Existing law, the Alcoholic Beverage Control Act, is administered by the Department of Alcoholic Beverage Control and regulates the granting of licenses for the manufacture, distribution, and sale of alcoholic beverages within the state. Under existing law, any violation of the Alcoholic Beverage Control Act is a misdemeanor, as provided.

This bill would require a beer wholesaler to comply with specified requirements for any sale or offer of sale of beer within the state. By expanding existing crimes by imposing additional duties on a licensee under the Alcoholic Beverage Control Act, 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, is administered by the Department of Alcoholic Beverage Control and regulates the granting of licenses for the manufacture, distribution, and sale of alcoholic beverages within the state. Under existing law, any violation of the Alcoholic Beverage Control Act is a misdemeanor, as provided.

This bill would require a beer wholesaler to comply with specified requirements for any sale or offer of sale of beer within the state. By expanding existing crimes by imposing additional duties on a licensee under the Alcoholic Beverage Control Act, 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, is administered by the Department of Alcoholic Beverage Control and regulates the granting of licenses for the manufacture, distribution, and sale of alcoholic beverages within the state. Under existing law, any violation of the Alcoholic Beverage Control Act is a misdemeanor, as provided.

This bill would require a beer wholesaler to comply with specified requirements for any sale or offer of sale of beer within the state. By expanding existing crimes by imposing additional duties on a licensee under the Alcoholic Beverage Control Act, 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, is administered by the Department of Alcoholic Beverage Control and regulates the granting of licenses for the manufacture, distribution, and sale of alcoholic beverages within the state. Under existing law, any violation of the Alcoholic Beverage Control Act is a misdemeanor, as provided.

This bill would require a beer wholesaler to comply with specified requirements for any sale or offer of sale of beer within the state. By expanding existing crimes by imposing additional duties on a licensee under the Alcoholic Beverage Control Act, 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, is administered by the Department of Alcoholic Beverage Control to prevent unlicensed manufacturing, selling, and disposing of alcoholic beverages, among other things. Existing law prohibits an off-sale licensee from delivering alcoholic beverages from an order received over the telephone or other electronic means without proof of age and identity, as specified, when the beverages are delivered. and regulates the granting of licenses for the manufacture, distribution, and sale of alcoholic beverages within the state. Under existing law, any violation of the Alcoholic Beverage Control Act is a misdemeanor, as provided.

This bill would additionally prohibit an off-sale licensee from delivering alcoholic beverages from an order received by digital means without proof of age and identity. require a beer wholesaler to comply with specified requirements for any sale or offer of sale of beer within the state. By expanding existing crimes by imposing additional duties on a licensee under the Alcoholic Beverage Control Act, 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, is administered by the Department of Alcoholic Beverage Control to prevent unlicensed manufacturing, selling, and disposing of alcoholic beverages, among other things. Existing law prohibits an off-sale licensee from delivering alcoholic beverages from an order received over the telephone or other electronic means without proof of age and identity, as specified, when the beverages are delivered. Under existing law, any violation of the Alcoholic Beverage Control Act is a misdemeanor, as provided.

This bill would additionally prohibit an off-sale licensee from delivering alcoholic beverages from an order received by digital means without proof of age and identity. By expanding existing crimes by imposing additional duties on a licensee under the Alcoholic Beverage Control Act, 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.

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 2469

Author:(Berman)

As Amended Ver:July 2, 2018

Majority vote

(G. O.)

Original Committee Reference: G.O.

SUMMARY: Would require a beer wholesaler to comply with specified requirements for any sale or offer of sale of beer within the State.

The Senate amendments delete the Assembly version of this bill, and instead:

1. Require a beer wholesaler to comply with all of the following:
   1. To file and maintain with the Department of Alcoholic Beverage Control (ABC) a written territorial agreement with each beer manufacturer prior to the wholesaler's sale or offer of sale of each beer manufacturer's beer.
   2. To file prices with ABC for each beer manufacturer's beer prior to the wholesaler's sale or offer of sale of each manufacturer's beer.
   3. Own or lease a warehouse sufficient to store at one time a stock of beer equal to 10% or more of the wholesaler's annual volume of beer case and keg sales to retailers within this state.
2. Requires a beer wholesaler to maintain at all times in a warehouse owned or leased by the wholesaler a stock of beer equal to not less than 5% of the wholesaler's annual volume of beer case and keg sales to retailers within this state. If a wholesaler has more than one leased or owned warehouse, only one of those premises is required to comply with this provision.
3. Requires the beer wholesaler to receive all beer for sale at the wholesaler's licensed warehouse premises, unload and maintain beer on the premises, and record the beer into the wholesaler's inventory and for the California Beverage Container Recycling and Litter Reduction Act, prior to any sale or reloading for delivery.
4. Specifies that the beer wholesaler shall sell only beer that the wholesaler owns and has in physical possession and that is not acquired, held, or offered for sale under consignment.
5. Specifies that the beer wholesaler shall sell beer only from the wholesaler's licensed warehouse premises or from wagons or trucks operated by licensees to licensees authorized to sell beer.
6. Requires the beer wholesaler to deliver all beer sold to retailers for delivery from the wholesaler's licensed warehouse premises only with equipment owned, leased, or rented by the wholesaler.
7. Requires a beer wholesaler to sell beer for resale generally and not to a single retailer or retailers that have a direct or indirect interest in the wholesaler or in each other and that are owned in whole or in part or managed or controlled directly or indirectly by the retailer or retailers.
8. Defines a "beer manufacturer" to mean any holder of a beer manufacturer's license, any holder of an out-of-state beer manufacturer's certificate, or any holder of a beer and wine importer's general license.

