Existing law, the Alcoholic Beverage Control Act, prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. Existing law makes a violation of any of its provisions, for which another penalty or punishment is not specifically provided, a misdemeanor.

This bill would expand this provision to prohibit a nonretail licensee, as defined, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a nonretail licensee. The bill would revise the definition of coupon for these purposes. By imposing additional duties on a licensee under the act, and, thereby, expanding the definition of an existing crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, the Alcoholic Beverage Control Act, prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. Existing law makes a violation of any of its provisions, for which another penalty or punishment is not specifically provided, a misdemeanor.

This bill would expand this provision to prohibit a nonretail licensee, as defined, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a nonretail licensee. The bill would revise the definition of coupon for these purposes. By imposing additional duties on a licensee under the act, and, thereby, expanding the definition of an existing crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, the Alcoholic Beverage Control Act, prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. Existing law makes a violation of any of its provisions, for which another penalty or punishment is not specifically provided, a misdemeanor.

This bill would expand this provision to prohibit a nonretail licensee, as defined, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a nonretail licensee. The bill would revise the definition of coupon for these purposes. By imposing additional duties on a licensee under the act, and, thereby, expanding the definition of an existing crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, the Alcoholic Beverage Control Act, prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. Existing law makes a violation of any of its provisions, for which another penalty or punishment is not specifically provided, a misdemeanor.

This bill would expand this provision to prohibit a nonretail licensee, as defined, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a nonretail licensee. The bill would revise the definition of coupon for these purposes. By imposing additional duties on a licensee under the act, and, thereby, expanding the definition of an existing crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, the Alcoholic Beverage Control Act, prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. Existing law makes a violation of any of its provisions, for which another penalty or punishment is not specifically provided, a misdemeanor.

This bill would expand this provision to prohibit a nonretail licensee, as defined, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon and licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a nonretail licensee. The bill would revise the definition of coupon for these purposes. By imposing additional duties on a licensee under the act, and, thereby, expanding the definition of an existing crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

SENATE THIRD READING

STR Bill Id:SB 1032

Author:(Galgiani)

As Amended Ver:May 19, 2016

Majority vote

SENATE VOTE: 38-0

SUMMARY: Expands the prohibition on beer manufacturers and beer wholesalers from offering consumer coupons, as defined, to include those involved in the production of wine, such as winemakers, winegrowers, and wine blenders. This bill also prohibits licensed retailers from accepting or redeeming such coupons from these nonretail licensees. Specifically, this bill:

1. Modifies an existing provision of law that prohibits beer manufacturers and wholesalers from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming certain consumer coupons by expanding the type of "nonretail licensees" that will be prohibited from offering consumer coupons that can be redeemed at the point of sale by licensed retailers.
2. Makes an identical change to the companion provision in law that prohibits a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by beer manufacturers and wholesalers by substituting the term "nonretail licensee" for beer manufacturers and wholesalers.
3. Defines "nonretail licensee" to mean any person who owns or holds any interest, directly or indirectly, in any license, authorization, or permit issued pursuant to this division that authorizes the manufacture, production, rectification, importation, or wholesaling of alcoholic beverages, except for a brewpub restaurant license issued pursuant to the Alcoholic Beverage Control Act (Act).
4. Revises the definition of coupon, as specified, and clarifies that wineries are not precluded from offering discounts directly to their consumers through wine clubs or purchases made over the Internet.
5. Permits a nonretail licensee, until and including March 31, 2017, to reimburse a licensee authorized to sell alcoholic beverages at retail for any coupon providing a consumer with an instant discount at the time of purchase of wine, if beer, malt beverages, cider or perry are not advertised in connection with such coupon, that is otherwise prohibited by this section of law, that was received, accepted, or possessed by such licensee authorized to sell alcoholic beverages at retail on or before December 31, 2016.
6. Makes it explicit that these provisions are not intended to preclude or prevent or restrict an on-sale or off-sale retail licensee that is not also a nonretail licensee from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming a discount to consumers on the purchase of alcoholic beverages that is not otherwise prohibited by this section of law or any other provision of law.
7. Makes other conforming, clarifying and technical changes.

EXISTING LAW:

1. The enactment of the 21st Amendment to the United States (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.
2. Establishes the Department of Alcohol Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the Act. 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.
3. States that 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. Separates the alcoholic beverage industry into three component parts of manufacturer, wholesaler, and retailer.
4. Prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as specified. Also, prohibits licensed retailers from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. Provides that a coupon does not include: a) a mail-in rebate by which the consumer purchases an item and submits required information in order to receive a rebate or discount from the beer manufacturer; b) a coupon offered and funded by a winegrower, a wine rectifier, a wine blender, a beer and wine wholesaler, a beer and wine importer, a wine importer general, or a wine broker that offers a discount on the purchase of a wine product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; c) a coupon that is offered and funded by a distilled spirits manufacturer, distilled spirits importer general, distilled spirits importer, or distilled spirits wholesaler that offers a discount on the purchase of a distilled spirits product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; and, d) a discount that is offered and funded by a beer manufacturer on the purchase of beer, malt beverages, cider, or perry at the licensed premises of production or other licensed premises owned and operated by the beer manufacturer.
5. 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.
6. Defines an "on-sale" license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

FISCAL EFFECT: According to the Assembly Appropriations Committee, minor enforcement costs to ABC.

