Category archives for “Beer”

Governor Brown Signs Three New Alcoholic Beverage Laws

October 03, 2016

On Wednesday, September 28, 2016, Governor Brown signed three alcohol-related bills into law, creating new on-sale restaurant licenses for San Francisco, legalizing the glass of bubbly you have with your haircut and criminalizing powdered alcohol. All three laws become effective on January 1, 2017.

SB 1285 - 5 New Restricted Restaurant Licenses for San Francisco

Senate Bill 1285 (“SB 1285”) adds Section 23826.13 to the California Business and Professions Code, which authorizes the California Department of Alcoholic Beverage Control (“ABC”) to allocate 5 new “neighborhood-restricted special on-sale general” licenses in San Francisco. The 5 new licenses are subject to most of the same privileges and restrictions – and the same original fee of $13,800 – as an on-sale general license for a bona-fide eating place (Type 47). However, these 5 licenses differ from regular Type 47 licenses in that they are neighborhood-specific, are nontransferable, and when surrendered, revert back to the ABC for issuance to a new applicant. This means that licenses will only be available, and must remain in, the eligible neighborhoods – Bayview’s Third Street, outer Mission Street in the Excelsior, San Bruno Avenue, Ocean Avenue, Noriega Street, Taraval Street and Visitacion Valley. Licenses in the most popular restaurant hubs remain available only by purchasing an existing license, market values of which often run several hundred thousand dollars. The new licenses also do not permit the exercise of off-sale privileges, like a Type 47 does.

In order to be eligible to apply for a license, SB 1285 requires a pre-application meeting, which must be conducted and verified by a local government body. This requirement includes notifying nearby residents, conducting a community meeting, outreach to certain neighborhood associations and to the San Francisco Chief of Police. The ABC will establish a priority application period in accordance with Cal. Bus. & Prof. Code § 23961, and if more than 5 applications are received, they will hold a lottery for eligible applicants.

AB 1322 - Beauty Salons and Barber Shops

Assembly Bill 1322 (“AB 1322”) permits beauty salons and barber shops to serve wine and beer without a license provided there is no extra charge for the service. The service can only be offered during business hours and no later than 10:00 p.m., and the amount of beer and wine cannot exceed 12 ounces and 6 ounces per customer, respectively. Further, the salon or barber shop providing the service must be in good standing with the State Board of Barbering and Cosmetology. Prior to AB 1322, the exception allowing unlicensed service of alcohol by a business to its customers only existed for limousines and hot air balloon ride services. (Cal. Bus. & Prof. Code § 23399.5)

AB 1554 - Ban on Powdered Alcohol

Assembly Bill 1554 makes it a crime to purchase or possess powered alcohol. The bill defines powdered alcohol as “an alcohol prepared or sold in a powder or crystalline form that is used for human consumption in that form or reconstituted as an alcoholic beverage when mixed with water or any other liquid.” The definition makes clear that vaporized alcohol (which is already illegal in California) is not powdered alcohol. The bill also prohibits the manufacture, distribution and sale of powered alcohol. An individual caught making, selling or using powered alcohol is guilty of an infraction and must pay a $125 fine. (Cal. Bus. & Prof. Code §§ 23794 and 25623)

For more information about the recent changes to California’s alcohol laws, contact an attorney at Strike & Techel.


TTB Further Expands List of Malt Beverage Ingredients Exempt from Formula Approval

December 28, 2015

The Alcohol and Tobacco Tax and Trade Bureau (TTB) has further expanded the list of ingredients used in the production of beer that are exempt from the formula requirements of 27 C.F.R. § 25.55. On December 17, 2015, the TTB issued Ruling 2015-1, Ingredients and Processes Used in the Production of Beer Not Subject to Formula Requirements (LINK), which modifies and supersedes Ruling 2014-4. Ruling 2014-4 exempted 35 ingredients from formula approval requirements, including ingredients such as honey, chocolate, cherries, oranges, allspice, and clove. Ruling 2015-1 now exempts more than 50 additional ingredients from the formula requirements, including ingredients such as tea, oyster shells, jasmine, rosemary, grapes, and figs. A complete list of ingredients used in the production of beer that are exempt from formula requirements is located in Attachment 1 to Ruling 2015-1 (LINK).

Ruling 2015-1 also clarifies the TTB’s position regarding extracts, essential oils, and syrups. These preparations may contain alcohol or other ingredients, and thus are not exempt from formula requirements. For example, although vanilla, spearmint, and strawberries are included on the list of exempt ingredients, the use of vanilla extract, essential oil of spearmint, or strawberry syrup would still trigger the formula requirements of 27 C.F.R. § 25.55.

Ruling 2015-1 was issued in response to an ongoing conversation between the TTB and the Brewers Association, which has been petitioning the TTB since 2006 to expand the list of exempt ingredients. The most recent Brewers Association petition was submitted on September 30, 2015, and Ruling 2015-1 exempts all of the ingredients requested by the Brewers Association in that petition, with the exception of licorice, juniper branches, pluot, spruce leaves, squid ink, and woodruff. The TTB declined to adopt licorice as an exempt ingredient due to Food and Drug Administration (FDA) regulations regarding that ingredient. The TTB declined to adopt the remaining ingredients at this time because it did not find that the available data established that these ingredients are “traditional” in the production of beer. Although the TTB did not exempt all the ingredients requested by the Brewers Association, the TTB is open to future petitions from brewers regarding additional ingredients that brewers believe should be exempted from formula requirements. A procedure for such a petition is located at 27 C.F.R. § 25.55(f).

Contact an attorney at Strike & Techel today with any questions about beer regulations or formula requirements.


California Brewpub Licenses: What You Need to Know

October 08, 2015

Craft beer continues to be all the rage in California and across the country. With the increase in demand for local craft beers, we’ve been getting a lot of questions about how to get licensed as a brewery in California. The California Department of Alcoholic Beverage Control (“ABC”) issues three primary license types that permit beer production, including Beer Manufacturer licenses (Type 1), Small Beer Manufacturer licenses (Type 23) and the increasingly popular On-Sale General Brewpub license (Type 75). The license privileges of each type of brewery license vary, and the brewpub license is a good choice for brewers that primarily want to operate a brewpub or microbrewery restaurant rather than sell their beers for consumers to drink off the brewery’s premises.

A Type 75 brewpub license authorizes the sale of beer, wine and distilled spirits for consumption at a bona fide eating place, which essentially requires that the facility be a restaurant with its own kitchen that serves meals. The ability to sell distilled spirits as a brewpub is a privilege that many find attractive in deciding between brewery licenses. Type 1 and Type 23 breweries may, but are not required to, operate bona fide eating places, but they are limited to beer and wine, and cannot sell distilled spirits. Additionally, beer, wine, and distilled spirits restaurant licenses (i.e., Type 47 On-Sale General for Bona Fide Public Eating Place) are often extremely expensive as the number of licenses issued is limited per county based on population. There is no cap on the number of Type 75 licenses that can be issued, so the Type 75 license can be an attractive option for businesses that want to sell distilled spirits, although all Type 75 licensees must meet certain brewing requirements.