EXISTING LAW:

1. Establishes ABC and grants it exclusive authority to administer the provisions of the Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this State and the collection of license fees for this purpose.
2. 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.
3. Specifies that no wholesale license shall be issued to any person who does not in good faith carry on a bonafide wholesale business by sale to retail licensees of the alcoholic beverage designated in the wholesale license.
4. Authorizes ABC to revoke any wholesale license when the licensee fails, for a period of 45 days, actively engage in the wholesale business.
5. Prescribes that a spirits wholesaler's license shall not be held by any person unless, at all times throughout the license year, he has on his wholesale premises a reasonable stock of distilled spirits, as determined by the ABC, for which he has fully paid lawful money or its equivalent.
6. Defines a "wholesale sale" or "sale at wholesale" to mean a sale to any licensee for purposes of resale.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

AS PASSED BY THE ASSEMBLY, this bill would prohibit an off-sale licensee from delivering an alcoholic beverage that is ordered digitally without proof of age or identity.

COMMENTS:

Purpose of the bill: According to the author's office, "California brandy wholesalers and distilled spirits wholesalers must achieve qualifications related to the quality, storage, and ownership of California brandy and distilled spirits stock to maintain their licenses. However, existing law does not provide qualifications for beer wholesalers. This bill would bring parity to California law by setting forth qualifications for a beer wholesaler consistent with qualifications for brandy and distilled spirits wholesalers."

Current regulations, Rule 28 of Article 5 of Division 1 of Title 4 of the California Code of Regulations, requires that any person who holds a distilled spirits wholesaler's license to meet specific qualifications in connections with the licensees premises licensed as the licensees principal place of business.

Those qualifications require the licensee to maintain warehouse space that is sufficient to either; 1) store at one time either a stock of distilled spirits equal to 10% or more of the licensees annual sales to retailers; 2) a stock of distilled spirits whose costs of acquisition is $100,000 or more. The licensee is also required to maintain a stock of distilled spirits consisting of either no less than 5% of annual sales or whose cost of acquisition is $100,000 or more.

A stock of distilled spirits are also required to be owned by the licensee, not held on consignment, and not acquired pursuant to a prior agreement to sell it to a specific licensee or licensees

This bill seeks to establish similar qualifications for beer wholesalers.

In support: According to the California Beer and Beverage Distributors, "beer distributors inventory systems enable superior freshness management for perishable beer through the use of First In and First Out inventory quality controls, a distributor practice recognized and affirmed in agreements with brewers. This comprehensive system of quality control from arrival through unloading, storage, maintenance and delivery to retailers assures beer freshness and traceability for health and safety purposes. In the event of recalls, these distributor inventory systems can quickly identify those beer packages that a distributor must immediately retrieve and remove from the marketplace to protect public safety and beer quality."

Related/Prior Legislation: SB 1164 (Skinner) of the current legislative session, makes various changes to the craft distiller's license, including eliminating the requirement that a person must attend a tasting before being able to purchase prepackaged containers of the licensee's spirits directly from the craft distiller and increasing the maximum amount of distilled spirits that a craft distiller is permitted to manufacture from 100,000 gallons to 150,000. (Pending in the Assembly Appropriations Committee)

AB 1890 (Levine) of the current legislative session, allows a licensed craft distiller to share a common area with a licensed winegrower or a licensed small beer manufacturer, as long as specified conditions are met and their premises of production are adjacent to each other. (Pending on the Senate Floor)

AB 1891 (Levine) of the current legislative session, allows a licensed craft distiller to instruct consumers and conduct tastings on the premises of an on-sale and off-sale retailer, as long as certain specified conditions are met. (Pending on the Senate Floor)

AB 1986 (Cunningham) of the current legislative session, expands an existing tied-house exception within the Act to allow a licensed craft distiller to give or sell distilled spirits to nonprofit organizations for the purpose of assisting in fund-raising efforts. (Pending on the Senate Floor)

AB 997 (Aguiar-Curry), Chapter 788, Statutes of 2017, allowed a licensed winegrower and a licensed small beer manufacturer, whose premises of production are immediately adjacent to each other, to share a common area in which the consumption of alcoholic beverages is permitted, under specified circumstances.

AB 2913 (Governmental Organization Committee), Chapter 423, Statutes of 2016, among other things, revised the definition of a licensed "distilled spirits rectifier", as defined.