COMMENTS:

Purpose of the bill: According to the author, there is a lack of transparency in the beer market as it relates to beer manufacturer coupons. Additionally, there is a high level of inequity between the major beer conglomerates and the craft breweries in the marketplace. Instant redeemable coupons (IRCs) offered by beer manufacturers are one type of discount that offers an instant reduction in the price of a product when purchased at a retail licensee. However, these beer manufacturer coupons could easily lend themselves to fraudulent practices, such as counterfeiting.

The author states, brewers and retailers are losing revenues and are being exposed to unnecessary liability due to fake coupons, which are often hard to distinguish from coupons that are produced by the manufacturer.

The author further states that the elimination of coupons will level the playing field between the major brewing conglomerates and the craft breweries that are quickly becoming a sizeable part of our state economy. Unlike the major conglomerates, most craft breweries, which are much smaller operations, cannot afford to offer their own beer coupons. The author points out that a number of states, including New York, Massachusetts, and Texas, already ban manufacturer beer coupons.

Background: This bill expands the above-referenced coupon ban applicable to beer manufacturers and wholesalers to include winemakers, winegrowers, wine blenders, amongst others, and also prohibits alcoholic beverage retail licensees from redeeming such coupons. This bill will prohibit winery-funded IRCs on direct wine purchases, as well as cross-merchandizing coupons where a consumer purchases bottle(s) of wine and receives a discount off of food and non-food items. This bill, however, does not ban winery funded, mail-in coupons and does not preclude any coupons or discounts offered and funded by licensed retailers. Additionally, this bill allows wineries to offer discounts directly to their consumers through wine clubs or purchases made over the Internet.

In support: Proponents of this bill believe that "the evolution of instant redeemable coupons has led to a number of adverse impacts. Specifically, current coupon practices can create competitive imbalances between large and small wineries as well as large grocery chains and smaller independent retailers. The deep discounting nature of IRC's reduces brand equity of California wine brands, which the state's wineries strive to maintain. In addition to not being as effective as other promotional activities, some couponing programs potentially damage the wine industry's social responsibility ethic as a beverage of moderation to be enjoyed with family and friends. For example, some coupon programs observed in the marketplace would require consumers to purchase six bottles of wine in order to receive $25-$30 off groceries."

Proponents state that such programs raise social responsibility issues, do little to help build California wine brands, and are cost prohibitive for smaller and mid-sized wineries. Proponents emphasize that "eliminating winery-funded instant redeemable coupons will further provide regulatory certainty and if signed into law, California would follow similar laws prohibiting IRCs already in place in nearly half of the nation's states."

In opposition: Writing in opposition, the California Grocers Association states, "While we appreciate the efforts to increase transparency, reduce fraudulent activity, and reduce waste by eliminating paper coupons, we utilize electronic discount programs to help drive innovation and bring new products to consumers. These programs are important to many retailers and to our consumers. They are viable options to paper coupons and by their very nature help prevent fraud and eliminate waste."

Additionally, opponents argue, "this bill is unnecessary and that product manufacturers to whom SB 1032 would apply are not required by law to offer or fund discounts on their products. A statute is not required to eliminate manufacturer coupons – manufacturers can simply stop offering them. In the retail food industry, for example, some grocery companies have decided to stop honoring double coupons to help address fraud. They did not need a statute to do that. And in fact, some very successful manufacturers do not include coupons in their business model at all."

Prior legislation: AB 1928 (Bocanegra), Chapter 145, Statutes of 2014. Prohibited beer manufacturers and beer wholesalers, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as defined. Also, prohibited alcoholic beverage retail licensees from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. In addition, this bill exempted from the definition of coupon certain rebates, coupons, and discounts.

AB 2184 (Hall), Chapter 480, Statutes of 2012. Authorized, until January 1, 2016, wine, beer and spirits producers to participate in promotional events held at an off-sale retail licensed location for the purpose of providing autographs on bottles or other items to consumers.

SB 778 (Padilla), Chapter 489, Statutes of 2012. Added a new section of law to the Act that authorizes wine, beer and spirits producers to conduct consumer "contests" or "sweepstakes."

AB 1245 (Torrico), Chapter 629, Statutes of 2008. Allowed beer manufacturers to give adult consumers promotional advertising items valued at $3 per unit original cost to the beer manufacturer who purchased it.

AB 2293 (De León), Chapter 638, Statutes of 2008. Added a new provision to the Act that permits a manufacturer of distilled spirits, winegrower, rectifier, or distiller, or its authorized agent to provide their product, as well as entertainment and food to consumers over 21 years of age during invitation-only events (free of charge), as specified. The events must occur on premises for which a caterer's permit authorization has been issued.

SB 993 (Burton), Chapter 544, Statutes of 1997. Among other things: 1) provided that no rule of ABC may impose a dollar limit for consumer advertising specialties furnished by a distilled spirits supplier to a retailer or to the general public of less than $5 per unit original cost to the supplier who purchased it; and, 2) authorized a licensed distilled spirits manufacturer to conduct tastings of distilled spirits on the licensed premises under specified conditions.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0003799

Date of Hearing: August 3, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 1032

Author:(Galgiani) – As Amended Ver:May 19, 2016

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill expands the prohibition on beer manufacturers and beer wholesalers from offering consumer coupons, as defined, to include those involved in the production of wine, such as winemakers, winegrowers, and wine blenders. This bill also prohibits licensed retailers from accepting or redeeming such coupons from these nonretail licensees.

FISCAL EFFECT:

Minor enforcement costs to the Department of Alcoholic Beverage Control (ABC).

