The Alcoholic Beverage Control Act provides for the issuance of various categories of alcoholic beverage licenses, including the imposition of fees, conditions, and restrictions in connection with the issuance of those licenses. The act provides that any on-sale licensee authorized to sell wine may also sell soju, an imported Korean alcoholic beverage, as specified, and shochu, an imported Japanese alcoholic beverage, as specified.

This bill would provide that any on-sale licensee authorized to sell wine may also sell domestically produced soju and shochu, as specified.

The Alcoholic Beverage Control Act provides for the issuance of various categories of alcoholic beverage licenses, including the imposition of fees, conditions, and restrictions in connection with the issuance of those licenses. The act provides that any on-sale licensee authorized to sell wine may also sell soju, an imported Korean alcoholic beverage, as specified, and shochu, an imported Japanese alcoholic beverage, as specified.

This bill would provide that any on-sale licensee authorized to sell wine may also sell domestically produced soju and shochu, as specified.

The Alcoholic Beverage Control Act provides for the issuance of various categories of alcoholic beverage licenses, including the imposition of fees, conditions, and restrictions in connection with the issuance of those licenses. The act provides that any on-sale licensee authorized to sell wine may also sell soju, an imported Korean alcoholic beverage, as specified, and shochu, an imported Japanese alcoholic beverage, as specified.

This bill would provide that any on-sale licensee authorized to sell wine may also sell domestically produced soju and shochu, as specified.

 THIRD READING  

Bill No: AB 2069

Author: Gallagher (R), et al.

Introduced: 2/5/24

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 15-0, 6/11/24

AYES: Dodd, Wilk, Alvarado-Gil, Archuleta, Ashby, Bradford, Glazer, Jones, Nguyen, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto

NO VOTE RECORDED: Smallwood-Cuevas

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 65-0, 5/9/24 (Consent) - See last page for vote

SUBJECT: Sale of soju and shochu

SOURCE: Author

DIGEST: This bill allows any on-sale licensee authorized to sell wine to also sell domestically produced soju and shochu, in addition to imported soju and shochu.

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. 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) and an “off-sale” license as authorizing the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.
3. Authorizes any on-sale licensee authorized to sell wine to also sell the following:
   1. Soju, an imported Korean alcoholic beverage that contains not more than 24% alcohol by volume (ABV) and is derived from agricultural products.
   2. Shochu, an imported Japanese alcoholic beverage that contains not more than 24% ABV and is derived from agricultural products.
4. Defines “wine” to mean the product obtained from normal fermentation of the juice of sound ripe grapes or other agricultural products containing natural or added sugar or any such alcoholic beverage to which is added grape brandy, fruit brandy, or spirits of wine, which is distilled from the particular agricultural product or products of which the wine is made and other rectified wine products and by whatever name and which does not contain more than 15% added flavoring, coloring, and blending material and which contains not more than 24% of ABV, and includes vermouth and sake, known as Japanese rice wine.
5. Defines “bona fide public eating place” to mean a place which is regularly and in a bona fide manner used and kept open for the serving of meals to guests for compensation and which has suitable kitchen facilities connected therewith, containing conveniences for cooking an assortment of foods which may be required for ordinary meals, the kitchen of which must be kept in a sanitary condition with the proper amount of refrigeration for keeping of food on said premises and must comply with all the regulations of the local Department of Health.

This bill authorizes any on-sale license authorized to sell wine, to also sell domestically produced soju and shochu, alcoholic beverages that contain not more than 24% ABV and are derived from agricultural products.