Brewpubs must produce at least 100 barrels of beer per year and can produce no more than 5,000 barrels of beer per year. That production cap is substantially lower than the production allowances for Small Beer Manufacturers (less than 60,000 barrels per year) and Beer Manufacturers (60,000 barrels per year or more). Additionally, a Type 75 brewpub premises must have brewing equipment that has at least seven-barrel brewing capacity. The ABC has recently been looking into the brewing equipment of Type 75 licensees and enforcing against brewpubs that aren’t actually brewing beer or don’t have the requisite brewing capacity.

Other key features of Type 75 brewpub licenses include the following:

• Cannot make sales from the brewpub premises for off-premises consumption. This means that a brewpub cannot sell bottles, cans, growlers or other containers for consumption away from the brewpub.

• Can sell beer produced by the brewpub to California licensed wholesalers.

• Must buy all wine, distilled spirits, and beer not produced by the brewpub from a licensed wholesaler or winegrower. Note that brewpubs cannot buy or sell beer or other alcoholic beverages from other brewpubs or retailers.

The initial fee for a brewpub license is currently $12,000, which is more expensive than most California license types. The annual fee is determined by the population where the brewpub is located, and varies between approximately $500 and $1,000 per year. Additionally, local rules where the brewpub is located may require additional permitting or other approvals before the brewpub can operate. Lastly, all breweries, including brewpubs, must obtain a brewery basic permit from the Alcohol and Tobacco Tax and Trade bureau, the federal agency that regulates alcoholic beverages. There is no fee for the federal permit, but a bond is required.

Contact one of the attorneys at Strike & Techel if you have any questions about starting a brewery!


Comparing Apples and Pears

July 29, 2015

The cider and perry industry is booming. More and more producers are entering the market, and existing producers of other alcoholic beverages are expanding into cider and perry production. Although commonly associated with beer, cider and perry are actually considered wine under federal law, and can be interchangeably labeled as apple wine or cider, and pear wine or perry. Production of cider or perry requires a bonded winery permit from the Alcohol & Tobacco Tax and Trade Bureau (“TTB”). It must be made wholly from the alcoholic fermentation of sound, ripe apples, or sound ripe pears (the addition of sugar, water, or alcohol is permitted in specified quantities). The TTB recently updated its FAQs with a section on cider, which can be found HERE.

A cider or perry which is over 7% alcohol must be labeled in the same manner as wine, and a Certificate of Label Approval (“COLA”) must be obtained for the product from the TTB. If it is under 7%, the product is subject to Food and Drug Administration (“FDA”) labeling rules, including a required nutritional statement (see our recent blog posts on FDA alcoholic beverage labeling HERE and HERE). If any flavoring materials are added, like honey, spices, or artificial flavors, the product requires formula approval, even if it is under 7%.

Each state has its own regulatory framework for cider and perry. For example, in California, a Type 2 Winegrower can make cider and perry, and a licensed Type 1 Beer Manufacturer may also produce cider and perry without any additional state license (although they still need the TTB bonded winery permit). In New York, Breweries, Farm Breweries, and Farm Wineries can make cider and other “pome fruit” wines, including perry (again with the TTB winery permit). Interestingly, in New York, a product marketed as a cider or perry, up to 8.5% alcohol, must be brand label registered, and is not eligible for the standard wine exemption from registration.

If you have any questions about producing cider or perry, please contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2015 • All Rights Reserved •


Beer that isn’t Beer, Wine that isn’t Wine and Drinks that aren’t Beverages

April 27, 2015

Mostly in our practice at Strike & Techel we work with clients making fairly traditional alcoholic beverage products, albeit with new flavors, production methods and quality drivers. These classic alcoholic beverages are distilled spirits, wines and beers, subject to regulation by the Alcohol and Tobacco Tax and Trade Bureau (TTB). More and more, however, we are called upon to work with alcohol products that fall outside the TTB’s jurisdiction, either because they don’t meet traditional definitions, or because they simply aren’t classified as beverages.

Products that do not fit within TTB jurisdiction are subject to Food & Drug Administration (FDA) labeling requirements. Under TTB rules, wine must contain at least 7% alcohol, and beer must be malt-based. Because of these restricted definitions, common examples of drinks that are subject to FDA rules are wine coolers and ciders below 7% alcohol, and beers that aren’t made with malt. Any beers made with other grains, like sorghum, rice or wheat (usually to be sold as “gluten free” products), are under FDA rules. These beverages do not need to obtain label approval, as a standard alcoholic beverage would, but must comply with FDA rules on labeling, to avoid in-market audits for violations. In December 2014, the FDA finally published its guidance for industry on the labeling of non-malt-based beers, which had been in draft form since 2009 (LINK). It helpfully goes through all of the FDA labeling requirements that apply to such beers. These are the same requirements that apply to any FDA-regulated alcoholic beverage, including many ready to drink (RTD) beverages, as discussed in our recent blog post (LINK). Among the key distinctions from standard alcoholic beverage labeling are that the label must include an ingredient list and a nutritional statement.

As well as regulating alcoholic beverages, FDA also regulates certain non-beverage alcoholic products. These are products which are consumed – often as cocktail ingredients – but which are not classified as beverages by the TTB because they have been deemed “unfit” for beverage purposes under TTB regulations. Common examples of these products are bitters and other alcohol-based flavorings. Attaining non-beverage status is a goal rather than a failure for these products because products eligible for non-beverage status are exempt from payment of federal excise taxes and they can be sold by retailers without an alcoholic beverage license. Products with a lot of sugar or other flavorings or ingredients that serve to make them more palatable as beverages may not make the cut as non-beverages and would remain subject to excise taxes and TTB label jurisdiction.

TTB and FDA classifications of alcoholic products have significant implications on the way they are labeled, taxed and sold, so it is important to submit these products for TTB review before bringing them to market.

For more advice on alcoholic beverages and non-beverages, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2015 • All Rights Reserved •


Compliance Check-In: 2014 TTB Beverage Sample Program Results

February 02, 2015

Each year, the Alcohol and Tobacco Tax and Trade Bureau (TTB), conducts a random sampling of alcoholic beverages, known as the Alcohol Beverage Sample Program. TTB agents purchase alcohol products from retail stores and take them back to the TTB lab for review. The survey identifies compliance issues with the tested beverages, including incorrect alcohol content levels, and Certificate of Label Approval (COLA) discrepancies. The TTB recently released the results of their 2014 review, finding 139 out of 450 total products sampled to be non-compliant.

The most commonly identified issue was mislabeled alcohol percent by volume (ABV), in which the ABV stated on the label was either above or below the actual tested alcohol content. In distilled spirits products, 42 of the 190 beverages sampled were found to contain an ABV over the advertised content, while 14 products contained a lower ABV than advertised. Aside from misleading the consumer, incorrect ABVs can lead to regulatory action from federal tax authorities if the actual alcohol content would place the product in a different tax class.

Another common compliance issue was a discrepancy between the product’s label information and the information listed on the product’s COLA. When a bottler or importer applies for label approval with the TTB, they are issued a COLA and their product’s label must match the information provided on their COLA application (with the exception of some limited information which can be changed without a new COLA). Of the 139 non-compliant products, 40 had labels with missing or added information that did not match their approved COLA.

