BILL ANALYSIS �
Bill No: AB
2004
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Lou Correa, Chair
2013-2014 Regular Session
Staff Analysis
AB 2004 Author: Chesbro
As Amended: June 15, 2014
Hearing Date: June 24, 2014
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages
DESCRIPTION
AB 2004 authorizes a licensed beer manufacturer to apply to
the Department of Alcoholic Beverage Control (ABC) for a
"certified farmers' market beer sales permit" which allows
the licensee to sell packaged beer at a farmers' market,
including any area outside the footprint of the farmers'
market, under specified conditions. AB 2004 also expands a
licensed beer manufacturer's privileges under the ABC Act
by authorizing a beer manufacturer to sell or serve all
beer, wines, and brandy, regardless of source, to guests
during private events held on the licensed beer
manufacturer's premises. Specifically, this measure:
1)Authorizes a beer manufacturer to have upon the licensed
premises, or on premises owned by the manufacturer that
are contiguous to the licensed premises and are operated
by and for the manufacturer all beer, wines, and
brandies, regardless of source, for sale or service only
to guests during private events not open to the general
public. In addition, imposes the following requirements
on the beer manufacturer:
a) The alcoholic beverages sold at the premises that
are not produced and bottled by, or produced and
packaged for, the beer manufacturer must be purchased
by the beer manufacturer only from a licensed
wholesaler.
AB 2004 (Chesbro) continued
Page 2
b) All alcoholic beverages sold or served must be
produced by a licensee authorized to manufacture the
product.
2)Authorizes a licensed beer manufacturer to apply to ABC
for a certified farmers' market beer sales permit that
grants the beer manufacturer the privilege of selling
beer, that has been produced by the beer manufacturer, at
a certified farmers' market, including any permitted
community event area adjacent to, and operated in
conjunction with, a certified farmers' market, as
specified. Also, imposes the following conditions on the
beer manufacturer:
a) The farmers' market sales permit is subject to
the respective discretion and managerial control of a
certified farmers' market or community event operator
and existing regulations governed by law under the
California Department of Food and Agriculture.
b) The farmers' market sales permit may be issued
for up to 12 months but shall not be valid for more
than one day a week at any single specified farmers'
market or community event location. And, allows a
beer manufacturer to hold more than one permit.
c) Prohibits the licensed beer manufacturer from
selling more than 5,000 gallons of beer annually
pursuant to all certified farmers' markets permits
held by any single beer manufacturer.
d) Requires the licensed beer manufacturer to
maintain records of annual beer sales made pursuant
to all farmers' market beer sales permits issued.
3)Requires ABC to notify the local entity and applicable
law enforcement agency where the certified farmers'
market or community event is to be held of the issuance
of the permit.
4)Establishes a $50 permit which is subject to adjustment
pursuant to the ABC Act.
EXISTING LAW
AB 2004 (Chesbro) continued
Page 3
Existing law establishes the Department of ABC and grants
it exclusive authority to administer the provisions of the
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 or occupation taxes for this purpose.
Existing law authorizes a licensed beer manufacturer, at
the licensed premises of production, to sell to consumers
for consumption off the premises beer that is produced and
bottled by, or produced and packaged for, that
manufacturer.
Existing law also grants licensed beer manufacturers the
following privileges: (1) selling beer to any person
holding a license authorizing the sale of beer; (2) selling
beer to consumers for consumption on the manufacturer's
licensed premises or on premises owned by the manufacturer
which are contiguous to the licensed premises and which are
operated by and for the manufacturer; and, (3) selling beer
and wine, regardless of source, to consumers for
consumption at a bona fide public eating place on the
manufacturer's licensed premises or at a bona fide public
eating place on premises owned by the manufacturer which
are contiguous to the licensed premises and which are
operated by and for the manufacturer.
Additionally, existing law provides that licensed beer
manufacturers and holders of out-of-state beer
manufacturer's certificates may be issued and may hold
retail package off-sale beer and wine licenses. The law
also stipulates that alcoholic beverages produced or sold
at or from the off-sale premises which are not produced and
bottled by, or produced and packaged for, the beer
manufacturer must be purchased by the beer manufacturer
only from a licensed wholesaler.