Background

1. Author Statement. According to the author’s office, “AB 2069 addresses the current disparity within liquor regulations that unfairly restrict on-sale licensees from selling domestically produced soju and shochu. While restaurants with on-sale privileges are permitted to offer imported versions of these beverages, they are barred from showcasing locally crafted alternatives, made right here in California. AB 2069 seeks to rectify this imbalance by allowing on-sale licensees to sell domestically produced soju and shochu, thereby supporting local farmers and fostering economic growth within California.”
2. Soju. Soju is a popular Korean alcoholic beverage that is traditionally made from various grains, such as rice, wheat, barley, or sweet potatoes. Although it can be made from rice, soju is not a “rice wine” and it’s very different from sake, which hails from Japan. Soju is distilled, like vodka, it has a clear color and a mild taste, and it usually contains about 20% ABV. Soju is often consumed as a small pour that is consumed as a shot or sip or mixed with other drinks. Beyond its long-standing Korean origins, soju has expanded into the international market, where it has become well-known and accepted as one of the most widely consumed spirits worldwide.
3. Shochu. Shochu is a Japanese traditional hard liquor that has been around for approximately 500 years. It is predominantly manufactured in Japan’s southern regions of Okinawa and Kyushu, where it was first developed. It is generally a clear white spirit that’s distilled from rice, barley, sweet potatoes, buckwheat, or brown sugar, though it is sometimes produced from other ingredients such as chestnut, meaning “burned liquor,” which refers to the heating process during distillation. Shochu is a lower-proof spirit, typically 24% ABV or less, but can contain higher ABV in certain cases. According to the Alcohol and Tobacco Tax and Trade Bureau, shochu is not considered wine. Traditional pouring styles range from being served straight, on the rocks, or long with tonic or soda.
4. Regulation of Soju and Shochu. According to the Department of ABC, soju and shochu are classified as a distilled spirit, allowing them to be sold in liquor stores, grocery stores, bars, and restaurants, with distilled spirits retail privileges. However, in 1998, the legislature passed SB 1710 (Polanco, Chapter 204, Statutes of 1998), which authorized any on-sale licensee authorized to sell wine to also sell soju, an imported Korean alcoholic beverage that contains not more than 24% ABV and is derived from agricultural products.

Last year, AB 416 (Muratsuchi, Chapter 653 Statutes of 2023) established the same exception for shochu that already existed for soju, an imported Korean alcoholic beverage. Specifically, the bill allowed an on-sale license with wine privileges (e.g. Type 41 or Type 42 license) to also sell shochu, an imported Japanese distilled spirit up to 24% ABV that is derived from agricultural products. Under previous California law and Department of ABC regulations, Japanese shochu could be sold in California restaurants with a wine sales license only if it was labeled as soju, a traditional Korean distilled spirit.

The Department of ABC had previously published industry guidance on its interpretation of the soju exception. Specifically, the department clarified that the exception only applied to soju imported from any country and not solely Korea (it does not apply to soju made in the United States; imported product may be bottled in the United States as long as no other treatment occurs). This same interpretation and application of law now applies to shochu. Additionally, products labeled as containing a mix of soju and shochu qualify for this exception provided they meet the importation requirement and are within the 24% ABV limit.

Soju and shochu have a long and celebrated history within the United States. More specifically, the sale of soju in California has increased in recent years, as more people have become interested in Korean culture and cuisine. Soju is especially popular among young adults and Asian Americans, who enjoy its versatility and affordability. Soju can also be used to make various cocktails, such as soju bomb, soju mojito, and soju margarita. Soju connoisseurs believe that soju can help to promote cultural diversity and exchange.

This bill expands the two related privileges in the ABC Act to allow a licensee authorized to sell wine to also sell soju and shochu made in the United States, rather than solely imports, as is currently the case.

1. On-sale Alcohol License Types. There are generally two main types of alcohol licenses for the on-sale of beer, wine and distilled spirits; general licenses and non-general licenses. General licenses generally allow for the sale of beer, wine, and distilled spirits while non-general licenses only allow the sale of beer and wine, but not distilled spirits. The term “on-sale” refers to the ability of the licensee to allow consumers to consume alcoholic beverages on the license premises.

There are four main types of on-sale license types. Two of these, Type 47 and Type 48 licenses, are on-sale general licenses and therefore already allow for the consumption of distilled spirits. The other two, Type 41 and Type 42 licenses, are non-general and only allow for the consumption of beer and wine. A Type 41 licensee is required to maintain a bona-fide public eating-place and thus generally operate as a restaurant. A Type 42 licensee is not required to maintain a bona-fide public eating-place and thus generally operate as a bar. Under current law, both Type 41 and Type 42 are allowed to serve soju and sochu. However, current law describes both those products as being imported alcoholic beverages; Soju being described as an imported Korean alcoholic beverage that contains not more than 24% ABV and derived from agricultural products and sochu being described as an imported Japanese alcoholic beverage that contains not more than 24% of ABV and is derived from agricultural products.

This bill would allow any on-sale license that is currently allowed to sell wine to also sell domestically produced soju and shochu, which the bill describes as alcoholic beverages that contain not more than 24% ABV and are derived from agricultural products.

Related/Prior Legislation

SB 247 (Wilk, Chapter 212, Statutes of 2023) clarified that an alcohol license or permit is not required for the serving of wine and beer as part of any service provided by an establishment that is subject to regulation by the State Board of Barbering and Cosmetology under the Barbering and Cosmetology Act.

