Senate Standing Committee on Environmental Quality

All right. Good morning. We're going to start in 30 seconds. Let me know when you're ready. It's exactly 9am and we're a timely committee. We are ready. Okay. Good morning, everybody. We are officially calling this committee to order. This is the Senate Environmental Quality Committee. It's 9:00am and we have one item to hear. It is AB 720.

This is pursuant to Senate Rule 2910. So, we will invite up the author as we start as a subcommittee and encourage all members of this committee to come to room 2200 as soon as possible. So Assemblymember Rogers, go ahead.

Thank you so much, Chair. So, AB 720 actually started as a really simple bill as I know that they all do. Really trying to help the Wine Institute and the wine industry here in California.

As you all know, demographic shifts have happened where younger folks are drinking less and then couple that with what we've seen from tariffs and the impact that that's having on wine from California. And specifically, the way that Canada has reacted has really been difficult for wine and for winemakers.

We originally sought out to start by fixing an error with ABC, where in which they were classifying, adding in what's generally called the angel share, which is loss of evaporation as you age wine, that they were calling it a separate production facility. We were trying to fix that issue.

We also allowed for events to be able to be held in vineyards to create more of an experience to try to bolster the tourism aspect of wine. And then just recently we hit what is critical, and I'll let our sponsors come up and talk about this as well, critical issue for the industry where in which the bottle bills that have previously been passed by the legislature.

CalRecycle has been behind on issuing their regulations and their guidance. The regulations were actually due this year and are still not done.

So, this bill would now extend out that date for implementation for those who are trying to comply and also address a mix up where in which original guidance was given for the size of the QR code. Diligently, folks followed that guidance, printed bottles.

We're talking tens of millions of dollars of investment from wineries in terms of the bottling and the equipment only to have then now guidance come back changing that after folks have been through the process. We want to grandfather in those bottles so that they don't go to waste as well.

So, with me, I'll go ahead and bring up - we've got Tim Smelzer with the Wine Institute. We also have Rachel Michelin from the California Retailers Association.

Welcome. Come forward and you may begin when ready.

Good morning. Tim Schmelzer with Wine Institute. We represent approximately a thousand wineries throughout California. We're here in strong support of this legislation. I want to thank the committee for its analysis. I think you hit our points pretty well.

But just to reiterate, the delay in implementation of some of these labeling requirements are really important, particularly for small wineries. When the wine industry entered the Bottle Bill program, the number of folks that were subject to the bottle bill, I think quadrupled overnight.

And the overwhelming majority of the wineries subject to this are small businesses, many of whom have 8 to 10 different varietals that they sell every year. Every single year they need new labels for those. And it's just been difficult for the industry to keep up with these labeling requirements.

This delay will help get caught up and ensure everybody's in compliance. This helps both the wineries to ensure they're not subject to enforcement for these label, for the labeling element, and also the retailer so they can continue to sell those products.

Probably most importantly to us, it should be noted that none of these delays in the labeling compliance date affect the need for wineries to continue to register with the program, pay all associated fees and so on. So, all of the other elements of the program remain in place.

If you take any wine bottle, regardless of whether it's labeled, you still get your deposit back when you pay it. All of those parts of the program are in place. Obviously, we're extremely supportive of the other elements of the bill that the Assemblymember mentioned regarding the barrel topping and the wine tasting events. Thank you very much.

And I'm not Rachel. Rachel stuck at another hearing, but Leticia Garcia with the California Retailers Association. You know, the California Retailer Associations, along with other California businesses support supported SB 1013, the Atkins Bill from 2022, which expanded the Bottle Bill program to include white and distilled spirits.

And despite the new compliance obligations and costs for our members. Among other provisions, SB 1013 required that these newly included beverage containers to be compliant with the bottle bill labeling requirements by July 1st of 2025.

Unfortunately, like the Assemblymember said, CalRecycles regulations for these labeling requirements are still in the rulemaking process and were not finalized before the compliance date of July 1st.

AB 720 simply extends the labeling compliance date by one year to allow the regulations to take effect and codifies requirements for the use of a QR code in place of the CRV verbiage on beverage containers, providing clarity that will enable the printing and affixing of proper labels.