COMMENTS:

1. Background. Instant redeemable coupons (IRCs) offered by alcohol manufacturers provide an instant reduction in the price of a product when purchased at a retail licensee. However, AB 1928 (Bocanegra), Chapter 145, Statutes of 2014, prohibited beer manufacturers and beer wholesalers from IRCs. Supporters of that bill contended that these coupons were prone to problems such as fraud and that they gave an unfair competitive advantage to large beer manufacturers because smaller craft breweries could not afford to offer such coupons.
2. Purpose. According to supporters of this bill, which include The Wine Institute and Family Winemakers of California, current coupon practices in the wine industries can create competitive imbalances between large and small wineries as well as between large grocery chains and smaller independent retailers. Proponents state that these coupons raise social responsibility issues as well by promoting excessive drinking.
3. Nonretail licensees and coupon exemption. This bill expands the IRC prohibition to nonretail licensees, defined as those involved in the production, manufacturing, rectification, importation, or wholesaling of alcoholic beverages. However, SB 1032 also contains provisions that state that the prohibition does not apply to distilled spirit producers and manufactures or in instances when wineries offer discounts directly to consumers through wine clubs or on internet purchases.
4. Opposition. The California Grocers Association and the California Retailers Association oppose this bill, arguing that these discount programs are important to retailers and consumers.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: June 30, 2016

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

SBPCA Bill Id:SB 1032

Author:(Galgiani) – As Amended Ver:May 19, 2016

SENATE VOTE: 38-0

SUBJECT: Alcoholic beverages: coupons

SUMMARY: Expands a provision of the Alcoholic Beverage Control (ABC) Act that currently prohibits beer manufacturers and beer wholesalers from offering consumer coupons, as defined, that can be redeemed at the point of sale by licensed retailers and also prohibits licensed retailers from accepting or redeeming such coupons from beer manufacturers and beer wholesalers, to include a broader range of nonretail licensees, as defined. Specifically, this bill:

1) Modifies an existing provision of law that prohibits beer manufacturers and wholesalers from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming certain consumer coupons by expanding the type of “nonretail licensees” that will be prohibited from offering consumer coupons that can be redeemed at the point of sale by licensed retailers.

2) Makes an identical change to the companion provision in law that prohibits a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by beer manufacturers and wholesalers by substituting the term “nonretail licensee” for beer manufacturers and wholesalers.

3) Defines “nonretail licensee” to mean any person who owns or holds any interest, directly or indirectly, in any license, authorization, or permit issued pursuant to this division that authorizes the manufacture, production, rectification, importation, or wholesaling of alcoholic beverages, except for a brewpub restaurant license issued pursuant to the ABC Act.

4) Revises the definition of coupon, as specified, and clarifies that wineries are not precluded from offering discounts directly to their consumers through wine clubs or purchases made over the Internet.

5) Permits a nonretail licensee, until and including March 31, 2017, to reimburse a licensee authorized to sell alcoholic beverages at retail for any coupon providing a consumer with an instant discount at the time of purchase of wine, if beer, malt beverages, cider or perry are not advertised in connection with such coupon, that is otherwise prohibited by this section of law, that was received, accepted, or possessed by such licensee authorized to sell alcoholic beverages at retail on or before December 31, 2016.

6) Makes it explicit that these provisions are not intended to preclude or prevent or restrict an on-sale or off-sale retail licensee that is not also a nonretail licensee from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming a discount to consumers on the purchase of alcoholic beverages that is not otherwise prohibited by this section of law or any other provision of law.

7) Makes other conforming, clarifying and technical changes.

EXISTING LAW:

1) The enactment of the 21st Amendment to the United States (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.

2) Establishes the Department of Alcohol Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the Alcoholic Beverage Control Act (Act). 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.

3) States that 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. Separates the alcoholic beverage industry into three component parts of manufacturer, wholesaler, and retailer.

4) Prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as specified. Also, prohibits licensed retailers from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. Provides that a coupon does not include: (a) a mail-in rebate by which the consumer purchases an item and submits required information in order to receive a rebate or discount from the beer manufacturer; (b) a coupon offered and funded by a winegrower, a wine rectifier, a wine blender, a beer and wine wholesaler, a beer and wine importer, a wine importer general, or a wine broker that offers a discount on the purchase of a wine product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; (c) a coupon that is offered and funded by a distilled spirits manufacturer, distilled spirits importer general, distilled spirits importer, or distilled spirits wholesaler that offers a discount on the purchase of a distilled spirits product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; and, (d) a discount that is offered and funded by a beer manufacturer on the purchase of beer, malt beverages, cider, or perry at the licensed premises of production or other licensed premises owned and operated by the beer manufacturer.

5) 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.

6) Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill: According to the author, there is a lack of transparency in the beer market as it relates to beer manufacturer coupons. Additionally, there is a high level of inequity between the major beer conglomerates and the craft breweries in the marketplace.

Instant redeemable coupons (IRCs) offered by beer manufacturers are one type of discount that offers an instant reduction in the price of a product when purchased at a retail licensee. However, these beer manufacturer coupons could easily lend themselves to fraudulent practices, such as counterfeiting.

The author states, brewers and retailers are losing revenues and are being exposed to unnecessary liability due to fake coupons, which are often hard to distinguish from coupons that are produced by the manufacturer.

The author further states that the elimination of coupons will level the playing field between the major brewing conglomerates and the craft breweries that are quickly becoming a sizeable part of our state economy. Unlike the major conglomerates, most craft breweries, which are much smaller operations, cannot afford to offer their own beer coupons. The author points out that a number of states, including New York, Massachusetts, and Texas, already ban manufacturer beer coupons.