SB 277 (Dodd, 2023) authorized a retail package off-sale beer and wine license, also known as a Type 20 License, to sell low ABV spirits beverages, as defined, in containers no larger than 16 ounces. (Pending in the Assembly Governmental Organization Committee)

SB 788 (Ashby, Chapter 114, Statutes 2023) authorized beer manufacturers that produce 60,000 or less barrels of beer per year to manufacture cider or perry at the licensed premises and to sell cider or perry to any licensee authorized to sell wine without the need to obtain a winegrowers license.

AB 416 (Muratsuchi, Chapter 653, Statutes of 2023) allowed any on-sale licensee that is currently authorized to sell wine, to also sell shochu, an imported Japanese alcoholic beverage that contains no more than 24% ABV and is derived from agricultural products.

AB 495 (Bigelow, 2022) would have allowed any person that manufacturers or produces distilled spirits within or without this state to hold a distilled spirits importer or wholesaler’s license if the person meets specified criteria. (Held on the Senate Floor Inactive File)

AB 1046 (Choi, 2017) would have authorized any on-sale licensee authorized to sell wine to also sell shochu that contains not more than 24% ABV, as defined. (Never Heard in the Assembly Governmental Organization Committee)

AB 1322 (Daly and Wilk, Chapter 741, Statutes of 2016) allowed beauty salons and barber shops to serve their limited quantities of beer and wine at no extra charge and without obtaining a license or permit from the Department of ABC, as specified.

AB 779 (Bocanegra, Chapter 379, Statutes of 2013) authorized beer manufacturers producing more than 60,000 barrels of beer per year the privilege of also manufacturing cider or perry at their licensed premises and to sell the product to any licensee authorized to sell wine without the need to obtain a winegrowers license.

AB 1649 (Chesbro, Chapter 129, Statutes of 2010) allowed licensed winegrowers to produce spirts of wine, a byproduct of wine fermentation, without having to additionally obtain a distilled spirits manufacturer’s licenses.

SB 1710 (Polanco, Chapter 204, Statutes of 1998) authorized any on-sale licensee authorized to sell wine to also sell soju, an imported Korean alcoholic beverage that contains not more than 24% ABV and is derived from agricultural products.

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

According to the Senate Appropriations Committee, the Department of ABC’s activities are funded by regulatory and license fees and generally the department does not receive support from the General Fund. New legislative mandates, although modest in scope, may in totality create new cost pressures and impact the department’s operating costs and future budget requests.

SUPPORT: (Verified 6/28/24)

American Craft Spirits Association

American Distilling Institute

California Distillers Association

California Rice Commission

Corning and Company

DC Beverage LLC

Distilled Spirits Council of the United States

Far West Rice, Inc.

Golden Beaver Distillery

Patio29 Spirits Company

St. George Spirits

Yobo Drinks

OPPOSITION: (Verified 6/28/24)

None received

ARGUMENTS IN SUPPORT: Supporters of the bill state that this bill not only addresses the current imbalance in liquor regulations but also contributes to the support of California agriculture. Soju, traditionally distilled from agricultural products such as rice, barley, or wheat, represents an opportunity for local farmers to showcase their products in the domestic craft distillery market. By allowing on-sale licensees to sell domestically produced soju and shochu, this bill encourages the utilization of locally sourced ingredients, thus bolstering California’s agricultural sector and fostering economic growth within the state.

ASSEMBLY FLOOR: 65-0, 5/9/24

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO VOTE RECORDED: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Schiavo, Ting, Wallis

Prepared by: Felipe Lopez / G.O. / (916) 651-1530

7/2/24 9:31:58

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2023 - 2024 Regular

Bill No: AB Hearing Date: 6/11/2024

SUBJECT:

DIGEST: This bill allows any on-sale licensee authorized to sell wine to also sell domestically produced soju and shochu, in addition to imported soju and shochu.

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. 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) and an “off-sale” license as authorizing the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.
3. Authorizes any on-sale licensee authorized to sell wine to also sell the following:
   1. Soju, an imported Korean alcoholic beverage that contains not more than 24% alcohol by volume (ABV) and is derived from agricultural products.
   2. Shochu, an imported Japanese alcoholic beverage that contains not more than 24% ABV and is derived from agricultural products.
4. Defines “wine” to mean the product obtained from normal fermentation of the juice of sound ripe grapes or other agricultural products containing natural or added sugar or any such alcoholic beverage to which is added grape brandy, fruit brandy, or spirits of wine, which is distilled from the particular agricultural product or products of which the wine is made and other rectified wine products and by whatever name and which does not contain more than 15% added flavoring, coloring, and blending material and which contains not more than 24% of ABV, and includes vermouth and sake, known as Japanese rice wine.
5. Defines “bona fide public eating place” to mean a place which is regularly and in a bona fide manner used and kept open for the serving of meals to guests for compensation and which has suitable kitchen facilities connected therewith, containing conveniences for cooking an assortment of foods which may be required for ordinary meals, the kitchen of which must be kept in a sanitary condition with the proper amount of refrigeration for keeping of food on said premises and must comply with all the regulations of the local Department of Health.