AB 1295 (Levine), Chapter 640, Statutes of 2015, created a new "craft distiller's license" in the Act with specified privileges and limited to persons who manufacture less than 100,000 gallons of distilled spirits annually, exclusive of brandy production.

AB 776 (Cooper), Chapter 519, Statutes of 2015, allowed a licensed beer manufacturer to apply to ABC for a brewery event permit that grants the licensee the privilege of selling beer it produces for consumption on property contiguous and adjacent to its licensed premises for special events (up to four such events in a calendar year).

AB 2004 (Chesbro), Chapter 806, Statutes of 2014, authorized a licensed beer manufacturer to apply to ABC for a certified farmers' market beer sales permit, which allows the licensee to sell packaged beer at a farmers' market, including any specified area, under certain conditions.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0005057

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2469

Author:(Berman)

As Amended Ver:July 2, 2018

Majority vote

(vote not relevant)

Original Committee Reference: G.O.

SUMMARY: Would require a beer wholesaler to comply with specified requirements for any sale or offer of sale of beer within the State.

The Senate amendments delete the Assembly version of this bill, and instead:

1. Require a beer wholesaler to comply with all of the following:
   1. To file and maintain with the Department of Alcoholic Beverage Control (ABC) a written territorial agreement with each beer manufacturer prior to the wholesaler's sale or offer of sale of each beer manufacturer's beer.
   2. To file prices with ABC for each beer manufacturer's beer prior to the wholesaler's sale or offer of sale of each manufacturer's beer.
   3. Own or lease a warehouse sufficient to store at one time a stock of beer equal to 10% or more of the wholesaler's annual volume of beer case and keg sales to retailers within this state.
2. Requires a beer wholesaler to maintain at all times in a warehouse owned or leased by the wholesaler a stock of beer equal to not less than 5% of the wholesaler's annual volume of beer case and keg sales to retailers within this state. If a wholesaler has more than one leased or owned warehouse, only one of those premises is required to comply with this provision.
3. Requires the beer wholesaler to receive all beer for sale at the wholesaler's licensed warehouse premises, unload and maintain beer on the premises, and record the beer into the wholesaler's inventory and for the California Beverage Container Recycling and Litter Reduction Act, prior to any sale or reloading for delivery.
4. Specifies that the beer wholesaler shall sell only beer that the wholesaler owns and has in physical possession and that is not acquired, held, or offered for sale under consignment.
5. Specifies that the beer wholesaler shall sell beer only from the wholesaler's licensed warehouse premises or from wagons or trucks operated by licensees to licensees authorized to sell beer.
6. Requires the beer wholesaler to deliver all beer sold to retailers for delivery from the wholesaler's licensed warehouse premises only with equipment owned, leased, or rented by the wholesaler.
7. Requires a beer wholesaler to sell beer for resale generally and not to a single retailer or retailers that have a direct or indirect interest in the wholesaler or in each other and that are owned in whole or in part or managed or controlled directly or indirectly by the retailer or retailers.
8. Defines a "beer manufacturer" to mean any holder of a beer manufacturer's license, any holder of an out-of-state beer manufacturer's certificate, or any holder of a beer and wine importer's general license.

EXISTING LAW:

1. Establishes ABC and grants it exclusive authority to administer the provisions of the Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this State and the collection of license fees for this purpose.
2. 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.
3. Specifies that no wholesale license shall be issued to any person who does not in good faith carry on a bonafide wholesale business by sale to retail licensees of the alcoholic beverage designated in the wholesale license.
4. Authorizes ABC to revoke any wholesale license when the licensee fails, for a period of 45 days, actively engage in the wholesale business.
5. Prescribes that a spirits wholesaler's license shall not be held by any person unless, at all times throughout the license year, he has on his wholesale premises a reasonable stock of distilled spirits, as determined by the ABC, for which he has fully paid lawful money or its equivalent.
6. Defines a "wholesale sale" or "sale at wholesale" to mean a sale to any licensee for purposes of resale.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

AS PASSED BY THE ASSEMBLY, this bill would prohibit an off-sale licensee from delivering an alcoholic beverage that is ordered digitally without proof of age or identity.

COMMENTS: This bill was substantially amended in the Senate and the Assembly-approved provisions of the bill were deleted.

Purpose of the bill: According to the author's office, "California brandy wholesalers and distilled spirits wholesalers must achieve qualifications related to the quality, storage, and ownership of California brandy and distilled spirits stock to maintain their licenses. However, existing law does not provide qualifications for beer wholesalers. This bill would bring parity to California law by setting forth qualifications for a beer wholesaler consistent with qualifications for brandy and distilled spirits wholesalers."

Current regulations, Rule 28 of Article 5 of Division 1 of Title 4 of the California Code of Regulations, requires that any person who holds a distilled spirits wholesaler's license to meet specific qualifications in connections with the licensees premises licensed as the licensees principal place of business.