Background: This bill expands the above-referenced coupon ban applicable to beer manufacturers and wholesalers to include winemakers, winegrowers, wine blenders, amongst others, and also prohibits alcoholic beverage retail licensees from redeeming such coupons. This bill will prohibit winery-funded IRCs on direct wine purchases, as well as cross-merchandizing coupons where a consumer purchases bottle(s) of wine and receives a discount off of food and non-food items. This bill, however, does not ban winery funded, mail-in coupons and does not preclude any coupons or discounts offered and funded by licensed retailers. Additionally, this bill allows wineries to offer discounts directly to their consumers through wine clubs or purchases made over the Internet.

In support: Proponents of this bill believe that “the evolution of instant redeemable coupons has led to a number of adverse impacts. Specifically, current coupon practices can create competitive imbalances between large and small wineries as well as large grocery chains and smaller independent retailers. The deep discounting nature of IRC’s reduces brand equity of California wine brands, which the state’s wineries strive to maintain. In addition to not being as effective as other promotional activities, some couponing programs potentially damage the wine industry’s social responsibility ethic as a beverage of moderation to be enjoyed with family and friends. For example, some coupon programs observed in the marketplace would require consumers to purchase six bottles of wine in order to receive $25-$30 off groceries.”

Proponents state that such programs raise social responsibility issues, do little to help build California wine brands, and are cost prohibitive for smaller and mid-sized wineries. Proponents emphasize that “eliminating winery-funded instant redeemable coupons will further provide regulatory certainty and if signed into law, California would follow similar laws prohibiting IRCs already in place in nearly half of the nation’s states.”

In opposition: Writing in opposition, the California Grocers Association states, “While we appreciate the efforts to increase transparency, reduce fraudulent activity, and reduce waste by eliminating paper coupons, we utilize electronic discount programs to help drive innovation and bring new products to consumers. These programs are important to many retailers and to our consumers. They are viable options to paper coupons and by their very nature help prevent fraud and eliminate waste.”

Additionally, opponents argue that “this bill is unnecessary and that product manufacturers to whom SB 1032 would apply are not required by law to offer or fund discounts on their products. A statute is not required to eliminate manufacturer coupons – manufacturers can simply stop offering them. In the retail food industry, for example, some grocery companies have decided to stop honoring double coupons to help address fraud. They did not need a statute to do that. And in fact, some very successful manufacturers do not include coupons in their business model at all.”

Opponents believe that this bill is overly broad, creates a dangerous precedent, and in reality is not needed to accomplish the goal articulated by supporters.

Prior legislation: AB 1928 (Bocanegra), Chapter 145, Statutes of 2014. Prohibited beer manufacturers and beer wholesalers, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as defined. Also, prohibited alcoholic beverage retail licensees from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. In addition, this bill exempted from the definition of coupon certain rebates, coupons, and discounts.

AB 2184 (Hall), Chapter 480, Statutes of 2012. Authorized, until January 1, 2016, wine, beer and spirits producers to participate in promotional events held at an off-sale retail licensed location for the purpose of providing autographs on bottles or other items to consumers.

AB 778 (Padilla), Chapter 489, Statutes of 2012. Added a new section of law to the Act that authorizes wine, beer and spirits producers to conduct consumer “contests” or “sweepstakes.”

AB 1245 (Torrico), Chapter 629, Statutes of 2008. Allowed beer manufacturers to give adult consumers promotional advertising items valued at $3 per unit original cost to the beer manufacturer who purchased it.

AB 2293 (De León), Chapter 638, Statutes of 2008. Added a new provision to the Act that permits a manufacturer of distilled spirits, winegrower, rectifier, or distiller, or its authorized agent to provide their product, as well as entertainment and food to consumers over 21 years of age during invitation-only events (free of charge), as specified. The events must occur on premises for which a caterer's permit authorization has been issued.

SB 993 (Burton), Chapter 544, Statutes of 1997. Among other things: 1) provided that no rule of ABC may impose a dollar limit for consumer advertising specialties furnished by a distilled spirits supplier to a retailer or to the general public of less than $5 per unit original cost to the supplier who purchased it; and, 2) authorized a licensed distilled spirits manufacturer to conduct tastings of distilled spirits on the licensed premises under specified conditions.

REGISTERED SUPPORT / OPPOSITION:

Support

Alcohol Justice

Family Winemakers of California

Wine Institute

Opposition

California Grocers Association

California Retailers Association

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

 THIRD READING  

Bill No: SB 1032

Author:

: 5/19/16

Vote:

SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 4/12/16

AYES: Hall, Berryhill, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Vidak

NO VOTE RECORDED: Runner

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT:

SOURCE: Southern Wine & Spirits

Wine and Spirits Wholesalers of California

Wine Institute

__________________________________________________________________

DIGEST: This bill expands a provision of the Alcoholic Beverage Control (ABC) Act that currently prohibits beer manufacturers and beer wholesalers from offering consumer coupons, as defined, that can be redeemed at the point of sale by licensed retailers and also prohibits licensed retailers from accepting or redeeming such coupons from beer manufacturers and beer wholesalers, to include a broader range of nonretail licensees, as defined.

Senate Floor Amendments of 5/19/16 revise the definition of non-retail licensee to clarify that a brewpub is a nonretail licensee; correct drafting errors that inadvertently reauthorized brewery funded instant redeemable coupons (IRCs); restore the ability of restaurants and other on-sale licensees to offer their own IRCs; and, retain the current law’s ban on IRCs, such as the so-called “beer bucks” paid for by beer manufacturers and redeemed by on-sale customers.

