BILL ANALYSIS �
Bill No: SB
39
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 39 Author: Padilla
As Amended: March15, 2011
Hearing Date: March 22, 2011
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages: caffeinated beer beverages
DESCRIPTION
SB 39 prohibits the import, production, manufacture,
distribution, or sale of "caffeinated beer beverages" at
retail locations within California. Specifically, this
measure:
1. Stipulates that caffeinated beer beverages shall
not be imported into this state, produced,
manufactured, or distributed within this state, or
sold by a licensed retailer within this state.
2. Defines "caffeinated beer beverage" as a beer which
contains caffeine and for which the manufacturer has
filed a formula for approval with the U.S. Alcohol and
Tobacco Trade and Tax Bureau (TTB) pursuant to Section
25.55 of Title 27 of the Code of Federal Regulations.
EXISTING LAW
The enactment of the 21st Amendment to the U.S.
Constitution in 1933 repealed the 18th Amendment and ended
the era of Prohibition. Accordingly, states were granted
the authority to establish alcoholic beverage laws and
administrative structures to regulate the sale and
distribution of alcoholic beverages. In California, this
responsibility was originally entrusted to the State Board
of Equalization. In 1955, however, the State Constitution
was amended to shift this responsibility to the newly
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established Department of Alcoholic Beverage Control (ABC).
Existing law grants ABC exclusive authority to administer
the provisions of the Act in accordance with laws enacted
by the Legislature.
Existing law recognizes three types of alcoholic beverages
for tax purposes, namely, distilled spirits, beer, and wine
and the definitions of beer, wine, and distilled spirits
are found in the Alcoholic Beverage Control (ABC) Act
(Business & Professions Code Section 23000 et seq.).
Existing law defines "Beer" as any alcoholic beverage
obtained by the fermentation of any infusion or decoction
of barley, malt, hops, or any other similar product, or any
combination thereof in water, and includes ale, porter,
brown, stout, lager beer, small beer, and strong beer but
does not include sake, known as Japanese rice wine.
Existing law (Business & Professions Code Section 25205)
provides that any container of beer or alcoholic beverage,
other than sake, that is approved for labeling as a malt
beverage under the Federal Alcohol Administration (FAA)
Act, that derives 0.5% or more of its alcoholic content by
volume from flavors or other ingredients containing
distilled alcohol and that is sold within this state on or
after July 1, 2009, shall bear a distinctive, conspicuous,
and prominently displayed label, or firmly affixed sticker,
as defined.
Existing law prohibits the use in any advertisement of
alcoholic beverages, of any subject matter, language or
slogans addressed to and intended to encourage minors to
drink alcoholic beverages.
Existing law provides that consumer advertising specialties
furnished by a beer manufacturer are intended only for
adults of legal drinking age and prohibits the use of coin
banks, toys, balloons, magic tricks, miniature bottles or
cans, confections, dolls or other items that appeal to
minors or underage drinkers in connection with the
merchandising of beer.
Federal Law: The Treasury Department's Alcohol and Tobacco
Tax and Trade Bureau (TTB) is responsible for implementing
and enforcing a broad range of statutory and compliance
provisions and ensuring that alcohol products are created,
labeled, and marketed in accordance with the Federal
Alcohol Administration (FAA) Act. While TTB regulates the
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labeling of alcoholic beverages, it is the Food and Drug
Administration's (FDA) responsibility to evaluate the
safety of ingredients added to alcoholic beverages,
pursuant to FDA's authority under the Federal Food, Drug,
and Cosmetic (FFDC) Act. Labeling and formulation approval
requirements can be found in Title 27 of the Code of
Federal Regulations (CFR).
BACKGROUND
Federal Response to Caffeinated Alcoholic Beverages : On
November 12, 2009, the Food and Drug Administration (FDA)
notified nearly 30 manufacturers of certain alcoholic
beverages containing added caffeine of its intent to look
into the safety and legality of their products. The list
of manufacturers was provided to FDA in a letter from the
co-chairs of the National Association of Attorneys General
Youth Access to Alcohol Committee.
The FDA requested that the companies produce evidence of
their rationale, with supporting data and information, for
concluding that the use of caffeine in their product is
Generally Recognized As Safe (GRAS) or prior sanctioned.