The California Retailers support AB 720 in order for the regulations to be adopted and for all entities, manufacturers, distributors, and retail establishments to make the necessary steps to comply. AB 720 ultimately preserves a consumer choice while the regulations are being finalized. Thank you.

Okay. Thank you. Is there anybody else in the room who would wish to express support? Please come forward.

Good morning, Madam Chair and members. Gavin Mchugh, on behalf of the Distilled Spirits Council. We support the bill. Thank you.

Good morning, Madam Chair and members. Kate Bell, on behalf of Pernod Ricard, we are also in strong support specifically for the CRV labeling extension. Thank you.

Good morning, Madam Chair, members of the committee. Louis Brown with the Law Offices of Kahn, Soares, and Conway, on behalf of the California Grocers Association, in support.

Good morning, Madam Chair, and members. Cesar Diaz, on behalf of Diageo, in support.

Good morning, Chair and members. Anna Vasquez with Dodd & Chaaban Strategies, on behalf of California Distillers Association and Family - Jackson Family Wines, here in support. Thank you.

Okay. Thank you. Do we have any opposition in the room wishing to come forward and testify, in opposition? Okay. Seeing none. Do we have any opposition in the room who would like to express opposition at the microphone? All right, not seeing any. We will bring it back to the Committee for any questions or comments. Do we have a quorum?

Okay. Yes. Senator Menjivar?

As a member, I was a little confused. Did you bring a sample of this wine that we're looking to vote on?

Well, the good news is this applies equally across the entire industry. So, you just let us know what your favorite is and will make sure that you get a sample.

Thank you for entertaining me.

Well, so given that we're still waiting for a quorum, I'll just ask a few questions. So, what does the bottling - what does the label say?

Yeah, Tim, do you want to get into the specifics?

The bill's addressing the need for containers subject to the bottle bill to contain. We call it CRV labeling. And there's a number of choices here, so we use the shorthand CRV, and most wineries are using the letter CRV; on their labeling, you can do California Redemption Value. I think there's a number of other choices.

Also alluded to the possible use of QR codes.

That was an element of SB 1013 when it passed, to create for the first time, the opportunity to put a QR code in lieu of that CRV and so that not only could customers recognize that it's that you can get a deposit back, but you can also scan the code, get information on where to recycle it, more information about the product, sometimes nutritional value information, things of that nature.

So, this is the labeling element that we're talking about. Wine and, I know spirits probably similarly, but I can't speak to, has to get new labels all the time, different than other products that have previously been subject to the bottle bill. And that's why this extension is so important to us.

Including something as simple as changing the artwork on the bottle, they still have to get different approval for it. But my understanding with the QR code aspect of this in particular is that the original guidance was for a half inch for the size of the QR code.

And then after folks had started to print the bottles, the new guidance came out saying three fourths of an inch. Obviously, we want them to comply, but we also don't want that product to go to waste and certainly don't want to encumber the businesses that have already made the investments and are ready to go.

Right. Okay. Okay, great. Well, thank you very much. This seems like a really important bill, basically a cleanup bill, and we do now have a quorum, so why don't we establish? Yeah. Please call the roll.

[Roll Call].

Okay, thank you. I think the Vice Chair moved the bill. Oh, yes. So, would you like to close?

Absolutely. Just I really appreciate you all taking the time to hear the bill today. As you heard, there's no known opposition; no one has sour grapes, and we are ready to move forward. So, with that, I ask for an aye vote.

Okay, so we have a motion, and let's go ahead and call.

Okay. AB 720: the motion is that the measure be returned to the Senate Floor for consideration. [Roll Call].

It's five to zero and we will keep that on call. Thank you. Thank you for coming to testify. Okay, please call the roll.

AB 720 motion is that the measure be returned to the Senate Floor for consideration. [Roll Call].

It's 6 to 0 and we will keep that on call. Okay, please call the roll.

AB 720, [Roll Call]. The bill is out.

Okay: 7 to 0. That bill is out, and this committee is now adjourned.