ANALYSIS:

Existing law:

1. 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.
   
2. Prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as specified. Also, prohibits licensed retailers from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler.
   
3. Provides that a coupon does not include: (a) a mail-in rebate by which the consumer purchases an item and submits required information in order to receive a rebate or discount from the beer manufacturer; (b) a coupon offered and funded by a winegrower, a wine rectifier, a wine blender, a beer and wine wholesaler, a beer and wine importer, a wine importer general, or a wine broker that offers a discount on the purchase of a wine product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; (c) a coupon that is offered and funded by a distilled spirits manufacturer, distilled spirits importer general, distilled spirits importer, or distilled spirits wholesaler that offers a discount on the purchase of a distilled spirits product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; and, (d) a discount that is offered and funded by a beer manufacturer on the purchase of beer, malt beverages, cider, or perry at the licensed premises of production or other licensed premises owned and operated by the beer manufacturer.
4. 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. This is known as the “tied-house” law.
   
5. 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.
   
6. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Modifies an existing provision of law that prohibits beer manufacturers and wholesalers from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming certain consumer coupons by expanding the type of “nonretail licensees” that will be prohibited from offering consumer coupons that can be redeemed at the point of sale by licensed retailers.
   
2. Makes an identical change to the companion provision in law that prohibits a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by beer manufacturers and wholesalers by substituting the term “nonretail licensee” for beer manufacturers and wholesalers.
   
3. Defines “nonretail licensee” to mean any person who owns or holds any interest, directly or indirectly, in any license, authorization, or permit issued pursuant to this division that authorizes the manufacture, production, rectification, importation, or wholesaling of alcoholic beverages, except for a brewpub restaurant license issued pursuant to the ABC Act.
   
4. Revises the definition of coupon, as specified, and clarifies that wineries are not precluded from offering discounts directly to their consumers through wine clubs or purchases made over the Internet.
   
5. Permits a nonretail licensee, until and including March 31, 2017, to reimburse a licensee authorized to sell alcoholic beverages at retail for any coupon providing a consumer with an instant discount at the time of purchase of wine, if beer, malt beverages, cider or perry are not advertised in connection with such coupon, that is otherwise prohibited by this section of law, that was received, accepted, or possessed by such licensee authorized to sell alcoholic beverages at retail on or before December 31, 2016.
   
6. Makes it explicit that these provisions are not intended to preclude or prevent or restrict an on-sale or off-sale retail licensee that is not also a nonretail licensee from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming a discount to consumers on the purchase of alcoholic beverages that is not otherwise prohibited by this section of law or any other provision of law.
   
7. Makes other conforming, clarifying and technical changes.
   

Background

This bill expands the above-referenced coupon ban applicable to beer manufacturers and wholesalers to include winemakers, winegrowers, wine blenders, amongst others, and also prohibits alcoholic beverage retail licensees from redeeming such coupons. This bill will prohibit winery-funded IRCs on direct wine purchases, as well as cross-merchandizing coupons where a consumer purchases bottle(s) of wine and receives a discount off of food and non-food items. This bill, however, does not ban winery funded, mail-in coupons and does not preclude any coupons or discounts offered and funded by licensed retailers. Additionally, this bill allows wineries to offer discounts directly to their consumers through wine clubs or purchases made over the Internet.

Purpose of SB 1032. According to the author's office, this bill is intended to address the problem over a lack of transparency with winery-funded IRCs. The author’s office argues that their use makes tied-house laws prohibiting the gift of anything of value being exchanged between a supplier and retailer unenforceable by the Department of ABC. In contrast, mail-in coupons are transparent and provide the winery with valuable demographic data.

The author’s office states that this bill seeks to provide a level playing field for medium-sized wineries competing with the large wineries for highly sought after, supermarket shelf space as well as amongst large and small retailers. Additionally, the author’s office claims that IRC programs are generally skewed towards large retailers which have the electronic equipment to handle “scanback” programs and carry a large variety of grocery items.

Furthermore, the author’s office points out that this bill is an extension of AB 1928 (Bocanegra, Chapter 145, Statutes of 2014) which established a coupon ban applicable to beer manufacturers and distributors – the wine industry, at that time, sought specific exemptions to that prohibition.

Prior Legislation

AB 1928 (Bocanegra, Chapter 145, Statutes of 2014) prohibited beer manufacturers and beer wholesalers, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as defined. Also, prohibited alcoholic beverage retail licensees from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. In addition, this bill exempted from the definition of coupon certain rebates, coupons, and discounts.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

(Verified 5/20/16)

Southern Wine & Spirits (co-source)

Wine and Spirits Wholesalers of California (co-source)

Wine Institute (co-source)

Alcohol Justice

Family Winemakers of California

OPPOSITION: (Verified 5/20/16)

California Grocers Association

California Retailers Association

ARGUMENTS IN SUPPORT: Proponents of this bill believe that “the evolution of instant redeemable coupons has led to a number of adverse impacts. Specifically, current coupon practices can create competitive imbalances between large and small wineries as well as large grocery chains and smaller independent retailers. The deep discounting nature of IRC’s reduces brand equity of California wine brands, which the state’s wineries strive to maintain. In addition to not being as effective as other promotional activities, some couponing programs potentially damage the wine industry’s social responsibility ethic as a beverage of moderation to be enjoyed with family and friends. For example, some coupon programs observed in the marketplace would require consumers to purchase six bottles of wine in order to receive $25-$30 off groceries.”