For a substance to be GRAS there must be evidence of its
safety at the levels used and a basis to conclude that this
evidence is generally known and accepted by qualified
experts. FDA informed each company that if it determined
that the use of caffeine in each alcoholic beverage is not
GRAS or prior sanctioned, FDA would take appropriate action
to ensure that the products are removed from the
marketplace. FDA's action was not directed at products
that are flavored with coffee. The beverages that were the
subject of FDA's request for information are characterized
by the intentional addition of caffeine to alcoholic
beverages by the manufacturer. FDA stated that "a decision
regarding the use of caffeine in alcoholic beverages could
take some time."
More recently, in a letter dated November 17, 2010, the FDA
advised four companies (New Century Brewing Company,
Boston, MA - product known as "Moonshot;" Phusion Projects,
LLC., Chicago, IL - product known as "Four Loko;" Charge
Beverage Corporation, Lake Oswego, OR - product known as
"Core High Gravity HG Green," "Core High Gravity HG
Orange," "Lemon Lime Core Spiked;" and, United Brands
Company, La Mesa, CA - product known as "Joose" and "Max")
that it had reviewed the regulatory status of their
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products, each of which contained caffeine that had been
directly added to an alcoholic beverage and packaged in
combined caffeine and alcohol form. The FDA letter warned
the companies that as it was used in their products,
caffeine is an unsafe food additive, and therefore the
products are adulterated, unsafe, and illegal under the
FFDC Act and mislabeled under the FAA Act. The companies
were given a specific time-frame to submit detailed steps
that would be taken to correct the situation and assure
that similar violations would not occur.
The TTB also issued letters to the same four companies and
asked them to submit detailed steps that would be taken to
correct any violations of the FAA Act.
Purpose of SB 39 : Caffeinated alcoholic drinks have
certainly made headlines over the past year including a
highly publicized incident at Central Washington University
involving approximately 10 students who were hospitalized
after drinking a product called "Four Loko" at a party.
Some states (e.g., Massachusetts, Michigan and Washington)
have even taken steps to ban the products.
Advocates of limited government are quoted as saying, "The
government has gone too far and it's time the FDA started
treating consumers old enough to buy alcoholic beverages as
adults." Critics have also noted that a number of popular
sodas (e.g., Mountain Dew, Dr. Pepper and Coke Zero) and an
array of other well-known caffeinated drinks remain on
store shelves. Health officials on the other hand, speak
out against the dangers of mixing alcohol and caffeine and
cite various studies that point to the dangers of such
drinks.
According to the author's office, combining alcohol with
caffeine and other stimulants does not ameliorate alcohol's
negative effects on one's motor coordination and visual
reaction times. Recent science has revealed that adding
caffeine and other stimulants to alcohol is harmful because
these additives impair one's ability to judge their own
level of intoxication as well as the ability to judge the
level of intoxication in someone else. This results in
increased alcohol consumption and can lead drinkers to
wrongly conclude that they are capable of engaging in risky
and potentially dangerous activities, like operating a
motor vehicle or engaging in risky sexual behavior.
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The author's office emphasizes that there is no general
consensus among health professionals and the scientific
research community that the use of caffeine in alcoholic
beverages has been demonstrated to be safe. On the
contrary, these alcoholic beverages have been associated
with dangerous behaviors.
Arguments in Support: Writing in support, the Alameda
County Board of Supervisors states, "There are currently a
number of caffeinated malt beverage products on the market
that are targeted in packaging and advertising to young
people and these products impair the ability of a person to
judge their own level of intoxication or to judge the
intoxication of someone else. SB 39 will help reduce the
rates of alcohol-related traffic accidents, violence,
sexual assaults, and suicides, particularly among young
people."
Also writing in support, the County Alcohol and Drug
Program Administrators Association of California states,
"The beverages are often flavored with fruit, and typically
come in large, flashy cans that use graphic images to
promote partying and heavy drinking." The Association also
writes, "Underage drinking remains one of the most pressing
public health concerns for the State - it costs the
citizens of California an estimated $7.3 billion each year
in medical care, work loss, and pain and suffering stemming
from alcohol related youth violence, traffic accidents,
property crime and other injuries."