Other prevalent compliance issues included no COLA for the product, errors in the mandatory government warning message, and incorrect statements of class or type of alcohol. Possible TTB actions in response to incorrectly labeled products could include monetary fines and other regulatory penalties, and at a minimum, would require that the non-compliant labels be corrected. To see the full results of the sample program, click here.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2015 · All Rights Reserved ·


New California ABC Advisory on Merchandising Services by Suppliers

January 07, 2015

In December 2014, the California ABC posted a new Industry Advisory about merchandising services. Free services provided by suppliers to retail licensees, such as stocking shelves, pricing inventory, rotating stock, etc., are prohibited things-of-value under California Business & Professions Code sections 25500 and 25502. However, a number of permitted exceptions are separately provided for in Section 25503.2. The Advisory was posted in response to inquiries and complaints about the scope of permissible activity. When ABC receives multiple complaints about impermissible conduct, investigations and license accusations may well follow, so it would be prudent for suppliers to review the scope of permissible merchandising activities.

Permitted activity varies depending on the type of retailer and the products involved so we created a simple chart below to help keep it straight.

Note that in all cases, any merchandising activities can only be done with the retailer’s permission. In no case can a supplier move the inventory of another supplier, except for “incidental touching” to access the space allocated to the licensee providing the merchandising service.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2015 · All Rights Reserved ·


NYSLA Expands Suppliers’ Ability to Entertain Consumers

May 06, 2014

Suppliers’ ability to run events for consumers in the New York market has been up in the air for a number of years now, and especially since the industry consent orders in 2006. Now, the New York State Liquor Authority (SLA) has given helpful and detailed guidance on how these events can be run.

Supplier Purchases of Alcohol from On-Premise Retailers – #2014-8

This new SLA Advisory covers the ways in which suppliers and wholesalers may purchase alcoholic beverages from on premise retailers for consumers. Under the consent orders issued in 2006, there were three ways in which this could be done: (1) on an incidental basis; (2) for employees or private guests at an invitation-only event; or (3) at a bar spend promotional event open to the general public. The new advisory clarifies the scope of those activities and also expands on them.

Purchases for Consumers on an Individual or Incidental Basis

This is unchanged from SLA’s prior position. It is not intended to be an option for promotional events. It permits a supplier rep to buy themselves a drink and to buy a drink for individual patrons of a retailer.

Business Meetings and Private Events

- Business meetings or business entertainment

This means a gathering of a supplier employees, and/or representatives for entities that do business with a supplier (including other suppliers, distributors and retailers). There must be a legitimate business purpose for the meeting, like discussing product sales, new product introductions etc. It does not include holiday parties or other special occasion events. There are no spending restrictions, or limits on the number of meetings at any particular on premise location. The event must be in a reserved area (can be as little as one table), and at least one supplier employee must be present. Retail licensees and their employees can be invited and an invite can be sent to all employees of a particular retailer. Media reps can be present.

- Private invitation only events closed to the general public

This is an event not conducted for a business purpose or for promotional purposes. It must be a gathering of invitees who have an identifiable affiliation with a supplier (e.g., a party for employees, vendors or business associates), or a common affiliation or relationship with each other (e.g. journalists, sports teams or non-profit organizations). The language of the advisory makes it clear the group cannot just be a large gathering of a group of consumers or potential consumers without meaningful commonality other than an attempt to market or target a demographic. Invitations must be sent by a supplier to invitees by individual name, each such invitee may bring only one guest. Invites can be by phone, e-mail, letter, in person, etc. Invites cannot be in any type of media advertisement or generic communication to anyone wishing to attend and cannot be sent to a “mailing list” of consumers obtained or created by a supplier. The event must be in a reserved area (can be as little as one table) and at least one supplier employee must be present. Despite the stated non-business and non-promotional purpose of the events, retail licensees and their employees can be invited, as can the media. A supplier cannot send a general invite to all employees of a retailer or a retail chain.

Promotional Events Open to the General Public – No Invitation Required

Prior to the advisory, a bar spend was limited to $500 (plus 20% tip) and no more than six events per retailer, per year. Now, the limit is $700 (plus 20% tip), and no more than ten events per retailer, per year. A supplier cannot purchase food, non-alcoholic beverages, or anything else from the retailer for such an event. These events can now be advertised, identifying the time, date and location. Invites may also be sent to members of the general public, but the event cannot be restricted to people that received such invitations. There is no longer a need to submit statements after these events; a supplier must maintain a record of each event for two years that includes date, time, location and duration, brands that were purchased, and names of supplier reps or agents who conducted the event.

Promotional Events Open to the General Public – Invitation Required (“Brand Experience Events”)

This is a new category of events which will be extremely helpful for supplier marketing and promotions in New York. The advisory refers to these as “brand experience” events that are “much larger” than bar spend events. At a brand experience event, a supplier can spend up to $10,000 (plus 20% tip), and may purchase alcoholic beverages, non-alcoholic beverages and food. A supplier can also apply to the SLA for advance permission to spend more than $10,000 for an event. A supplier can have up to six such events per retailer per year (whether the event is at a retail premises or whether a retailer caters the event, as catering permits in New York are only held by on premise licensees). Attendees at these events must be invited and an event can be restricted to invitees only. A supplier can invite people individually (by phone, letter, e-mail, in person, etc.), or can also place media advertisements including invitations, generic communications inviting anyone who wishes to attend to register, and “mailing lists” of consumers. A supplier can advertise brand experience events, including date, time and location. Each person registered as an invitee may bring one guest. A supplier must maintain a record of each event for two years that includes date, time, location and duration, brands that were purchased, and names of supplier reps or agents who conducted the event.

Events Where the Supplier or Wholesaler Provides the Alcoholic Beverages

In a very helpful clarification, the new advisory notes that it is only intended to cover occasions where a supplier is purchasing alcoholic beverages from a retailer. It goes on to discuss the fact that a supplier may provide alcoholic beverages for an event without being bound to any of the above exceptions. Specifically:

- Not-for-profit organizations

A supplier may donate product to a not-for-profit organization for an event which the not-for-profit organization is conducting, either at licensed premises or at an unlicensed location with a permit from the SLA. A supplier can also receive promotional benefits in exchange for the donation to the organization. The only real restriction is that a supplier cannot choose the retailer for the event. The new advisory does not use the same restrictive “bona fide charitable organization” language used in the tasting advisory published in July, 2013. It appears that non-charitable not-for-profit organizations qualify for these events.

- Private/Brand Experience events at unlicensed locations

The new advisory allows a supplier to conduct a private invitation-only event or a brand experience event at an unlicensed location and to provide the alcoholic beverages for that event without having to fit into one of the four event types above. Note that any unused alcoholic beverages must be removed by a supplier after any event under this section.

An appropriate permit must be in place for these events. This means that a supplier should use a retail licensee caterer for such events at this stage. We anticipate a new supplier event permit will available in the future.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·


Brewing Beer in California

April 14, 2014

With the explosive growth in craft beers and micro and nano and other really, really small breweries, we at Strike & Techel wanted to put together some helpful tips for anyone looking to brew beer in the state. If you want to make beer commercially, these guidelines will help you work out the best way to start your new business. You will find three ways to get going in the guidelines: small beer manufacturing, beer manufacturing (over 60,000 barrels of beer), and brewpub operations where you get to brew beer and sell it to people in a restaurant or pub setting.