This bill authorizes any on-sale license authorized to sell wine, to also sell domestically produced soju and shochu, alcoholic beverages that contain not more than 24% ABV and are derived from agricultural products.

Background

Author Statement. According to the author’s office, “AB 2069 addresses the current disparity within liquor regulations that unfairly restrict on-sale licensees from selling domestically produced soju and shochu. While restaurants with on-sale privileges are permitted to offer imported versions of these beverages, they are barred from showcasing locally crafted alternatives, made right here in California. AB 2069 seeks to rectify this imbalance by allowing on-sale licensees to sell domestically produced soju and shochu, thereby supporting local farmers and fostering economic growth within California.”

Soju. Soju is a popular Korean alcoholic beverage that is traditionally made from various grains, such as rice, wheat, barley, or sweet potatoes. Although it can be made from rice, soju is not a “rice wine” and it’s very different from sake, which hails from Japan. Soju is distilled, like vodka, it has a clear color and a mild taste, and it usually contains about 20% ABV. Soju is often consumed as a small pour that is consumed as a shot or sip or mixed with other drinks. Beyond its long-standing Korean origins, soju has expanded into the international market, where it has become well-known and accepted as one of the most widely consumed spirits worldwide.

Shochu. Shochu is a Japanese traditional hard liquor that has been around for approximately 500 years. It is predominantly manufactured in Japan’s southern regions of Okinawa and Kyushu, where it was first developed. It is generally a clear white spirit that’s distilled from rice, barley, sweet potatoes, buckwheat, or brown sugar, though it is sometimes produced from other ingredients such as chestnut, meaning “burned liquor,” which refers to the heating process during distillation. Shochu is a lower-proof spirit, typically 24% ABV or less, but can contain higher ABV in certain cases. According to the Alcohol and Tobacco Tax and Trade Bureau, shochu is not considered wine. Traditional pouring styles range from being served straight, on the rocks, or long with tonic or soda.

Regulation of Soju and Shochu. According to the Department of ABC, soju and shochu are classified as a distilled spirit, allowing them to be sold in liquor stores, grocery stores, bars, and restaurants, with distilled spirits retail privileges. However, in 1998, the legislature passed SB 1710 (Polanco, Chapter 204, Statutes of 1998), which authorized any on-sale licensee authorized to sell wine to also sell soju, an imported Korean alcoholic beverage that contains not more than 24% ABV and is derived from agricultural products.

Last year, AB 416 (Muratsuchi, Chapter 653 Statutes of 2023) established the same exception for shochu that already existed for soju, an imported Korean alcoholic beverage. Specifically, the bill allowed an on-sale license with wine privileges (e.g. Type 41 or Type 42 license) to also sell shochu, an imported Japanese distilled spirit up to 24% ABV that is derived from agricultural products. Under previous California law and Department of ABC regulations, Japanese shochu could be sold in California restaurants with a wine sales license only if it was labeled as soju, a traditional Korean distilled spirit.

The Department of ABC had previously published industry guidance on its interpretation of the soju exception. Specifically, the department clarified that the exception only applied to soju imported from any country and not solely Korea (it does not apply to soju made in the United States; imported product may be bottled in the United States as long as no other treatment occurs). This same interpretation and application of law now applies to shochu. Additionally, products labeled as containing a mix of soju and shochu qualify for this exception provided they meet the importation requirement and are within the 24% ABV limit.

Soju and shochu have a long and celebrated history within the United States. More specifically, the sale of soju in California has increased in recent years, as more people have become interested in Korean culture and cuisine. Soju is especially popular among young adults and Asian Americans, who enjoy its versatility and affordability. Soju can also be used to make various cocktails, such as soju bomb, soju mojito, and soju margarita. Soju connoisseurs believe that soju can help to promote cultural diversity and exchange.

AB 2069 expands the two related privileges in the ABC Act to allow a licensee authorized to sell wine to also sell soju and shochu made in the United States, rather than solely imports, as is currently the case.