Proponents state that such programs raise social responsibility issues, do little to help build California wine brands, and are cost prohibitive for smaller and mid-sized wineries. Proponents emphasize that “eliminating winery-funded instant redeemable coupons will further provide regulatory certainty and if signed into law, California would follow similar laws prohibiting IRCs already in place in nearly half of the nation’s states.”

ARGUMENTS IN OPPOSITION: Writing in opposition, the California Grocers Association states, “While we appreciate the efforts to increase transparency, reduce fraudulent activity, and reduce waste by eliminating paper coupons, we utilize electronic discount programs to help drive innovation and bring new products to consumers. These programs are important to many retailers and to our consumers. They are viable options to paper coupons and by their very nature help prevent fraud and eliminate waste.”

Additionally, opponents argue that “this bill is unnecessary and that product manufacturers to whom SB 1032 would apply are not required by law to offer or fund discounts on their products. A statute is not required to eliminate manufacturer coupons – manufacturers can simply stop offering them. In the retail food industry, for example, some grocery companies have decided to stop honoring double coupons to help address fraud. They did not need a statute to do that. And in fact, some very successful manufacturers do not include coupons in their business model at all.”

Opponents believe that this bill is overly broad, creates a dangerous precedent, and in reality is not needed to accomplish the goal articulated by supporters.

Prepared by:

5/25/16 13:50:23

**** END ****

 THIRD READING  

Bill No: SB 1032

Author:

:

Vote:

SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 4/12/16

AYES: Hall, Berryhill, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Vidak

NO VOTE RECORDED: Runner

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT:

SOURCE: Southern Wine & Spirits

Wine and Spirits Wholesalers of California

Wine Institute

__________________________________________________________________

DIGEST: This bill expands a provision of the Alcoholic Beverage Control (ABC) Act that currently prohibits beer manufacturers and beer wholesalers from offering consumer coupons, as defined, that can be redeemed at the point of sale by licensed retailers and also prohibits licensed retailers from accepting or redeeming such coupons from beer manufacturers and beer wholesalers, to include a broader range of nonretail licensees, as defined.

ANALYSIS:

Existing law:

1. 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.
   
2. Prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as specified. Also, prohibits licensed retailers from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler.
   
3. Provides that a coupon does not include: (a) a mail-in rebate by which the consumer purchases an item and submits required information in order to receive a rebate or discount from the beer manufacturer; (b) a coupon offered and funded by a winegrower, a wine rectifier, a wine blender, a beer and wine wholesaler, a beer and wine importer, a wine importer general, or a wine broker that offers a discount on the purchase of a wine product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; (c) a coupon that is offered and funded by a distilled spirits manufacturer, distilled spirits importer general, distilled spirits importer, or distilled spirits wholesaler that offers a discount on the purchase of a distilled spirits product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; and, (d) a discount that is offered and funded by a beer manufacturer on the purchase of beer, malt beverages, cider, or perry at the licensed premises of production or other licensed premises owned and operated by the beer manufacturer.
4. 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. This is known as the “tied-house” law.
   
5. 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.
   
6. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Modifies an existing provision of law that prohibits beer manufacturers and wholesalers from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming certain consumer coupons by expanding the type of “nonretail licensees” that will be prohibited from offering consumer coupons that can be redeemed at the point of sale by licensed retailers.
   
2. Makes an identical change to the companion provision in law that prohibits a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by beer manufacturers and wholesalers by substituting the term “nonretail licensee” for beer manufacturers and wholesalers.
   
3. Defines “nonretail licensee” as a manufacturer, winegrower, wine blender, manufacturer’s agent, rectifier, bottler, broker, importer, wholesaler, or holder of an out-of-state beer manufacturer’s certificate, or any beer manufacturer or winegrower located without the state, or any officer, director, agent, or affiliate of such person, or a beer and wine wholesaler that also holds an off-sale beer or wine retail license and only sells wine.
   
4. Revises the definition of coupon, as specified, and clarifies that wineries are not precluded from offering discounts directly to their consumers through wine clubs or purchases made over the Internet.
   
5. Provides that a nonretail licensee may offer, fund, produce, sponsor, promote, or furnish a coupon until December 31, 2016.
   
6. Permits a nonretail licensee to redeem a coupon submitted by an off-sale licensed retailer prior to March 31, 2017.
   
7. Makes other conforming, clarifying and technical changes.
   

Background

This bill expands the above-referenced coupon ban applicable to beer manufacturers and wholesalers to include winemakers, winegrowers, wine blenders, amongst others, and also prohibits alcoholic beverage retail licensees from redeeming such coupons. This bill will prohibit winery-funded, instant redeemable coupons (IRCs) on direct wine purchases, as well as cross-merchandizing coupons where a consumer purchases bottle(s) of wine and receives a discount off of food and non-food items. This bill, however, does not ban winery funded, mail-in coupons and does not preclude any coupons or discounts offered and funded by licensed retailers. Additionally, this bill allows wineries to offer discounts directly to their consumers through wine clubs or purchases made over the Internet.

Purpose of SB 1032. According to the author's office, this bill is intended to address the problem over a lack of transparency with winery-funded IRCs. The author’s office argues that their use makes tied-house laws prohibiting the gift of anything of value being exchanged between a supplier and retailer unenforceable by the Department of ABC. In contrast, mail-in coupons are transparent and provide the winery with valuable demographic data.

The author’s office states that this bill seeks to provide a level playing field for medium-sized wineries competing with the large wineries for highly sought after, supermarket shelf space as well as amongst large and small retailers. Additionally, the author’s office claims that IRC programs are generally skewed towards large retailers which have the electronic equipment to handle “scanback” programs and carry a large variety of grocery items.

