BILL ANALYSIS �
SB 39
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Date of Hearing: June 22, 2011
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
SB 39 (Padilla) - As Amended: June 7, 2011
SENATE VOTE : 24-14
SUBJECT : Alcoholic beverages: caffeinated beer beverages.
SUMMARY : Prohibits the importation, production, manufacture,
distribution, or sale of beer to which caffeine has been
directly added as a separate ingredient at retail locations in
California, as defined. Specifically, this bill :
1) Provides that beer to which caffeine has been directly added
as a separate ingredient shall not be imported into this state,
produced, manufactured, or distributed within this state, or
sold by a licensed retailer within this state.
2) Provides that ABC may require licensees to submit product
formulas as it determines to be necessary to implement and
enforce this law, as specified.
EXISTING LAW :
1) 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in 1933 repealed the 18th Amendment and ended the era of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 established Department of Alcoholic Beverage
Control (ABC).
2) Grants ABC exclusive authority to administer the provisions
of the Act in accordance with laws enacted by the Legislature.
3) 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 Act (Act).
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4) 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.
5) 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.
6) 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.
7) 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.
8) 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 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).
FISCAL EFFECT : Unknown.
COMMENTS :
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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 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.
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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. In November 2010, Phusion Projects,
the creators of Four Loko, announced before receiving the
warning letter from the FDA that they would be reformulating
their malt beverage and would remove caffeine from the product.
Two manufacturers are still awaiting approval or have not
applied for permits to sell their reformulated drinks. In
addition, two companies have decided to stop making their malt
beverages altogether.
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 non-beverage 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
non-beverage 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 non-beverage ingredients containing alcohol.
Purpose of the bill : According to the author, 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., New York, Massachusetts, Michigan,
Kansas, Utah, Oklahoma, and Washington) have even taken steps to
ban the products.
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
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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.
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. Alcoholic energy drinks are known
for hiding true impairment. Alcohol is a depressant, and the
high amounts of caffeine in these drinks counteract the
exhaustion of the alcohol but they do not counteract the
impairment. This can lead to a person not feeling they are
impaired as they truly are, and tragedy can result.
Proponents also contend that "manufacturers of these products
appear to be targeting underage people through youth-orientated
media marketing.
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."
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The California Council on Alcohol Problems (CCAP) submitted a
letter supporting the overall concept of banning such products;
however, they believe that SB 39 doesn't go far enough to
protect California youth. CCAP would like to see the bill
amended to include other stimulants (e.g., guarana, ginseng and
turine).
Prior 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 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)
REGISTERED SUPPORT / OPPOSITION :
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Support
Alameda County Board of Supervisors
California Commission on the Status of Women
California Medical Association
County Alcohol and Drug Program Administrators Association of
California
Ventura County Board of Supervisors
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531