Contact one of the attorneys at Strike & Techel if you have questions about brewing beer in California or other states.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·


Kate Hardy Joins Strike & Techel!

February 12, 2014

We are pleased to announce that Kate Hardy has joined the firm as a partner. Kate joins Strike & Techel from Nixon Peabody LLP’s Beverage Alcohol Group. Previously, Kate spent four years as manager of the Economy and Law Commission for the International Organization of Wine and Vine (OIV) in Paris, preceded by years of law practice in Australia. We are thrilled to add Kate to the Strike & Techel team!

Kate’s many years of beverage industry experience will be invaluable to wineries, breweries, distillers, suppliers, importers, distributors, retailers, ecommerce providers and other industry members that make up the diverse Strike & Techel client base. To learn more about Kate and the firm, visit strikeandtechel.com.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·


TTB Updates its Position on Gluten-Free Label Claims

February 11, 2014

On Tuesday, the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) issued an Announcement regarding its treatment of “gluten-free” claims on alcoholic beverage labels. As we previously blogged here, TTB has been looking into the issue of gluten-free labeling since at least 2012, and TTB Ruling 2012-2 implemented a policy of allowing the term “gluten-free” only on the labels of products that are produced without any ingredients that contain gluten. For products made from gluten-containing materials, the 2012 Ruling implemented several requirements, including: a) a statement that the product is “Processed or Treated or Crafted to remove gluten;” b) a qualifying statement to inform consumers that (i) the product was made from a grain that contains gluten, (ii) there is currently no valid test to verify the gluten content of fermented products, and (iii) the finished product may contain gluten; and, c) a detailed description of the method used to remove gluten from the product.

TTB explains in its most recent announcement that it has finished its review of the FDA’s rule on gluten-free labeling, and has updated its requirements accordingly. TTB will continue to allow the term “gluten-free” only on the labels of products that are produced without any ingredients that contain gluten. However, for products made from gluten-containing materials, TTB has lessened the labeling requirements, and now provides that such products may be labeled with a statement that the product was “processed, “treated” or “crafted” to remove gluten, if that claim “is made together with a qualifying statement that warns the consumer that the gluten content of the product cannot be determined and that the product may contain gluten.” Labels no longer require a detailed description of the method used to remove gluten from the product.

If you have any questions about alcoholic beverage labeling, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·


Getting Started in the Business: Licensing

December 12, 2013

This blog entry is part of a continuing series discussing important steps to get started in the alcoholic beverage industry. Once you have pinpointed a location for your business (discussed in a previous post, here), you will need to obtain a license, or a combination of licenses, before you commence operations. To determine what type(s) of license(s) you need, here are some answers to questions you may be asking:

* Do the Tied-House Laws Permit Me to Hold the Licenses I Want? Federally and across all states, “tied house” laws generally prohibit the same person or entity from having an ownership interest in alcohol beverage businesses in more than one of the 3 tiers -manufacturing/importing, distribution and retail. (To learn more about tied house laws, review this post.) However, that restriction is far from absolute. Many statutory exceptions have been carved out of the 3-tier system to permit cross-tier licensing and the resulting patchwork of exceptions can be difficult to comprehend. For example, in California, wineries can also own restaurants (subject to restrictions) and certain off-sale retail stores. Small breweries (less than 60,000 barrels/year) can own on-sale retailers but large breweries cannot. Beer and wine wholesalers cannot also be retailers, unless they sell only wine through the retail store. Other states have their own set of hard-to-explain exceptions.

* What Does My License Permit Me to Do? The general rule is that manufacturers sell to wholesalers; wholesalers sell to retailers; and retailers sell to consumers. But this, too, is riddled with exceptions. California wineries and breweries can sell their products directly to retailers and consumers without using a distributor, but distilled spirits manufacturers can sell only to distributors and cannot themselves hold a distributor license. Rectifiers, on the other hand, can act as their own distributor and sell their products – and spirits products made by anyone else – directly to retailers. Moreover, you may need more than one license to operate your business. For example, if you are going to be operating a distillery, you will need a Type 4 (Distilled Spirits Manufacturer’s license), and a Type 6 (Still) license. If you are importing distilled spirits from outside of California and distributing them to retailers you’ll need a Type 12 (Distilled Spirits Importer), and a Type 18 (Distilled Spirits Wholesaler). California issues dozens of different licenses so it is important to know exactly what you want to do, which licenses are needed to accomplish it, and whether you are eligible to hold them.

* What are the Processing Times to Obtain a License? In California, it takes about 90-120 days to process an application for a new license, and slightly less time to transfer an existing license at a premises that is already licensed. It will take longer to process an application that is incomplete, contested by neighboring residents or the local authorities, or filed incorrectly. Also keep in mind that the ABC cannot issue a license until it has received confirmation from the City/County that all required use permits have been obtained. Each applicant will be assigned a local ABC investigator to handle the application until the process is completed. Currently, U.S. Alcohol Tobacco Tax Trade Bureau (“TTB”) licenses are processing in about 90 days, similar to California licenses.

* May I Obtain a Temporary Permit? Provided that you are transferring an existing license at an already licensed premises, the California ABC may grant a temporary permit so you may operate your business while the license transfer application is being processed. A temporary permit is not available in connection with applications for new licenses or applications to transfer existing licenses to a premises that has not been previously licensed.

* What Are the Costs Involved? Depending on what type(s) of license(s) applied for, the cost can vary considerably. A schedule of license costs is available here. Some retail licenses are limited in numbers and must be purchased on the open market. Prices for these licenses vary greatly by type and location. For instance, a Type-47 (On-sale general eating place) may sell for $200,000 in San Francisco, whereas the same type of license in Fresno County currently only costs $12,000.

In conjunction with your ABC application, you may also need to obtain other federal, state or local licenses/permits. In California this may include, for example: federal licenses through the TTB; a certification from the Secretary of State that you are qualified to do business in the state; and a sales tax permit from the State Board of Equalization.

Contact one of the attorneys at Strike & Techel if you have questions about applying for a license to get started in the alcohol beverage business.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·


Clarifications from the ABC on Sweepstakes and Contests in California

October 17, 2013

On June 13, 2013, guests attending ShipCompliant’s “Direct 2013” conference heard from Matthew Botting, General Counsel to the California ABC, on supplier participation in sweepstakes and contests under California’s new law. We’ve previously blogged about the new law here and here.