On-sale Alcohol License Types. There are generally two main types of alcohol licenses for the on-sale of beer, wine and distilled spirits; general licenses and non-general licenses. General licenses generally allow for the sale of beer, wine, and distilled spirits while non-general licenses only allow the sale of beer and wine, but not distilled spirits. The term “on-sale” refers to the ability of the licensee to allow consumers to consume alcoholic beverages on the license premises.

There are four main types of on-sale license types. Two of these, Type 47 and Type 48 licenses, are on-sale general licenses and therefore already allow for the consumption of distilled spirits. The other two, Type 41 and Type 42 licenses, are non-general and only allow for the consumption of beer and wine. A Type 41 licensee is required to maintain a bona-fide public eating-place and thus generally operate as a restaurant. A Type 42 licensee is not required to maintain a bona-fide public eating-place and thus generally operate as a bar. Under current law, both Type 41 and Type 42 are allowed to serve soju and sochu. However, current law describes both those products as being imported alcoholic beverages; Soju being described as an imported Korean alcoholic beverage that contains not more than 24% ABV and derived from agricultural products and sochu being described as an imported Japanese alcoholic beverage that contains not more than 24% of ABV and is derived from agricultural products.

This bill would allow any on-sale license that is currently allowed to sell wine to also sell domestically produced soju and shochu, which the bill describes as alcoholic beverages that contain not more than 24% ABV and are derived from agricultural products.

Prior/Related Legislation

SB 247 (Wilk, Chapter 212, Statutes of 2023) clarifies that an alcohol license or permit is not required for the serving of wine and beer as part of any service provided by an establishment that is subject to regulation by the State Board of Barbering and Cosmetology under the Barbering and Cosmetology Act.

SB 277 (Dodd, 2023) authorizes a retail package off-sale beer and wine license, also known as a Type 20 License, to sell low ABV spirits beverages, as defined, in containers no larger than 16 ounces. (Pending in the Assembly Governmental Organization Committee)

SB 788 (Ashby, Chapter 114, Statutes 2023) authorizes beer manufacturers that produce 60,000 or less barrels of beer per year to manufacture cider or perry at the licensed premises and to sell cider or perry to any licensee authorized to sell wine without the need to obtain a winegrowers license.

AB 416 (Muratsuchi, Chapter 653, Statutes of 2023) allows any on-sale licensee that is currently authorized to sell wine, to also sell shochu, an imported Japanese alcoholic beverage that contains no more than 24% ABV and is derived from agricultural products.

AB 495 (Bigelow, 2022) would have allowed any person that manufacturers or produces distilled spirits within or without this state to hold a distilled spirits importer or wholesaler’s license if the person meets specified criteria. (Held on the Senate Floor Inactive File)

AB 1046 (Choi, 2017) would have authorized any on-sale licensee authorized to sell wine to also sell shochu that contains not more than 24% ABV, as defined. (Never Heard in the Assembly Governmental Organization Committee)

AB 1322 (Daly and Wilk, Chapter 741, Statutes of 2016) allows beauty salons and barber shops to serve their limited quantities of beer and wine at no extra charge and without obtaining a license or permit from the Department of ABC, as specified.

AB 779 (Bocanegra, Chapter 379, Statutes of 2013) authorizes beer manufacturers producing more than 60,000 barrels of beer per year the privilege of also manufacturing cider or perry at their licensed premises and to sell the product to any licensee authorized to sell wine without the need to obtain a winegrowers license.

AB 1649 (Chesbro, Chapter 129, Statutes of 2010) allows licensed winegrowers to produce spirts of wine, a byproduct of wine fermentation, without having to additionally obtain a distilled spirits manufacturer’s licenses.

SB 1710 (Polanco, Chapter 204, Statutes of 1998) authorized any on-sale licensee authorized to sell wine to also sell soju, an imported Korean alcoholic beverage that contains not more than 24% ABV and is derived from agricultural products.

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

SUPPORT:

American Craft Spirits Association

American Distilling Institute

California Distillers Association

California Rice Commission

Corning and Company

DC Beverage LLC

Distilled Spirits Council of the United States

Far West Rice, Inc.

