on or off the premises. (Held in Assembly Rules
Committee)
AB 520 (Chesbro), 2013-14 Session. Would expand the types of
licensees that may provide instructional tastings events
regarding wine or distilled spirits at on-sale retail licensed
premises and would place additional restrictions on the
instructional tastings events, including restrictions on the
types of advertising that may be conducted prior to the
instructional tasting event. (Pending in this Committee)
AB 933 (Skinner), Chapter 366, Statutes of 2013. Granted
licensed distilled spirits manufacturers and licensed brandy
manufacturers the privilege to conduct consumer tastings on
their licensed premises and to charge for those tastings.
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AB 636 (Hall), Chapter 329, Statutes of 2013. Authorized, under
specified conditions and until January 1, 2016, the appearance
of a person for the purpose of providing AB 2488 (Levine)
continued autographs at an instructional event for consumers
that a winegrower, California winegrower's agent, importer, or
other specified parties conduct, or participate in, that is held
at a retailer's premises featuring wines produced by or for the
winegrower or, imported by the wine importer.
AB 605 (Portantino), Chapter 230, Statutes of 2010. Among other
things, authorized ABC to issue to the holder of an "off-sale"
retail license an "instructional tasting license" for the
purpose of furnishing tastings of alcoholic beverages to
consumers, subject to certain limitations.
AB 2293 (De Leon), Chapter 638, Statutes of 2008. Added a new
provision to the ABC Act authorizing distilled spirits
manufacturers and winegrowers to provide their product offerings
directly to consumers (free of charge) during invitation-only
events on premises for which a caterer's permit authorization
has been issued.
SB 1548 (Murray), Chapter 670, Statutes of 2006. Authorized
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beer manufacturers and wholesalers to offer beer samples (not to
exceed 8 ounces per person, per day) to individuals of legal
drinking age at on-sale retail licensed premises under specified
conditions.
AB 2520 (Thomson), Chapter 384, Statutes of 2000. Authorized
licensed winegrowers to obtain certified farmers' market sales
permits authorizing the sale of wine at farmers' markets, as
specified.
AB 2285 (V. Brown), Chapter 248, Statutes of 1998. Allowed
on-sale retail licensees to offer limited tastings of wine or
distilled spirits at the licensed establishment.
SB 993 (Burton), Chapter 544, Statutes of 1997. Among other
things, authorized a licensed distilled spirits manufacturer to
conduct tastings of distilled spirits on the licensed premises
under specified conditions.
Support
California Craft Brewers Association
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Opposition
Alcohol Justice
California Council on Alcohol Problems
Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531