California Code of Regulations Title 4, Section 106 (“Rule 106”) has always allowed suppliers to “sponsor” a contest, meaning suppliers could give money or otherwise participate when the contest was organized by “bona fide amateur or professional organizations.” Previously, the privilege was limited. Now, the privileges are broader: suppliers (including wineries) can now “conduct” a contest under recently enacted Business and Professions Code Section 25600.1, and conduct or sponsor a sweepstakes under 25600.2. Mr. Botting discussed the different available privileges and their limitations:

* “Conduct” means the promotion is managed and organized by the supplier.
* “Sponsor” means it is someone else’s sweepstakes or contest and the supplier is providing a prize or other sponsorship of the promotion.
* For the time being, suppliers can only sponsor a contest in accordance with the existing Rule 106, which means sponsorship is limited to a contest conducted by bona fide amateur or professional organizations.
* Sponsoring a sweepstakes and conducting a sweepstakes or contest is now covered by Business and Professions Code Section 25600.1 and 25600.2. Sweepstakes or contests cannot require a visit to a licensed premises of any kind, so there must be an alternate method of entry (“AMOE”) if entry forms are available at a licensee.
* Sweepstakes and contests cannot be conducted on retail premises (e.g., a grocery store, liquor store, bar or restaurant). A “retail premise” includes some locations you might not think of, such as: an unlicensed premises if a licensed caterer is present, or at an event held by a nonprofit under a one-day permit. The ABC considers events held with a caterer’s license or a nonprofit one-day permit to occur “at the premises of a retail licensee,” and therefore a supplier may only provide a means of entry at either of these types of events.
* While suppliers may provide a means of entry for the contest or sweepstakes, the contest or sweepstakes may not be conducted at a winery or brewery’s duplicate tasting room.
* A contest or sweepstakes can only be advertised at a retailer if it is advertised at a minimum of three different retailers, and winners shouldn’t be picked at a licensed retail event nor in a tasting room.

The full presentation by Mr. Botting can be seen here (starting at the 5:00 minute mark).

Before conducting or sponsoring any contest or sweepstakes, be sure to consult the relevant laws, Business & Professions Code Sections 25600.1, 25600.2, and, if applicable, Rule 106 (regarding contests), and pay particular attention to whether the supplier involved holds a license that allows it to participate.

Contact one of the attorneys at Strike & Techel if you have questions about contests and sweepstakes in California or other states.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·


Facebook Eases Restrictions on Promotions Conducted on Commercial Facebook Pages

September 11, 2013

On August 27, 2013, Facebook announced changes to make it easier for businesses to create and administer promotions on the website. This means any business - including alcohol beverage industry members - can now collect entries for sweepstakes or contests using Facebook itself. Prior to these changes, all promotions on Facebook had to be administered through applications. Now, promotions can be administered on Page Timelines or in applications, though they may not be administered on personal Timelines. For example, now it is possible for businesses to:

- Collect entries by having users post on the company’s Page or comment/like a post

- Collect entries via messages users send to the company’s Page

- Have promotions including a voting element based on likes

You can read more about the changes here. If you have any questions about the ins and outs of using social media as part of the business marketing and promotional plans for companies in the alcohol beverage industry, call one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·


Beer Suppliers and Distributors May Now Preannounce Retail Visits in Texas

February 11, 2013

On February 7, 2013 the Texas Alcoholic Beverage Commission (“TABC”) issued an advisory, MPA053, entitled Promotional Activity Prearrangement/Preannouncement for Beer, which announces an amendment to 16 Tex. Admin. Code § 45.113, allowing beer manufacturers and distributors to prearrange and preannounce promotions at all on and off premise retail locations. Existing law (Tex. Alco. Bev. Code Ann. § 102.07(g)) permits distilled spirits and wine manufacturers and wholesalers to prearrange and preannounce promotional activities at retail premises (see MPB023), but beer manufacturers and wholesalers were excluded. Bar spending, sampling, appearances by agents, etc., could not be prearranged with the retailer or preannounced to consumers for beer; they had to be spontaneous. With this amendment, beer manufacturers and distributors are put on equal footing with spirits and wine suppliers and will be allowed to preannounce, or advertise, their promotional activities to consumers by means of email, TV, print, and digital media. These announcements may include event details, such as the date, time and location of the event. The amendment will enable beer manufacturers and distributors to more effectively prearrange their promotional activities.

The attorneys at Strike & Techel are available to answer questions about promotions and other industry trade practices.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·


TTB Allows Beer Returns Based on Freshness Dating

December 19, 2012

In response a request from industry members, the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) recently issued Ruling 2012-4, which addresses whether brewers may require wholesalers to pull beer from retailers that is past its freshness date and replace it with fresh beer. Many beers now include freshness dates, and some brewers ask distributors to remove beer from the retail market that is past its freshness date. Brewers argue that this ensures that consumers get fresh product, but the practice is arguably at odds with laws prohibiting consignment sales.

The FAA act makes it unlawful for industry members, including beer producers, importers, and wholesalers, to sell, offer for sale, or contract to sell to any retailer on consignment, under conditional sale, with the privilege of return, or on any basis otherwise than a bona fide sale. See 27 U.S.C. § 205(d). There are limited exceptions to this prohibition, but only for those “ordinary and usual commercial reasons” included in 27 C.F.R. §§ 11.32 – 39. The limited exceptions when an industry member may accept a return include: a) defective product, b) shipment error, c) change in law preventing the sale of a product, d) termination of the buyer’s business or franchise, e) change in product from that held in inventory, and f) possible spoilage of product during the off-season of a seasonal retailer.

None of the exceptions to the consignment sales law clearly applies to returns based on freshness dating, thus prompting the TTB’s Ruling. The Ruling makes clear that under certain conditions, returns based on freshness dating are permitted under the exception for “defective products” found in 27 C.F.R. § 11.32. Those conditions are as follows:

- The brewer has policies and procedures in place that specify the date after which the retailer must pull the product;

- The brewer’s freshness return/exchange policies and procedures are readily verifiable and consistently followed by the brewer;

- The container has identifying markings that correspond with this date; and

- The malt beverage product pulled by the retailer may not re-enter the retail marketplace.

Finally, the TTB noted that wholesalers may not force retailers to overstock the wholesaler’s products under the pretext that the retailer may exchange product based on the freshness date, and that such practices would violate consignment sale and tied-house laws.

Contact one of the attorneys at Strike & Techel if you have any questions about TTB rules and regulations.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·


Brewing and Winemaking in the Comforts of Home

September 12, 2012

Home brewing. Even Obama does it. Well, maybe not Obama himself, but he reaps the rewards of his staff’s fermentation adventures. Earlier this month, the White House’s beer recipes were released on the White House Blog (check them out here). With the release of the recipes, questions about home brewing and home winemaking have been rising. Each state has its own laws and regulations about making alcoholic beverages at home. Distilled spirits may never be made at home, as the distillation process raises too many safety issues. Most state laws are broad enough to encompass home production of both wine and beer. California’s law separately allows for home wine and home beer production (see Cal. Bus. & Prof. Code § 23356.2), while other states’ laws are often broad, like Illinois’ allowance which states that their laws do not “prevent the making of wine, cider or other alcoholic liquor by a person from fruits, vegetables or grains, or the products thereof, by simple fermentation and without distillation, if it is made solely for the use of the maker, his family and his guests…” 235 Ill. Comp. Stat. 5/2-1. Alabama and Mississippi still do not recognize home brewing, although Mississippi does allow people to make homemade wine (see Miss. Code Ann. § 67-3-11.)