Golden Beaver Distillery

Patio29 Spirits Company

St. George Spirits

Yobo Drinks

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: Supporters of the bill state that, “AB 2069 not only addresses the current imbalance in liquor regulations but also contributes to the support of California agriculture. Soju, traditionally distilled from agricultural products such as rice, barley, or wheat, represents an opportunity for local farmers to showcase their products in the domestic craft distillery market. By allowing on-sale licensees to sell domestically produced soju and shochu, AB 2069 encourages the utilization of locally sourced ingredients, thus bolstering California’s agricultural sector and fostering economic growth within the state.”

Date of Hearing: May 1, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2069

Author:(Gallagher) – As Introduced Ver:February 5, 2024

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

SUMMARY:

This bill allows an on-sale licensee authorized to sell wine to also sell domestically produced soju and shochu, in addition to imported soju and shochu.

FISCAL EFFECT:

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

This committee sees a wide array of bills that propose to modify the scope of alcohol laws. Generally, bills such as this one that grant licensees a relatively limited new privilege do not generate major new workload for ABC, but taken together, these proposals could lead to significant new costs and future budget requests. In this case, ABC notes it receives very few complaints related to soju or shochu violations.

COMMENTS:

1. Purpose. According to the author:

While restaurants with on-sale privileges are permitted to offer imported versions of [soju and shochu], they are barred from showcasing locally crafted alternatives, made right here in California. AB 2069 seeks to rectify this imbalance by allowing on-sale licensees to sell domestically produced soju and shochu, thereby supporting local farmers and fostering economic growth within California.

This bill is supported by distillery businesses and associations and the California Rice Commission.

1. Soju and Shochu. Existing law allows the sale of soju, defined as an imported Korean alcoholic beverage containing no more than 24% ABV and derived from agricultural products, by on-sale licensees authorized to sell wine. AB 416 (Muratsuchi), Chapter 653, Statutes of 2023, expanded this exception to the sale of shochu, defined as an imported Japanese alcoholic beverage with the same ABV and derivation as soju. These exceptions allow licensees to sell the beverages without acquiring a more expensive and scarce on-sale license authorizing the sale of distilled spirits. This bill grants domestically produced soju and shochu the same exception as imported beverages.
2. Prior Legislation. AB 1046 (Choi), of the 2017-2018 Legislative Session, was substantially similar to this bill. AB 1046 was not heard in the Committee on Governmental Organization at the request of the author.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 17, 2024

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Blanca Rubio, Chair

ABPCA Bill Id:AB 2069 (

Author:Gallagher) – As Introduced Ver:February 5, 2024

SUBJECT: Sale of soju and shochu

SUMMARY: The Alcoholic Beverage Control Act (Act) provides that any on-sale licensee authorized to sell wine may also sell soju, “an imported” Korean alcoholic beverage, as specified, and shochu, “an imported” Japanese alcoholic beverage, that contains not more than 24 percent of alcohol by volume and is derived from agricultural products.

AB 2069 would provide that any on-sale licensee authorized to sell wine may also sell “domestically produced” soju and shochu, as specified.

EXISTING LAW:

1) Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the Alcoholic Beverage Control Act (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 and the collection of license fees for this purpose.

2) Provides, under the Act, for the issuance of various categories of alcoholic beverage licenses, including the imposition of fees, conditions, and restrictions in connection with the issuance of those licenses.

3) States “Wine” means the product obtained from normal alcoholic fermentation of the juice of sound ripe grapes or other agricultural products containing natural or added sugar or any such alcoholic beverage to which is added grape brandy, fruit brandy, or spirits of wine, which is distilled from the particular agricultural product or products of which the wine is made and other rectified wine products and by whatever name and which does not contain more than 15 percent added flavoring, coloring, and blending material and which contains not more than 24 percent of alcohol by volume, and includes vermouth and sake, known as Japanese rice wine. (CA Bus & Prof Code § 23007)

4) Provides any on-sale license, issued that authorizes the sale of wine, also authorizes the sale of all of the following:

a) Soju, an imported Korean alcoholic beverage that contains not more than 24 percent of alcohol by volume and is derived from agricultural products.

b) Shochu, an imported Japanese alcoholic beverage that contains not more than 24 percent of alcohol by volume and is derived from agricultural products. (CA Bus & Prof Code § 23398.5)

5) Provides that anyone who imports and re-sells shochu and/or soju to retailers must hold a Distilled Spirits Importer (Type 12) license and a Distilled Spirits Wholesaler (Type 18) license because these products are defined as distilled spirits.

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 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.

7) Defines “bona fide public eating place” as a licensed premises that are maintained in good faith and used for the regular service of meals to patrons. The premises must have suitable kitchen facilities and supply an assortment of foods commonly ordered at various hours of the day. (CA Bus & Prof Code §§ 23038 and 23787)

FISCAL EFFECT: This bill is keyed fiscal by Legislative Counsel.