Those qualifications require the licensee to maintain warehouse space that is sufficient to either; 1) store at one time either a stock of distilled spirits equal to 10% or more of the licensees annual sales to retailers; 2) a stock of distilled spirits whose costs of acquisition is $100,000 or more. The licensee is also required to maintain a stock of distilled spirits consisting of either no less than 5% of annual sales or whose cost of acquisition is $100,000 or more.

A stock of distilled spirits are also required to be owned by the licensee, not held on consignment, and not acquired pursuant to a prior agreement to sell it to a specific licensee or licensees

This bill seeks to establish similar qualifications for beer wholesalers.

In support: According to the California Beer and Beverage Distributors, "beer distributors inventory systems enable superior freshness management for perishable beer through the use of First In and First Out inventory quality controls, a distributor practice recognized and affirmed in agreements with brewers. This comprehensive system of quality control from arrival through unloading, storage, maintenance and delivery to retailers assures beer freshness and traceability for health and safety purposes. In the event of recalls, these distributor inventory systems can quickly identify those beer packages that a distributor must immediately retrieve and remove from the marketplace to protect public safety and beer quality."

Related/Prior Legislation: SB 1164 (Skinner) of the current legislative session, makes various changes to the craft distiller's license, including eliminating the requirement that a person must attend a tasting before being able to purchase prepackaged containers of the licensee's spirits directly from the craft distiller and increasing the maximum amount of distilled spirits that a craft distiller is permitted to manufacture from 100,000 gallons to 150,000. (Pending in the Assembly Appropriations Committee)

AB 1890 (Levine) of the current legislative session, allows a licensed craft distiller to share a common area with a licensed winegrower or a licensed small beer manufacturer, as long as specified conditions are met and their premises of production are adjacent to each other. (Pending on the Senate Floor)

AB 1891 (Levine) of the current legislative session, allows a licensed craft distiller to instruct consumers and conduct tastings on the premises of an on-sale and off-sale retailer, as long as certain specified conditions are met. (Pending on the Senate Floor)

AB 1986 (Cunningham) of the current legislative session, expands an existing tied-house exception within the Act to allow a licensed craft distiller to give or sell distilled spirits to nonprofit organizations for the purpose of assisting in fund-raising efforts. (Pending on the Senate Floor)

AB 997 (Aguiar-Curry), Chapter 788, Statutes of 2017, allowed a licensed winegrower and a licensed small beer manufacturer, whose premises of production are immediately adjacent to each other, to share a common area in which the consumption of alcoholic beverages is permitted, under specified circumstances.

AB 2913 (Governmental Organization Committee), Chapter 423, Statutes of 2016, among other things, revised the definition of a licensed "distilled spirits rectifier", as defined.

AB 1295 (Levine), Chapter 640, Statutes of 2015, created a new "craft distiller's license" in the Act with specified privileges and limited to persons who manufacture less than 100,000 gallons of distilled spirits annually, exclusive of brandy production.

AB 776 (Cooper), Chapter 519, Statutes of 2015, allowed a licensed beer manufacturer to apply to ABC for a brewery event permit that grants the licensee the privilege of selling beer it produces for consumption on property contiguous and adjacent to its licensed premises for special events (up to four such events in a calendar year).

AB 2004 (Chesbro), Chapter 806, Statutes of 2014, authorized a licensed beer manufacturer to apply to ABC for a certified farmers' market beer sales permit, which allows the licensee to sell packaged beer at a farmers' market, including any specified area, under certain conditions.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0003863

 THIRD READING  

Bill No: AB 2469

Author:

:

Vote:

SENATE GOVERNMENTAL ORG. COMMITTEE: 13-0, 6/26/18

AYES: Dodd, Wilk, Bradford, Cannella, Gaines, Galgiani, Glazer, Hill, Hueso, Lara, Portantino, Vidak, Wiener

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 74-0, 4/26/18 (Consent) - See last page for vote

SUBJECT:

SOURCE: California Beer and Beverage Distributors

DIGEST: This bill requires a beer wholesaler to comply with specified requirements for any sale or offer of sale of beer within the State.

ANALYSIS:

Existing law:

1. Establishes the Department of Alcoholic Beverage Control (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 for this purpose.
2. 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.
3. Specifies that no wholesale license shall be issued to any person who does not in good faith carry on a bonafide wholesale business by sale to retail licensees of the alcoholic beverage designated in the wholesale license.
4. Authorizes the Department of ABC to revoke any wholesale license when the licensee fails, for a period of 45 days, actively engage in the wholesale business.
5. Prescribes that a spirits wholesaler’s license shall not be held by any person unless, at all times throughout the license year, he has on his wholesale premises a reasonable stock of distilled spirits, as determined by the Department of ABC, for which he has fully paid lawful money or its equivalent.
6. Defines a “wholesale sale” or “sale at wholesale” to mean a sale to any licensee for purposes of resale.