Existing law authorizes the Department of ABC to issue
special temporary licenses and permits to various entities
for limited purposes including a "certified farmers' market
sales permit" that authorizes a licensee under a
winegrower's license, a member of the licensee's family, or
an employee of the licensee to sell wine produced and
bottled by the winegrower at certified farmers' market
locations. The farmers' market sales permit may be issued
AB 2004 (Chesbro) continued
Page 4
for up to 12 months but shall not be valid for more than
one day a week at any single specified farmers' market
location. The law also allows a winegrower to hold more
than one certified farmers' market sales permit and
requires ABC to notify local agencies and enforcement
entities of the permits. Additionally, the law prohibits
the licensed winegrower from selling more than 5,000
gallons of wine annually pursuant to all certified farmers'
markets sales permits held by any single winegrower.
Existing law provides for certified farmers' markets which
are operated in accordance with regulations established in
the California Administrative Code pertaining to direct
marketing and are governed by 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.
Existing law, known as the "tied-house" law, separates the
alcoholic beverage industry into three component parts of
manufacturer, wholesaler, and retailer. The original
policy rationale for this body of law was to prohibit the
vertical integration of the alcohol industry and to protect
the public from predatory marketing practices. Generally,
other than exemptions granted by the Legislature, the
holder of one type of license is not permitted to do
business as another type of licensee within the
"three-tier" system.
BACKGROUND
Purpose of AB 2004 : According to the author's office, this
measure is intended to allow craft brewers to: (1) provide
and sell other alcoholic beverages, such as wine and
champagne, at private events held on their brewery premises
and (2) sell beer at certified farmers' markets events.
The author's office states that brewery customers are
increasingly requesting the use of brewery facilities and
premises for private events such as weddings and birthdays
and under current law the only alcoholic beverage a beer
manufacturer can provide to the guests of the private event
is beer produced by the brewery. The beer manufacturer is
prohibited from providing these guests with wine, champagne
AB 2004 (Chesbro) continued
Page 5
or beer from other producers. This measure would allow
guests at such private events to have access to other beers
and alcoholic beverages should they desire to have that
choice provided the beer manufacturer purchases the
alcoholic beverages from a licensed wholesaler.
The author's office also points out that as the popularity
of craft beer and certified farmers' markets grows and
expands concurrently it makes sense to combine the two and
allow for consumers to purchase locally manufactured craft
beer at farmers' market events. This measure would enable
a licensed beer manufacturer to apply for a permit, from
the Department of ABC, to sell beer for off premise
consumption at, or in conjunction with, certified farmers'
markets. The author emphasizes that the organizer of the
farmers' market retains full control over whether or not a
craft brewery may participate in their event
Arguments in Support: Writing in support of AB 2004, the
California Craft Brewers Association (CCBA) states that
certified farmers' markets 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 certified
farmers' market 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. As such, this bill
reflects the necessary authority under both circumstances."
Staff Comments: In most cases the certified farmers'
market operator is also the designated operator of the
community event area. However, in some cases each event may
have separate operators. Thus, an amendment may be
necessary to ensure full control over approval of brewery
participation by the organizer of the farmers' market, or
the operator of the community event area, whichever the
circumstances may dictate respectively.
California's Craft Breweries: 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
AB 2004 (Chesbro) continued
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produced in the U.S. 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 revenues in 2012.
PRIOR/RELATED LEGISLATION
ACR 116 (Chesbro), Resolution Chapter 43, Statutes of 2014.
Proclaimed the month of April 2014 as California Craft
Brewery Month.
AB 779 (Bocanegra), Chapter 379, Statutes of 2013. Added a
new provision to the ABC Act that grants beer
manufacturers producing more than 60,000 barrels of beer
per year the privilege of also manufacturing "cider or
perry" at their licensed premises and to sell the product
to any licensee authorized to sell wine.
AB 2488 (Levine), 2013-14 Session. Would expand 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 to also
grant the licensed winegrower the privilege of conducting
limited wine tastings for consumers at farmers' markets
under certain circumstances. (Pending in Senate
Appropriations 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.
AB 2134 (Chesbro), Chapter 149, Statutes of 2010. Created
a new tied-house exception in the ABC Act that allows
licensed brewers to conduct and participate in events
called "Beer Maker Dinners" for consumers held at an
on-sale retail licensed premise.
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
AB 2004 (Chesbro) continued
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permit authorization has been issued
AB 2004 (Evans), Chapter 127, Statutes of 2008. Authorized
a licensed winegrower to sell wine for consumption to
consumers on the winery's premises.
SB 1548 (Murray), Chapter 670, Statutes of 2006.
Authorized 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.
SUPPORT: As of June 20, 2014:
California Craft Brewers Association
OPPOSE: None on file as of June 20, 2014.
FISCAL COMMITTEE: Senate Appropriations Committee
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