What’s most important to remember is the part in every state’s allowance about the products being made for the home. Home brewed beers and homemade wines cannot be sold to the public. Some states don’t allow homebrew to be taken outside the home, while others allow homebrew to be entered into contests and consumed by others, so long as there’s no charge involved. The federal allowance for home brewing without payment of tax caps production at 200 gallons per year for a household in which two or more adults reside and 100 gallons per year for a household with only one adult (see 27 C.F.R. § 25.205). Home wine production without payment of federal tax has the same 200 gallons for households with two or more adults and 100 gallons for households with only one adult yearly production cap under the federal regulations (see 27 C.F.R. § 24.75). Like other alcoholic beverage laws, allowances vary by state. So if you’re planning on whipping up your own White House Honey Ale or Honey Porter this fall, remember to keep in mind your state’s laws and regulations on home fermentation.


Maybe That’s Not Beer You’re Drinking

August 16, 2012

A professor once told me: “Always define your terms.” That statement rings true in much of the law and it turns out, also for beer. In today’s age of health consciousness and gluten intolerances, beers crafted from sorghum, rice, or wheat are starting to make inroads into the mainstream market. But from the perspective of the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), those products don’t qualify as “malt beverages.” Only beverages made from both malted barley and hops meet the definition of “malt beverage” under the Federal Alcohol Administration Act (“FAA Act”). Thus, the labeling regulations that apply to these non-traditional beer products actually come from the Food and Drug Administration, as opposed to the TTB. Some TTB/FAA Act requirements do still apply – namely the government health warning and product classification required by the Internal Revenue Code to ensure proper tax classification and collection. Additionally, formula approval may be required through the TTB.

Wine beverages containing less than 7% alcohol by volume, such as many wine coolers and cider products are also subject to FDA labeling requirements because their low alcohol content causes them to fall outside of the TTB/FAA Act definition of “wine” and therefore outside of TTB’s labeling jurisdiction. Note that although sake is made from rice, it’s considered a wine product for labeling purposes and a malt beverage for tax purposes (confusing, right?), so it falls under the TTB/FAA Act labeling requirements, provided the product contains 7% or more alcohol by volume. How to identify these new products as “gluten-free” remains difficult as no final guidance has yet been issued by the FDA or TTB about the true definition of “gluten-free.” For more information about using “gluten-free” on alcoholic beverage labels, see our post from earlier this year. The landscape for labeling these non-traditional products is complicated. If you have questions, feel free to contact a Strike & Techel attorney.


[Your brand].wine, [Your brand].beer, [Your brand].sucks: ICANN Applications for Generic Top Level D

June 13, 2012

The Internet Corporation for Assigned Names and Numbers (“ICANN”) manages the internet’s domain name system. Before 1998 the following generic top level domains (“gTLDs”) were in existence: .com, .edu, .gov, .int, .mil, .net, .org, and .arpa. In 2000, seven additional gTLDs were added: .aero, .biz, .coop, .info, .museum, .name, and .pro. Then in 2004, eight additional gTLDs were added. They were: .asia, .cat, .jobs, .mobi, .post, .tel, .xxx, and .travel. In 2008, ICANN began a move to open up the recognized gTLDs to a much wider scope by allowing applicants to apply for any gTLD they wanted. However, the process was expensive and complicated, which curbed participation.

The first round of applications was announced today. ICANN received 1,930 applications from 60 countries and territories. Of the applications received, 911 are from North America, 675 are from Europe, 303 are from Asia-Pacific, 24 are from Latin American and the Caribbean, and 17 are from Africa. There are a few applications relevant to the alcoholic beverage business (.beer, .vodka, .wine, and .restaurant). Only one entity applied for .beer and .vodka, while three separate entities applied for .wine and four entities applied for .restaurant. There are also a few applications relevant to any business, such as .sucks and .best. The applications are subject to a 60-day comment period during which anyone in the world can submit comments or file formal objections to the applied for registrations. Additionally, ICANN will review all applications to determine whether or not they should be registered. The full list of applied for gTLDs is available here: http://newgtlds.icann.org/en/program-status/application-results/strings-1200utc-13jun12-en. If you have questions about your brand and the new gTLDs feel free to contact any of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·


Formulas Online a Useful Tool for Pre-COLA Evaluations

June 12, 2012

TTB is now offering Formulas Online, a web-based system for submitting and tracking formula submissions for domestic and imported alcoholic beverages and nonbeverages. Formulas Online follows COLAs Online, which was implemented several years ago as an online option for filing and tracking COLA Applications. The feature is a welcome arrival and should be much more efficient and provide for better tracking than the paper submission system of formulas. One of the most useful changes is that applications are verified throughout the process, meaning that errors can be corrected before an application is finalized, rather than finding out weeks after a submission that an application was not properly submitted. Submissions with Formulas Online can be made using the same user ID used to access COLAs Online. New users should be sure to review the TTB’s helpful reference guide, found here, which walks through the Formulas Online process in detail, and includes a list of common errors.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·


What Can I Do With the Type 85 ABC License?

April 20, 2012

We’ve been getting lots of inquiries about the privileges and limitations of the new limited off-sale license offered by the ABC. Though we’ve already commented on the basics of the permit here, we’re following up with answers to the clarification questions we’ve been getting:

Where can I find the privileges for the new off-sale wine license?

Read the ABC Advisory and the enabling statute CAL. BUS. & PROF. CODE §23393.5.

Can I sell tequila and beer with the Type 85?

No, the privilege is limited to wine.

Can I get the Type 85 license if I have an upper-tier California license?

No. The Type 85 is a retail-tier license, and there are no special exceptions permitting it to be held with an upper-tier license. On the flip side, you can get it if you are an employee of an on-sale retailer. This is a key distinction between the Type 85 and the Type 17/20 combination that remains popular in California.

Can I deliver product stored out-of-state directly to consumers in California with the Type 85?

No. You must have possession and title to the wine in California. It must be delivered to the consumer from your licensed premises in California or the premises of a licensed public warehouse (Type 14 License).

Can I deliver wine to consumers outside of California with the Type 85?

Yes, but only to about 13 states. 2/3 of those states require additional licensing. You can’t reach New York, Texas, Illinois or Florida.

Do I have to have a location to obtain the Type 85?

Yes. You have to choose an address where the license will be active and your records will be kept. It may not be open to the public. You will have to post notice at the premises and mail notice to nearby neighbors.

Who can I buy wine from with the Type 85?

Licensed California wholesalers and wineries. Not retailers.

How do I apply for the Type 85?

If you are interested in obtaining the license, you need to fill out the forms for an original retail license (e.g. ABC 211-SIG, 217, 208-A/B, 253, 257, 255, 247, 251, 140, entity forms). You can obtain them from the ABC website, or can hire an attorney or licensing specialist to complete them and assist you with the process. The filing fee is $342 ($100 application fee plus $242 annual fee).

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·


Texas Alcoholic Beverage Commission Releases New Advisory in Connection with Authentic Beverages Com

March 21, 2012

As readers of this blog may recall, at the end of 2011 interesting new precedent came out of Texas when the United States District Court for the Western District of Texas granted partial summary judgment for plaintiffs in Authentic Beverages Co., Inc. v. Tex. Alcoholic Beverage Comm’n, No. A-10-CA-710-SS (D. W.D. Tex., December 19, 2011), and consequently struck down some Texas’ laws regarding beer labeling, advertising alcoholic content and suppliers telling consumers where their products can be found for purchase. (See our prior coverage of the case here.) About a month later the Texas Alcoholic Beverage Commission (“TABC”) issued Marketing Practices Bulletin 49 regarding the case (available here) and today they’ve just released Marketing Practices Bulletin 50 (available here). The new bulletin stresses that Texas’ stance on suppliers pre-arranging and pre-announcing promotional activities has not changed.