This bill:

1. Requires a beer wholesaler to comply with all of the following:
   1. To file and maintain with the Department of ABC a written territorial agreement with each beer manufacturer prior to the wholesaler’s sale or offer of sale of each beer manufacturer’s beer.
   2. To file prices with the Department of ABC for each beer manufacturer’s beer prior to the wholesaler’s sale or offer of sale of each manufacturer’s beer.
   3. Own or lease a warehouse sufficient to store at one time a stock of beer equal to 10% or more of the wholesaler’s annual volume of beer case and keg sales to retailers within this state.
2. Requires a beer wholesaler to maintain at all times in a warehouse owned or leased by the wholesaler a stock of beer equal to not less than 5% of the wholesaler’s annual volume of beer case and keg sales to retailers within this state. If a wholesaler has more than one leased or owned warehouse, only one of those premises is required to comply with this provision.
3. Requires the beer wholesaler to receive all beer for sale at the wholesaler’s licensed warehouse premises, unload and maintain beer on the premises, and record the beer into the wholesaler’s inventory and for the California Beverage Container Recycling and Litter Reduction Act, prior to any sale or reloading for delivery.
4. Specifies that the beer wholesaler shall sell only beer that the wholesaler owns and has in physical possession and that is not acquired, held, or offered for sale under consignment.
5. Specifies that the beer wholesaler shall sell beer only from the wholesaler’s licensed warehouse premises or from wagons or trucks operated by licensees to licensees authorized to sell beer.
6. Requires the beer wholesaler to deliver all beer sold to retailers for delivery from the wholesaler’s licensed warehouse premises only with equipment owned, leased, or rented by the wholesaler.
7. Requires a beer wholesaler to sell beer for resale generally and not to a single retailer or retailers that have a direct or indirect interest in the wholesaler or in each other and that are owned in whole or in part or managed or controlled directly or indirectly by the retailer or retailers.
8. Defines a “beer manufacturer” to mean any holder of a beer manufacturer’s license, any holder of an out-of-state beer manufacturer’s certificate, or any holder of a beer and wine importer’s general license.

Background

Purpose of the bill. According to the author’s office, “California brandy wholesalers and distilled spirits wholesalers must achieve qualifications related to the quality, storage, and ownership of California brandy and distilled spirits stock to maintain their licenses. However, existing law does not provide qualifications for beer wholesalers. AB 2469 would bring parity to California law by setting forth qualifications for a beer wholesaler consistent with qualifications for brandy and distilled spirits wholesalers.”

Distilled spirits wholesalers qualifications. Current regulations, Rule 28 of Article 5 of Division 1 of Title 4 of the California Code of Regulations, requires that any person who holds a distilled spirits wholesaler’s license to meet specific qualifications in connections with the licensees premises licensed as the licensees principal place of business.

Those qualifications require the licensee to maintain warehouse space that is sufficient to either; (1) store at one time either a stock of distilled spirits equal to 10% or more of the licensees annual sales to retailers; (2) a stock of distilled spirits whose costs of acquisition is $100,000 or more. The licensee is also required to maintain a stock of distilled spirits consisting of either no less than 5% of annual sales or whose cost of acquisition is $100,000 or more.

A stock of distilled spirits are also required to be owned by the licensee, not held on consignment, and not acquired pursuant to a prior agreement to sell it to a specific licensee or licensees

This bill seeks to establish similar qualifications for beer wholesalers.

Related/Prior Legislation

SB 1164 (Skinner, 2018) makes various changes to the craft distiller’s license, including eliminating the requirement that a person must attend a tasting before being able to purchase prepackaged containers of the licensee’s spirits directly from the craft distiller and increasing the maximum amount of distilled spirits that a craft distiller is permitted to manufacture from 100,000 gallons to 150,000. (Pending in the Assembly Appropriations Committee)

AB 1890 (Levine, 2018) allows a licensed craft distiller to share a common area with a licensed winegrower or a licensed small beer manufacturer, as long as specified conditions are met and their premises of production are adjacent to each other. (Pending on the Senate Floor)

AB 1891 (Levine, 2018) allows a licensed craft distiller to instruct consumers and conduct tastings on the premises of an on-sale and off-sale retailer, as long as certain specified conditions are met. (Pending on the Senate Floor)

AB 1986 (Cunningham, 2018) expands an existing tied-house exception within the ABC Act to allow a licensed craft distiller to give or sell distilled spirits to nonprofit organizations for the purpose of assisting in fund-raising efforts. (Pending on the Senate Floor)

AB 997 (Aguiar-Curry, Chapter 788, Statutes of 2017) allowed a licensed winegrower and a licensed small beer manufacturer, whose premises of production are immediately adjacent to each other, to share a common area in which the consumption of alcoholic beverages is permitted, under specified circumstances.

AB 2913 (Committee on Governmental Organization, Chapter 423, Statutes of 2016), among other things, revised the definition of a licensed "distilled spirits rectifier", as defined.

AB 1295 (Levine, Chapter 640, Statutes of 2015) created a new "craft distiller's license" in the ABC Act with specified privileges and limited to persons who manufacture less than 100,000 gallons of distilled spirits annually, exclusive of brandy production.