Furthermore, the author’s office points out that this bill is an extension of AB 1928 (Bocanegra, Chapter 145, Statutes of 2014) which established a coupon ban applicable to beer manufacturers and distributors – the wine industry, at that time, sought specific exemptions to that prohibition.

Prior Legislation

AB 1928 (Bocanegra, Chapter 145, Statutes of 2014) prohibited beer manufacturers and beer wholesalers, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as defined. Also, prohibited alcoholic beverage retail licensees from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. In addition, this bill exempted from the definition of coupon certain rebates, coupons, and discounts.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

(Verified 4/25/16)

Southern Wine & Spirits (co-source)

Wine and Spirits Wholesalers of California (co-source)

Wine Institute (co-source)

Alcohol Justice

Family Winemakers of California

OPPOSITION: (Verified 4/25/16)

California Grocers Association

California Retailers Association

ARGUMENTS IN SUPPORT: Proponents of this bill believe that “the evolution of instant redeemable coupons has led to a number of adverse impacts. Specifically, current coupon practices can create competitive imbalances between large and small wineries as well as large grocery chains and smaller independent retailers. The deep discounting nature of IRC’s reduces brand equity of California wine brands, which the state’s wineries strive to maintain. In addition to not being as effective as other promotional activities, some couponing programs potentially damage the wine industry’s social responsibility ethic as a beverage of moderation to be enjoyed with family and friends. For example, some coupon programs observed in the marketplace would require consumers to purchase six bottles of wine in order to receive $25-$30 off groceries.”

Proponents state that such programs raise social responsibility issues, do little to help build California wine brands, and are cost prohibitive for smaller and mid-sized wineries. Proponents emphasize that “eliminating winery-funded instant redeemable coupons will further provide regulatory certainty and if signed into law, California would follow similar laws prohibiting IRCs already in place in nearly half of the nation’s states.”

ARGUMENTS IN OPPOSITION: Writing in opposition, the California Grocers Association states, “While we appreciate the efforts to increase transparency, reduce fraudulent activity, and reduce waste by eliminating paper coupons, we utilize electronic discount programs to help drive innovation and bring new products to consumers. These programs are important to many retailers and to our consumers. They are viable options to paper coupons and by their very nature help prevent fraud and eliminate waste.”

Additionally, opponents argue that “this bill is unnecessary and that product manufacturers to whom SB 1032 would apply are not required by law to offer or fund discounts on their products. A statute is not required to eliminate manufacturer coupons – manufacturers can simply stop offering them. In the retail food industry, for example, some grocery companies have decided to stop honoring double coupons to help address fraud. They did not need a statute to do that. And in fact, some very successful manufacturers do not include coupons in their business model at all.”

Opponents believe that this bill is overly broad, creates a dangerous precedent, and in reality is not needed to accomplish the goal articulated by supporters.

Prepared by:

4/27/16 15:57:18

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: SB Hearing Date: 4/12/2016

SUBJECT:

DIGEST: This bill expands a provision of the Alcoholic Beverage Control (ABC) Act that currently prohibits beer manufacturers and beer wholesalers from offering consumer coupons, as defined, that can be redeemed at the point of sale by licensed retailers and also prohibits licensed retailers from accepting or redeeming such coupons from beer manufacturers and beer wholesalers, to include a broader range of nonretail licensees, as defined.

ANALYSIS:

Existing law:

1. 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.
   
2. Prohibits a beer manufacturer or a beer wholesaler from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as specified. Also, prohibits licensed retailers from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler.
   
3. Provides that a coupon does not include: (a) a mail-in rebate by which the consumer purchases an item and submits required information in order to receive a rebate or discount from the beer manufacturer; (b) a coupon offered and funded by a winegrower, a wine rectifier, a wine blender, a beer and wine wholesaler, a beer and wine importer, a wine importer general, or a wine broker that offers a discount on the purchase of a wine product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; (c) a coupon that is offered and funded by a distilled spirits manufacturer, distilled spirits importer general, distilled spirits importer, or distilled spirits wholesaler that offers a discount on the purchase of a distilled spirits product if beer, malt beverages, cider, or perry are not advertised in connection with the coupon; and, (d) a discount that is offered and funded by a beer manufacturer on the purchase of beer, malt beverages, cider, or perry at the licensed premises of production or other licensed premises owned and operated by the beer manufacturer.
4. 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. This is known as the “tied-house” law.
   
5. 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.
   
6. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Modifies an existing provision of law that prohibits beer manufacturers and wholesalers from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming certain consumer coupons by expanding the type of “nonretail licensees” that will be prohibited from offering consumer coupons that can be redeemed at the point of sale by licensed retailers.
   
2. Makes an identical change to the companion provision in law that prohibits a licensee authorized to sell alcoholic beverages at retail from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by beer manufacturers and wholesalers by substituting the term “nonretail licensee” for beer manufacturers and wholesalers.
   
3. Defines “nonretail licensee” as a manufacturer, winegrower, wine blender, manufacturer’s agent, rectifier, bottler, broker, importer, wholesaler, or holder of an out-of-state beer manufacturer’s certificate, or any beer manufacturer or winegrower located without the state, or any officer, director, agent, or affiliate of such person, or a beer and wine wholesaler that also holds an off-sale beer or wine retail license and only sells wine.
   
4. Revises the definition of coupon, as specified, and clarifies that wineries are not precluded from offering discounts directly to their consumers through wine clubs or purchases made over the Internet.
   