Texas allows liquor manufacturers and wholesalers to pre-arrange and pre-announce promotional activities, for example bar spending or sampling events, novelty item giveaways, and promotional appearances, but they do not allow beer manufacturers and distributors to do the same. While the Authentic Beverages decision resulted in the allowance for beer manufacturers and distributors to advertise retail locations where their products can be purchased (provided the advertising is not cooperative), it has not changed anything regarding pre-arrangement and pre-announcement of promotions. Those promotional activities by beer suppliers must be spontaneous, meaning they are not pre-arranged with retailers or pre-announced to consumers. The TABC is still in the process of formal rulemaking to deal with the effects of the Authentic Beverages decision, at which time Marketing Practices Bulletins 49 and 50 will be superseded by the new rules, but we do not expect that their position will change on this matter and violations are likely an enforcement priority for the TABC.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·


New Law on California Beer Tasting Rooms

August 11, 2011

California beer fans are sure to toast the passage of AB1014, which Governor Jerry Brown signed into law on August 1st. The bill, presented by Assemblymen Fletcher (R) and Chesbro (D), amends California’s Health and Safety Code to exempt beer manufacturers’ beer tasting areas from the strict health and sanitation codes applied to food service locations. Beer manufacturers include those holding a beer manufacturer’s license, an out-of-state beer manufacturer’s certificate, or a beer and wine importer’s general license. Wine tasting rooms have been exempt from such provisions for years. The health and sanitation codes are lengthy and expensive to comply with; thus, compliance costs typically outweighed the benefit of a beer tasting room for many brewers, especially small craft operations. Compliance with the new exemption requires that the only foods served on the premises are crackers and pretzels. Additionally, only beer and “prepackaged nonpotentially hazardous beverages” may be offered. A copy of the revised Section 113789 of California’s Health and Safety code is available here.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·


Barry Strike Quoted in ABA Journal on Trademark Issues

August 09, 2011

Partner Barry Strike, who handles numerous trademark issues for clients in the alcoholic beverage industry, was quoted in the ABA Journal’s article on the popular beer Collaboration Not Litigation. Click here to read the full article. If you have alcoholic beverage trademark questions, please feel free to contact Barry Strike at .(JavaScript must be enabled to view this email address).

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·


No More Alcopops in California

August 03, 2011

On Monday Governor Jerry Brown signed Senate Bill 39 banning the production, importation, and sale of beer to which caffeine as a separate ingredient has been directly added. Senator Alex Padilla, a Democrat from the San Fernando Valley, introduced the Bill last December. In order to enforce the prohibition, licensees may be required by the California Department of Alcoholic Beverage Control to provide product formulas. All formulas provided will be considered confidential trade secrets and not subject to disclosure under the California Public Records Act. The new law can be found in Section 25622 of California’s Business and Professions Code. The law does not prohibit beers where caffeine is a part of the brewing process itself, such as a coffee porter. It is aimed instead at the Progressive Adult Beverages (PABs) (also commonly referred to as Ready to Drinks (RTDs) and Flavored Alcoholic Beverages (FABs)) that have been in the news since last fall. See our prior coverage here, here, here, and here. This puts California in line with states like New York, Massachusetts, Washington, Michigan, Kansas, and Utah, which have also banned such beverages.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·


Fanciful Names and the TTB

February 23, 2011

We get lots of questions on the topic of “fanciful names” in the context of certificate of label approvals (COLAs) through the Alcohol & Tobacco Tax & Trade Bureau (TTB). The TTB recently posted a helpful clarification, which we wanted to pass along:

Fanciful Name. Have you ever wondered what information should be entered into the “fanciful name” field on the COLA application? A fanciful name is a term used in addition to the brand name for the purposes of further identifying a product. A fanciful name is mandatory for any malt beverage product that is not known to the trade under a particular designation (27 CFR 7.24(a)) or distilled spirits products that do not meet the standards of identity or does not conform to trade and consumer understanding (27 CFR 5.34(a)). The use of a fanciful name on a flavored wine product or any wine product that meets a standard of identity is not required. Please note that if a fanciful name is used on a flavored wine product, it must appear in direct conjunction with a truthful and adequate statement of composition. (27 CFR 4.34(a))

In other words, if your distilled spirits or beer product does not fall within one of the specifically defined classifications, e.g., whiskey, gin, rum, tequila, beer, lager, ale, porter, stout, etc., then it must be labeled with a “truthful and adequate statement of composition” and a fanciful name in addition to the brand name. This generally occurs when a product starts as a distilled spirit or malt beverage product, but then additional flavorings or ingredients are added and those additional items are not permitted within the standard defined classifications. In the case of wine, the fanciful name is optional. Brand names and fanciful names cannot contain the name of a class or type of alcohol, so “vodka” or “whiskey” cannot serve as a fanciful name.

When a fanciful name is mandatory, it is important to plan ahead when creating a new product name and label. We have seen products identified by a single brand name that could not obtain a label approval because they were required to also have a fanciful name. Applicants in that situation are required to add a new name to be used as a fanciful name and revise their labels so that it is included. An example of a properly identified distilled spirits product is “ABC Brand, Peachy Passion, neutral spirits with added fruit juice and natural flavorings.” It uses a brand name, a fanciful name, and a statement of composition, as required under the labeling regulations. For most products, fanciful names are not required but it’s important to consider how TTB will classify your product before you create your labels and brand identity.
Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·


Vertical Integration in California (“Tied-House” Laws)

February 17, 2011

The general rule with alcoholic beverage licensing is that you cannot be involved in more than one “tier” of the industry, meaning that suppliers and importers can’t be wholesalers, wholesalers can’t be retailers, retailers can’t be suppliers, and vice versa. The objective, which came about following the repeal of prohibition, was to promote the organized and responsible distribution of alcohol. It was thought that by keeping the three tiers separate, suppliers would not exert undue influence over retailers, consumers would not be encouraged to over consume, and the societal ills that led to prohibition in the first place would not be repeated. In the 75+ years since the creation of the three-tier system, dozens of exceptions have found their way into the California ABC Act. The tiers are no longer entirely separate and some licensees are permitted to hold licenses in other tiers. For example:

12/18 (Distilled Spirits Importer)/(Distilled Spirits Wholesaler)

17/20 (Wine and Beer Wholesaler)/(Wine and Beer Retailer)

9/17/20 (Wine and Beer Importer)/ (Wine and Beer Wholesaler)/(Wine and Beer Retailer)

There are restrictions on operating under each of these combinations, but the ability to hold them in combination remains a privilege available in California that is not available in many other states. The “tied-house” rules have implications that extend well beyond the licensing structure. If you are interested in learning more about tied-house issues, feel free to contact any of the attorneys here at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·


Small Craft Brewers Get Bigger as the Brewers Association Changes Their Bylaws

January 12, 2011

As the formidable Harry Schuhmacher, editor and publisher of BeerNet, reported last week, the Brewers Association Board recently approved a change to the definition of “small” in their bylaws as it applies to craft brewers.