AB 776 (Cooper, Chapter 519, Statutes of 2015) allowed a licensed beer manufacturer to apply to the Department of ABC for a brewery event permit that grants the licensee the privilege of selling beer it produces for consumption on property contiguous and adjacent to its licensed premises for special events (up to four such events in a calendar year).

AB 2004 (Chesbro, Chapter 806, Statutes of 2014) authorized a licensed beer manufacturer to apply to the Department of ABC for a certified farmers' market beer sales permit, which allows the licensee to sell packaged beer at a farmers' market, including any specified area, under certain conditions.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/7/18)

California Beer and Beverage Distributors (source)

Ace Beverage LLC

Advance Beverage Company

Allied Beverages

Couch Distributing Company, Inc.

Crest Beverage LLC

DBI Beverage Modesto

DBI Beverage Napa

DBI Beverage San Francisco

DBI Beverage San Joaquin

DBI Beverage San Jose

DBI Beverage Truckee

Harbor Distributing LLC

Markstein Sales Company

Pacific Beverage Company

OPPOSITION: (Verified 8/7/18)

None received

ARGUMENTS IN SUPPORT: According to the California Beer and Beverage Distributors, “beer distributors inventory systems enable superior freshness management for perishable beer through the use of First In and First Out inventory quality controls, a distributor practice recognized and affirmed in agreements with brewers. This comprehensive system of quality control from arrival through unloading, storage, maintenance and delivery to retailers assures beer freshness and traceability for health and safety purposes. In the event of recalls, these distributor inventory systems can quickly identify those beer packages that a distributor must immediately retrieve and remove from the marketplace to protect public safety and beer quality.”

ASSEMBLY FLOOR: 74-0, 4/26/18

AYES: Acosta, Aguiar-Curry, Arambula, Baker, Berman, Bigelow, Bloom, Bonta, Brough, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dahle, Daly, Eggman, Flora, Frazier, Friedman, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Travis Allen, Fong, Cristina Garcia, Rodriguez

Prepared by:

8/8/18 10:32:24

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2017 - 2018 Regular

Bill No: AB Hearing Date: 6/26/2018

SUBJECT:

DIGEST: This bill requires a beer wholesaler to comply with specified requirements for any sale or offer of sale of beer within the State.

ANALYSIS:

Existing law:

1. Establishes the Department of Alcoholic Beverage Control (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 for this purpose.
2. 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.
3. Specifies that no wholesale license shall be issued to any person who does not in good faith carry on a bonafide wholesale business by sale to retail licensees of the alcoholic beverage designated in the wholesale license.
4. Authorizes the Department of ABC to revoke any wholesale license when the licensee fails, for a period of 45 days, actively engage in the wholesale business.
5. Prescribes that a spirits wholesaler’s license shall not be held by any person unless, at all times throughout the license year, he has on his wholesale premises a reasonable stock of distilled spirits, as determined by the Department of ABC, for which he has fully paid lawful money or its equivalent.
6. Defines a “wholesale sale” or “sale at wholesale” to mean a sale to any licensee for purposes of resale.

This bill:

1. Requires a beer wholesaler to comply with all of the following:
   1. To file and maintain with the Department of ABC a written territorial agreement with each beer manufacturer prior to the wholesaler’s sale or offer of sale of each beer manufacturer’s beer.
   2. To file prices with the Department of ABC for each beer manufacturer’s beer prior to the wholesaler’s sale or offer of sale of each manufacturer’s beer.
   3. Own or lease a warehouse sufficient to store at one time either a stock of beer equal to 10% or more of the wholesaler’s annual volume of beer case and keg sales to retailers within this state or whose cost of acquisition is $100,000 or more.
2. Requires a beer wholesaler to maintain at all times in a warehouse either owned or leased by the wholesaler a stock of beer equal to not less than 5% of the wholesaler’s annual volume of beer case and keg sales to retailers within this state or whose cost of acquisition is $100,000 or more. If a wholesaler has more than one leased or owned warehouse, only one of those premises is required to comply with this provision.
3. Requires the beer wholesaler to receive all beer for sale at the wholesaler’s licensed warehouse premises, unload and maintain beer on the premises, and record the beer into the wholesaler’s inventory and for the California Beverage Container Recycling and Litter Reduction Act, prior to any sale or reloading for delivery.
4. Specifies that the beer wholesaler shall sell only beer that the wholesaler owns and has in physical possession and that is not acquired, held, or offered for sale under consignment.
5. Specifies that the beer wholesaler shall sell beer only from the wholesaler’s licensed warehouse premises or from wagons or trucks operated by licensees to licensees authorized to sell beer.
6. Requires the beer wholesaler to deliver all beer sold to retailers for delivery from the wholesaler’s licensed warehouse premises only with equipment owned, leased, or rented by the wholesaler.
7. Requires a beer wholesaler to sell beer for resale generally and not to a single retailer or retailers that have a direct or indirect interest in the wholesaler or in each other and that are owned in whole or in part or managed or controlled directly or indirectly by the retailer or retailers.
8. Defines a “beer manufacturer” to mean any holder of a beer manufacturer’s license, any holder of an out-of-state beer manufacturer’s certificate, or any holder of a beer and wine importer’s general license.