The California Police Chiefs Association and the California
Narcotic Officers Association note that, "These products
typically come in large, flashy 24 oz. cans with graphic
images and consuming one can has been compared to drinking
5 cans of beer and one cup of coffee."
Additional Arguments: Two additional entities (Marin
Institute and California Council on Alcohol Problems) have
submitted letters supporting the overall concept of banning
such products, however these entities are of the opinion
that SB 39 doesn't go far enough to protect California
youth. These entities are requesting amendments that
would: (a) ban all alcoholic beverages containing caffeine,
(b) include other stimulants (e.g., guarana, ginseng and
turine), and limit such products to one standard size (12
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oz. at 6% alcohol).
Flavored Malt Beverages : Flavored Malt Beverages (FMBs)
are considered to be malt-based beverages, similar to beer,
and for the most part are regulated and marketed like beer
products. Because they are deemed to be malt-based
beverages they are taxed by most states, including
California, and the federal government as beer. The
current tax rate on beer is $0.20 per gallon, while the
current tax rate on distilled spirits under 100 proof is
$3.30 per gallon. A TTB regulation permits the addition of
flavors and other nonbeverage materials containing alcohol
to beers and malt beverages. Malt beverages that contain
no more than 6% alcohol by volume may derive no more than
49% of their alcohol content from flavors and other
nonbeverage materials. If a malt beverage contains more
than 6% alcohol by volume, not more than 1.5% of the volume
of the finished product may consist of alcohol derived from
flavors and other nonbeverage ingredients containing
alcohol.
Staff Comments: Over the past 15-20 years consumers have
been steadily embracing craft beers in California and
throughout the U.S. and overseas that are brewed using
coffee and chocolate as key flavoring ingredients (e.g.,
Cappuccino Stout, Coffee Oatmeal Stout, Brooklyn Black
Chocolate Stout, Chocolate Donut Beer, Coffee Vanilla
Porter). As currently drafted, this measure may create
some concern within the craft beer industry with respect to
those products that include incidental amounts of caffeine
as a constituent of natural ingredients (e.g., coffee, tea,
or chocolate).
PRIOR/RELATED LEGISLATION
AB 1598 (Beall) 2009-10 Session. Would have prohibited the
sale, production, importation, manufacture or distribution
of a caffeinated malted beverage, as defined. (Failed
passage in Assembly G.O. Committee)
AB 346 (Beall), Chapter 624, Statutes of 2008. Required
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that any container of beer or alcoholic beverage that
derives 0.5% or more of its alcoholic content by volume
from flavors or other ingredients containing distilled
alcohol and that is sold by a manufacturer or importer to a
wholesaler or retailer within this state to bear a label or
a firmly affixed sticker that includes specified
information regarding its alcohol content and its status as
an alcoholic beverage.
AB 345 (Saldana) 2007-08 Session. Would have required the
State Board of Equalization (BOE), for calendar years
beginning on or after January 1, 2008, to calculate the
total amount of all surtaxes, interest, and penalties that
would be collected as a result of a reclassification of any
alcoholic beverage from beer to a distilled spirit, as
specified. (Died in Assembly G.O. Committee)
AB 417 (Aghazarian) of the 2005-06 Session. Would have
modified the definition of beer to include any alcoholic
beverage that qualifies as a malt beverage under federal
law. (Vetoed - in his veto message, the Governor
encouraged "All interested parties, particularly health
professionals, law enforcement and the producers of
flavored malt beverages, to use this opportunity for public
debate and serious consideration of the policy issues
surrounding this beverage.")
AB 1657 (Chan) 2003-04 Session. Would have limited the
sale of any prepackaged alcoholic beverage product made
with a "gelatin" base to businesses that prohibit the
presence of persons under the age of 21 on the premises.
(Failed passage in Senate G.O. Committee)
SUPPORT: As of March 18, 2011:
Alameda County Board of Supervisors
California Police Chiefs Association
California Narcotic Officers Association
Consumer Federation of California
County Alcohol and Drug Program Administrators Association
of California
OPPOSE: None on file as of March 18, 2011.
FISCAL COMMITTEE: Senate Appropriations Committee
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