COMMENTS:

Purpose of the bill. According to the author’s office, “AB 2069 addresses the current disparity within liquor regulations that unfairly restrict on-sale licensees from selling domestically produced soju and shochu. While restaurants with on-sale privileges are permitted to offer imported versions of these beverages, they are barred from showcasing locally crafted alternatives, made right here in California. AB 2069 seeks to rectify this imbalance by allowing on-sale licensees to sell domestically produced soju and shochu, thereby supporting local farmers and fostering economic growth within California.

Background.

What is Soju? Soju is a popular Korean alcoholic beverage that is traditionally made from various grains, such as rice, wheat, barley, or sweet potatoes. Although it can be made from rice, soju is not a “rice wine” and it’s very different from sake, which hails from Japan. Soju is distilled, like vodka, it has a clear color and a mild taste, and it usually contains about 20% alcohol by volume (ABV). Soju is often consumed as a small pour that is consumed as a shot or sip or mixed with other drinks. Beyond its long-standing Korean origins, soju has expanded into the international market, where it has become well-known and accepted as one of the most widely consumed spirits worldwide.

What is Shochu? Shochu is Japan’s indigenous distilled spirit and has been around for approximately 500 years. It is most predominately made in Japan’s southern regions of Okinawa and Kyushu, where it was first developed. It is a clear white spirit that's distilled from rice, barley, sweet potatoes, buckwheat, or brown sugar, though it is sometimes produced from other ingredients such as chestnut, sesame seeds, potatoes, or even carrots. The word shochu is the Japanese rendition of the Chinese, meaning “burned liquor,” which refers to the heating process during distillation. Shochu is a lower-proof spirit, typically 24% ABV or less---but can contain higher alcohol percentages. It is not considered to be “wine” by the Alcohol and Tobacco Tax and Trade Bureau. Traditional pouring styles range from being served straight, on the rocks, or long with tonic or soda.

According to the ABC, soju and shochu are classified as a distilled spirit, allowing them to be sold in liquor stores, grocery stores, bars, and restaurants, with distilled spirts retail privileges. However, in 1998, the legislature passed an exception in law (Stats. 1998, Ch. 204, Sec. 1.) that allowed on-sale retailers who hold a beer and wine license to sell soju, defined in statute as “an imported Korean alcoholic beverage.” Specifically, an on-sale license (restaurant, beer and wine bar, etc.) that is authorized to sale wine, can offer for sale soju, as long as it is “an imported Korean alcoholic beverage that contains not more than 24 percent of alcohol by volume and is derived from agricultural products.”

Last year, AB 416 (Muratsuchi), Statutes of 2023 amended CA Bus & Prof Code § 23398.5 to establish the same exception for shochu that already existed for soju, an imported Korean alcoholic beverage. Specifically, the bill allowed an on-sale license with wine privileges (e.g. Type 41 or Type 42 license) to also sell shochu, an imported Japanese distilled spirit up to 24 percent alcohol by volume that is derived from agricultural products. Under previous California law and ABC regulations, Japanese shochu could be sold in California restaurants with a wine sales license only if it was labeled as soju, a traditional Korean distilled spirit.

ABC had previously published industry guidance on its interpretation of the soju exception. Specifically, ABC clarified that the exception only applied to soju imported from any country and not solely Korea (it does not apply to soju made in the United States; imported product may be bottled in the U.S. as long as no other treatment occurs). This same interpretation and application of law now applies to shochu. Additionally, products labeled as containing a mix of soju and shochu qualify for this exception provided they meet the importation requirement and are within the ABV limit.

Soju and shochu have a long and celebrated history within the United States. More specifically, the sale of soju in California has increased in recent years, as more people have become interested in Korean culture and cuisine. Soju is especially popular among young adults and Asian Americans, who enjoy its versatility and affordability. Soju can also be used to make various cocktails, such as soju bomb, soju mojito, and soju margarita. Soju connoisseurs believe that soju can help to promote cultural diversity and exchange.

AB 2069 expands the two related privileges in the ABC Act to allow a licensee authorized to sell wine to also sell soju and shochu made in the United States, rather than solely imports, as is currently the case.

ABC on-sale license types. There are two main types of ABC licenses for on-sale beer, wine and distilled spirts sales:

General License: These licenses often include distilled spirts. For instance, license Types 47 and 48.

Non-General License: Mainly reserved for beer and wine sales. For instance, license Types 40, 41, and 42.