Background

Purpose of the bill. According to the author’s office, “California brandy wholesalers and distilled spirits wholesalers must achieve qualifications related to the quality, storage, and ownership of California brandy and distilled spirits stock to maintain their licenses. However, existing law does not provide qualifications for beer wholesalers. AB 2469 would bring parity to California law by setting forth qualifications for a beer wholesaler consistent with qualifications for brandy and distilled spirits wholesalers.”

Distilled spirits wholesalers qualifications. Current regulations, Rule 28 of Article 5 of Division 1 of Title 4 of the California Code of Regulations, requires that any person who holds a distilled spirits wholesaler’s license to meet specific qualifications in connections with the licensees premises licensed as the licensees principal place of business.

Those qualifications require the licensee to maintain warehouse space that is sufficient to either; (1) store at one time either a stock of distilled spirits equal to 10% or more of the licensees annual sales to retailers; (2) a stock of distilled spirits whose costs of acquisition is $100,000 or more. The licensee is also required to maintain a stock of distilled spirits consisting of either no less than 5% of annual sales or whose cost of acquisition is $100,000 or more.

A stock of distilled spirits are also required to be owned by the licensee, not held on consignment, and not acquired pursuant to a prior agreement to sell it to a specific licensee or licensees

This bill seeks to establish similar qualifications for beer wholesalers.

Author’s amendments. The author will be taking the following amendments in committee to ensure that the acquisition costs are not a barrier for entry for a startup wholesaler and to fix drafting errors.

1. On page 2, beginning on line 17, strike out “or whose cost of acquisition is one hundred thousand dollars ($100,000) or more.”
2. On page 2, beginning on line 22, strike out “or whose cost of acquisition is one hundred thousand dollars ($100,000) or more.”
3. On page 2, line 15, strike out, “either”.
4. On page 2, line 30, after “maintain”, insert “the”.

Prior/Related Legislation

SB 1164 (Skinner, 2018) would make various changes to the craft distiller’s license, including eliminating the requirement that a person must attend a tasting before being able to purchase prepackaged containers of the licensee’s spirits directly from the craft distiller and increasing the maximum amount of distilled spirits that a craft distiller is permitted to manufacture from 100,000 gallons to 150,000. (Pending in the Assembly Governmental Organization Committee)

AB 1890 (Levine, 2018) would allow a licensed craft distiller to share a common area with a licensed winegrower or a licensed small beer manufacturer, as long as specified conditions are met and their premises of production are adjacent to each other. (Pending in the Senate Appropriations Committee)

AB 1891 (Levine, 2018) would allow a licensed craft distiller to instruct consumers and conduct tastings on the premises of an on-sale and off-sale retailer, as long as certain specified conditions are met. (Pending in the Senate Appropriations Committee)

AB 1986 (Cunningham, 2018) would expand an existing Tied-house exception within the Act to allow a licensed craft distiller to give or sell distilled spirits to nonprofit organizations for the purpose of assisting in fund-raising efforts. (Pending in the Senate Appropriations Committee)

AB 997 (Aguiar-Curry, Chapter 788, Statutes of 2017) allowed a licensed winegrower and a licensed small beer manufacturer, whose premises of production are immediately adjacent to each other, to share a common area in which the consumption of alcoholic beverages is permitted, under specified circumstances.

AB 2913 (Committee on Governmental Organization, Chapter 423, Statutes of 2016) among other things, revised the definition of a licensed "distilled spirits rectifier", as defined.

AB 1295 (Levine, Chapter 640, Statutes of 2015) created a new "craft distiller's license" in the Act with specified privileges and limited to persons who manufacture less than 100,000 gallons of distilled spirits annually, exclusive of brandy production.

AB 776 (Cooper, Chapter 519, Statutes of 2015) allowed a licensed beer manufacturer to apply to the ABC for a brewery event permit that grants the licensee the privilege of selling beer it produces for consumption on property contiguous and adjacent to its licensed premises for special events (up to four such events in a calendar year).

AB 2004 (Chesbro, Chapter 806, Statutes of 2014) authorized a licensed beer manufacturer to apply to ABC for a certified farmers' market beer sales permit, which allows the licensee to sell packaged beer at a farmers' market, including any specified area, under certain conditions.

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

SUPPORT:

California Beer and Beverage Distributors (Source)

Ace Beverage LLC

Advance Beverage Company

Allied Beverages

Couch Distributing Company, Inc.