5. Provides that a nonretail licensee may offer, fund, produce, sponsor, promote, or furnish a coupon until 12/31/2016.
   
6. Permits a nonretail licensee to redeem a coupon submitted by an off-sale licensed retailer prior to March 31, 2017.
   
7. Makes other conforming, clarifying and technical changes.
   

Background

This bill expands the above-referenced coupon ban applicable to beer manufacturers and wholesalers to include winemakers, winegrowers, wine blenders, amongst others, and also prohibits alcoholic beverage retail licensees from redeeming such coupons. The bill will prohibit winery-funded, instant redeemable coupons on direct wine purchases, as well as cross-merchandizing coupons where a consumer purchases bottle(s) of wine and receives a discount off of food and non-food items. This bill however, does not ban winery funded, mail-in coupons and does not preclude any coupons or discounts offered and funded by licensed retailers. Additionally, this bill allows wineries to offer discounts directly to their consumers through wine clubs or purchases made over the Internet.

Purpose of SB 1032. According to the author's office, this bill is intended to address the problem over a lack of transparency with winery-funded instant redeemable coupons (IRCs). The author’s office argues that their use makes tied-house laws prohibiting the gift of anything of value being exchanged between a supplier and retailer unenforceable by the Department of ABC. In contrast, mail-in coupons are transparent and provide the winery with valuable demographic data.

The author’s office states that this bill seeks to provide a level playing field for medium-sized wineries competing with the large wineries for highly sought after, supermarket shelf space as well as amongst large and small retailers. Additionally, the author’s office claims that IRC programs are generally skewed towards large retailers which have the electronic equipment to handle “scanback” programs and carry a large variety of grocery items.

Furthermore, the author’s office points out that this bill is an extension of AB 1928 (Bocanegra, Chapter 145, Statutes of 2014) which established a coupon ban applicable to beer manufacturers and distributors – the wine industry, at that time, sought specific exemptions to that prohibition.

Prior/Related Legislation

AB 1928 (Bocanegra, Chapter 145, Statutes of 2014) prohibited beer manufacturers and beer wholesalers, from offering, funding, producing, sponsoring, promoting, furnishing, or redeeming any type of coupon, as defined. Also, prohibited alcoholic beverage retail licensees from accepting, redeeming, possessing, or utilizing any type of coupon that is funded, produced, sponsored, promoted, or furnished by a beer manufacturer or beer wholesaler. In addition, this bill exempted from the definition of coupon certain rebates, coupons, and discounts.

SB 778 (Padilla, Chapter 489, Statutes of 2012) authorized wine, beer and spirits producers to conduct contests and sweepstakes and award prizes to consumers subject to various restrictions. Furthermore, this bill exempted prize awards from provisions limiting premium awards in connection with the sale or distribution of alcoholic beverages.

AB 2184 (Hall, Chapter 480, Statutes of 2012) created a new tied-house exception in the ABC Act that authorized wine, beer and spirits producers to participate in promotional events held at an off-sale retail licensed location for the purpose of providing autographs on bottles or other items to consumers.

AB 2293 (De Leon, Chapter 638, Statutes of 2008) added a new provision to the ABC Act that permits 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.

AB 1245 (Torrico, Chapter 629, Statutes of 2008) modified an existing provision of the ABC Act to allow beer manufacturers to give adult consumers promotional advertising items valued at $3 per unit original cost to the beer manufacturer who purchased it.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

Alcohol Justice

Family Winemakers of California

Southern Wine & Spirits (cosponsor)

Wine Institute (cosponsor)

Wine and Spirits Wholesalers of California (cosponsor)

OPPOSITION:

California Grocers Association

California Retailers Association

ARGUMENTS IN SUPPORT: Proponents of this bill believe that “the evolution of instant redeemable coupons has led to a number of adverse impacts. Specifically, current coupon practices can create competitive imbalances between large and small wineries as well as large grocery chains and smaller independent retailers. The deep discounting nature of IRC’s reduces brand equity of California wine brands, which the state’s wineries strive to maintain. In addition to not being as effective as other promotional activities, some couponing programs potentially damage the wine industry’s social responsibility ethic as a beverage of moderation to be enjoyed with family and friends. For example, some coupon programs observed in the marketplace would require consumers to purchase six bottles of wine in order to receive $25-$30 off groceries.”

Proponents state that such programs raise social responsibility issues, do little to help build California wine brands, and are cost prohibitive for smaller and mid-sized wineries. Proponents emphasize that “eliminating winery-funded instant redeemable coupons will further provide regulatory certainty and if signed into law, California would follow similar laws prohibiting IRCs already in place in nearly half of the nation’s states.”

ARGUMENTS IN OPPOSITION: Writing in opposition, the California Grocers Association states, “While we appreciate the efforts to increase transparency, reduce fraudulent activity, and reduce waste by eliminating paper coupons, we utilize electronic discount programs to help drive innovation and bring new products to consumers. These programs are important to many retailers and to our consumers. They are viable options to paper coupons and by their very nature help prevent fraud and eliminate waste.”

Additionally, opponents argue that “this bill is unnecessary and that product manufacturers to whom SB 1032 would apply are not required by law to offer or fund discounts on their products. A statute is not required to eliminate manufacturer coupons – manufacturers can simply stop offering them. In the retail food industry, for example, some grocery companies have decided to stop honoring double coupons to help address fraud. They did not need a statute to do that. And in fact, some very successful manufacturers do not include coupons in their business model at all.”

Opponents believe that this bill is overly broad, creates a dangerous precedent, and in reality is not needed to accomplish the goal articulated by supporters.