Type 41 (On-sale Beer & Wine – Eating Place (Restaurant). Authorizes the sale of beer and wine for consumption on or off the premises where sold. Distilled spirits may not be sold. Must operate and maintain the licensed premises as a bona fide eating place. Must maintain suitable kitchen facilities, and must make actual and substantial sales of meals for consumption on the premises. Minors are allowed on the premises.

Type 42 (On-sale Beer & Wine – Public Premises (Bar, Tavern). Authorizes the sale of beer and wine for consumption on or off the premises where sold. No distilled spirits may be on the premises. Minors are not allowed to enter and remain. Food service is not required.

Type 47 (On-sale General – Eating Place (Restaurant). Authorizes the sale of beer, wine and distilled spirits for consumption on the licenses premises. Authorizes the sale of beer and wine for consumption off the licenses premises. Must operate and maintain the licensed premises as a bona fide eating place. Must maintain suitable kitchen facilities, and must make actual and substantial sales of meals for consumption on the premises. Minors are allowed on the premises.

Type 48 (On-sale General – Public Premises (Bar, Night Club). Authorizes the sale of beer, wine and distilled spirits for consumption on the premises where sold. Authorizes the sale of beer and wine for consumption off the premises where sold. Minors are not allowed to enter and remain. Food service is not required.

In support. Supporters of this bill indicate that restaurants interested in selling domestic shochu and soju are required to obtain a more expensive on-sale general license type, which allows the sale of distilled spirits. Even though the domestic products meets the same requirements that are in place for the imported products, they do not enjoy the same exemption under current law. AB 2069 not only addresses the current imbalance in the Act but also contributes to the support of California agriculture. Soju, traditionally distilled from agricultural products such as rice, barley, or wheat, represents an opportunity for local farmers to showcase their products in the domestic craft distillery market. Supporters further note that by allowing on-sale licensees to sell domestically produced soju and shochu, this bill encourages the utilization of locally sourced ingredients, thus bolstering California's agricultural sector and fostering economic growth within the state. This bill is a critical step toward creating a fairer and more competitive business environment for California producers.

The Distilled Spirits Council of the United States (DISCUS) states, “AB 2609 not only addresses the current imbalance in liquor regulations but also contributes to the support of California agriculture. Soju, traditionally distilled from agricultural products such as rice, barley, or wheat, represents an opportunity for local farmers to showcase their products in the domestic craft distillery market. By allowing on-sale licensees to sell domestically produced soju and shochu, this bill encourages the utilization of locally sourced ingredients, thus bolstering California's agricultural sector and fostering economic growth within the state. DISCUS believes that this bill represents an important step towards creating a more equitable and competitive business environment and level playing field for all stakeholders.”

Prior legislation. AB 416 (Muratsuchi), Chapter 653, Statutes of 2023. Allowed an on-sale licensee authorized to sell wine to also sell shochu, defined as an imported Japanese alcoholic beverage containing no more than 24% of alcohol by volume (ABV) and derived from agricultural products.

SB 788 (Ashby), Chapter 114, Statutes of 2023. Authorized beer manufacturers that produce 60,000 or less barrels of beer per year to manufacture cider or perry at the licensed premises and to sell cider or perry to any licensee authorized to sell wine without the need to obtain a winegrowers license.

AB 1046 (Choi), of the 2017-2018 Legislative Session. Would have authorized the sale of shochu similar to soju, but would have specified that such soju or shochu is not required to be produced in Korea or Japan. (The bill was not heard in the Assembly Committee on Governmental Organization at the request of the author)

AB 779 (Bocanegra), Chapter 379, Statutes of 2013. Authorized beer manufacturers producing more than 60,000 barrels of beer per year the privilege of also manufacturing cider or perry at their licensed premises and to sell the product to any licensee authorized to sell wine without the need to obtain a winegrowers license.

SB 1710 (Polanco), Chapter 204, Statutes of 1998. Authorized any on-sale licensee authorized to sell wine to also sell soju, an imported Korean alcoholic beverage that contains not more than 24 percent ABV and is derived from agricultural products

REGISTERED SUPPORT / OPPOSITION:

Support

American Craft Spirits Association
American Distilling Institute
California Distillers Association
California Rice Commission
Corning & Company
DC Beverage LLC
Distilled Spirits Council of The United States
Far West Rice, INC
Golden Beaver Distillery, INC
Patio29 Spirits Company
St. George Spirits, INC
Yobo Drinks

Opposition

None on file

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