Crest Beverage LLC

DBI Beverage Modesto

DBI Beverage Napa

DBI Beverage San Francisco

DBI Beverage San Joaquin

DBI Beverage San Jose

DBI Beverage Truckee

Harbor Distributing LLC

Markstein Sales Company

Pacific Beverage Company

OPPOSITION:

Alcohol Justice

ARGUMENTS IN SUPPORT: According to the California Beer and Beverage Distributors, “beer distributors inventory systems enable superior freshness management for perishable beer through the use of First In and First Out inventory quality controls, a distributor practice recognized and affirmed in agreements with brewers. This comprehensive system of quality control from arrival through unloading, storage, maintenance and delivery to retailers assures beer freshness and traceability for health and safety purposes. In the event of recalls, these distributor inventory systems can quickly identify those beer packages that a distributor must immediately retrieve and remove from the marketplace to protect public safety and beer quality.”

ARGUMENTS IN OPPOSITION: According to Alcohol Justice, “allowing for the delivery of alcoholic beverages increases availability and makes enforcement of laws prohibiting sales to intoxicated or underage persons more difficult as a result of sales transaction taking place at a location different than that of the licensed off-sale premises.”

Date of Hearing: April 18, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 2469

Author:(Berman) – As Introduced Ver:February 14, 2018

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

SUMMARY:

This bill prohibits an off-sale licensee from delivering an alcoholic beverage that is ordered digitally without proof of age or identity.

FISCAL EFFECT:

No additional state costs.

COMMENTS:

Background and purpose. Existing law prohibits an off-sale licensee from delivering alcoholic beverages from an order received over the telephone or by other electronic means without proof of age and identity. According to the California Beer and Beverage Distributors, AB 2469’s sponsor, there is concern that not all forms of electronic communication are covered by this statute because of a technical distinction between digital information and electronic information. This bill updates existing law to ensure that alcoholic beverages are not delivered to minors, no matter how the order was received.

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

Date of Hearing: April 4, 2018

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 2469 (

Author:Berman) – As Introduced Ver:February 14, 2018

SUBJECT: Alcoholic beverages: off-site licensees

SUMMARY: Prohibits an off-sale licensee from delivering alcoholic beverages from an order received by "digital means" without proof of age and identity. Specifically, this bill:

1) Provides that no off-sale licensee shall deliver any alcoholic beverages pursuant to orders received for alcoholic beverages by digital means unless upon delivery the recipient shall be able to furnish proof of age and identity to indicate that he or she is 21 years of age or over.

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.

2) Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state and the collection of license fees for this purpose.

3) Separates the alcoholic beverage industry into three component parts, or tiers, of the manufacturer (including breweries, wineries, and distilleries), wholesaler, and retailer (both on-sale and off-sale). This is referred to as the “tied-house” law or the “three-tier” system. Generally, other than exceptions 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.

4) Defines “sell” or “sale” and “to sell” to include any transaction whereby, for any consideration, title to alcoholic beverages is transferred from one person to another, and includes the delivery of alcoholic beverages pursuant to an order placed for the purchase of such beverages and soliciting or receiving an order for such beverages.

5) Provides that every person who sells, furnishes, gives, or causes to be sold, furnished, or given away any alcoholic beverage to any person under 21 years of age is guilty of a misdemeanor.

6) Prohibits an off-sale licensee shall deliver any alcoholic beverages pursuant to orders received for alcoholic beverages by telephone or other electronic means unless upon delivery the recipient shall be able to furnish proof of age and identity to indicate that he or she is 21 years of age or over. (BPC Section 25605)

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill. According to the author’s office, existing law prohibits an off-sale licensee from delivering alcoholic beverages from an order received over the telephone or other electronic means without proof of age and identity.

Modern technological advancements such as digital communication have resulted in new ways for individuals to order alcoholic beverages delivery. Digital communication devices include, but are not limited to high definition televisions, cell phones, the internet, and e-mail. AB 2469 would additionally prohibit an off-sale licensee from delivering alcoholic beverages from an order received by "digital means" without proof of age and identity. This bill is intended to close a technological loophole in state law to prevent underage drinking and protect the public health.

In support. The California Beer and Beverage Distributors is the sponsor of this bill, and states that "there is some concern that current law may not necessary cover all forms of electronic communications. There is a big difference between "electronic" and digital". Information is often both electronic and digital, but there is some that is only electronic and some that is only digital"

Related legislation. SB 254 (Portantino) of 2017. This bill would prohibit a delivery network company, as defined, from delivering alcoholic beverages unless it has a system, reviewed and approved by ABC by January 1, 2020, that meets specified requirements, including that the company can verify that the products are delivered to a person who is 21 years of age or older. This bill also prohibits a delivery network company from delivering alcoholic beverages to consumers on the grounds of a college or university. (Pending in Assembly G.O. Committee)

Prior legislation. SB 818 (Senate Governmental Organization Committee), Chapter 337, Statutes of 2013. The bill made non-controversial, clarifying and code maintenance changes to the Act. The bill amended BPC Section 25605 to recognize forms of electronic communication, in addition to the telephone, by which alcohol orders may be placed. BPC Section 25605 was enacted in 1963 before e-mail and other forms of electronic communication existed.

REGISTERED SUPPORT / OPPOSITION:

Support

California Beer and Beverage Distributors (Sponsor)

Opposition

Alcohol Justice

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