The Brewers Association was formed in 2005, after a merger of two longstanding organizations, The Association of Brewers and Brewers’ Association of America. Its mission is to, “promote and protect small and independent American brewers, their craft beers and the community of brewing enthusiasts.” Currently, their membership includes over 1,000 U.S. brewers. The definition of “small” was changed in their bylaws from those brewing a maximum of 2 million barrels to those brewing a maximum of 6 million barrels. The definition is relevant for both classes of the Brewers Association’s membership, Professional Packaging Brewers and Associates. The change allows brewers that were nearing the 2 million barrel mark to remain a part of the Brewers Association. Boston Beer Co., makers of Samuel Adams and a public company with a current market cap of $1.21 billion, was poised to pass the 2 million barrel mark, but the recent change allows them to remain a member.

Regarding the change, Nick Matt, chairman of the Board of Directors, stated, “A lot has changed since 1976. The largest brewer in the U.S. has grown from 45 million barrels to 300 million barrels of global beer production. The craft brewer definition and bylaws now more accurately reflect and align with our governmental affairs efforts.”

In 2010, the Brewers Association supported H.R. 4278/S. 3339, which aims to expand a reduced excise tax for certain small brewers. The excise tax for small brewers was established in 1976 and currently applies to those producing 2 million barrels per year or less. The proposed bills would both increase the production allowances for “small brewers” to 6 million barrels per year, and decrease the excise tax for such brewers. In the House, the bill was last referred to the House Committee on Ways and Means, while in the Senate, an identical bill remains in the Committee on Finance.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·


Update on New Sampling Rules at Retail Stores in California

December 07, 2010

A few weeks ago, we wrote about the new permit available to California off-premise consumption retailers that will allow suppliers to come to their premises and conduct instructional consumer tastings. The ABC just released an industry advisory with additional helpful information. The industry advisory is available here.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010 · All Rights Reserved ·


Alcoholic Energy Drinks are Out, What’s Next?

December 06, 2010

At this point, we’ve all recovered from the landslide ban on alcoholic energy drinks that crossed the U.S. in November. We covered the opening act, here, when Michigan, quickly followed by Washington, banned the sale of alcoholic energy drinks. New York then reached an agreement with certain suppliers and distributors that halted caffeinated malt beverage sales in that state (review our coverage here). After that, the U.S. Food and Drug Administration (FDA) issued warning letters to four caffeinated alcoholic beverage companies. The letters warned those producers that caffeine added to their malt alcohol beverage products constitutes an “unsafe food additive.”

Substances added to food products, which includes beverages, are considered food additives and are subject to review and approval by the FDA, unless the substance is specifically excluded from the definition of “food additive,” has been sanctioned by the FDA, or is recognized by qualified experts as adequately safe when used as intended. This third category is referred to as Generally Recognized as Safe or GRAS.

As many know, the FDA isn’t the usual stop for federal regulation of alcoholic beverages, but rather the Alcohol and Tobacco Tax and Trade Bureau (TTB) which operates under the Federal Alcohol Administration Act (FAA Act). In this instance, the FDA’s statements meant that the beverages in question were considered adulterated under the Federal Food, Drug and Cosmetic Act (FFDCA). The TTB takes the position that adulterated beverages, even if their formulas and labels have been approved by the TTB, are mislabeled under the FAA Act. This means that shipping and selling such beverages violates the FAA Act, which can result in license revocations and misdemeanor penalties. As the TTB stated, “…each producer and importer of alcohol beverages is responsible for ensuring that the ingredients in its products comply with the laws and regulations that FDA administers. TTB’s approval of a label or formula does not imply or otherwise constitute a determination that the product complies with the FFDCA, including a determination as to whether the product is adulterated because it contains an unapproved food additive.”

Producers of alcoholic energy drinks likely thought their products fell under the GRAS status. The FDA’s announcement ended that assumption. The question is, what other assumptions might it have ended? Alcoholic beverage producers have been using caffeine in their products for years, the most popular being coffee. In the FDA’s Questions and Answers section about the warning letters, it states that the letters are not directed at “alcoholic beverages that only contain caffeine as a natural constituent of one or more of their ingredients, such as a coffee flavoring.” However, in that same section the FDA also stated that, “Other alcoholic beverages containing added caffeine may be subject to agency action in the future if the available scientific data and information indicate that the use of caffeine in those products is not GRAS. A manufacturer is responsible for ensuring that its products, including the ingredients of its products, are safe for their intended use and are otherwise in compliance with the law.” Further, the TTB stated that if requested by the FDA, it would share “formulas for beers containing added caffeine that are approved under 27 CFR Part 25 [TTB regulations].” In the upcoming months, and perhaps years, it will be interesting to see how the GRAS standard is applied to other alcoholic beverages containing some form of caffeine.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010 · All Rights Reserved ·


California Sampling at Retail Stores

November 22, 2010

Effective January 1, 2011, California off-sale retailers will be eligible for a $300 instructional tasting license that will allow wine, beer and spirits suppliers to conduct free consumer tastings on the retail premises.

The instructional tasting license will be available to most off-sale retailers. Off-sale retailers with a gas station are not eligible unless the retail store is over 10,000 sq. ft. Premises under 5,000 sq. ft. are not eligible unless 75% of gross sales on the premises are alcohol. This will tend to exclude convenience stores and small markets but will enable small wine and liquor stores to obtain the license. Permits may also be denied to retailers in “overconcentrated” areas, i.e., locations with more than the statutorily authorized number of ABC licenses.

Retailers obtaining the permit must separate the tasting area with a barrier and post signage prohibiting minors from entering the tasting area. The retailer is responsible for making sure no minors are in the tasting area and no open containers leave the tasting area. Tastings may only be conducted between the hours of 10:00 a.m. and 9:00 p.m., provided the retail license allows sale of alcohol within that time period.

The tastings must be free, and sample size is limited as follows:

Sample Limitations
Beer 8 oz. per person per day
Wine 3 tastings per person per day, 1 oz. per sample
Spirits 3 tastings per person per day, ¼ oz. per sample

Each tasting event can only involve one class of product and one “authorized licensee” tasting per retailer per day, so a single tasting event may not combine beer and wine tastings or multiple suppliers. “Authorized licensees” who may conduct the tastings are California licensed: winegrowers, winegrower’s agents, beer and wine importer generals, beer and wine wholesalers, wine rectifiers, distilled spirits manufacturers, distilled spirits manufacturer’s agents, distilled spirits importer generals, distilled spirits rectifiers, distilled spirits general rectifiers, rectifiers, out-of-state distilled spirits shipper’s certificate holders, distilled spirits wholesalers, brandy manufacturers, brandy importers, California brandy wholesalers, beer manufacturers, or an out –of-state beer manufacturer certificate holders.

The alcohol tastes are to be served by the “authorized licensee” or her/his agent. The exception is that beer and wine wholesalers, though “authorized licensees”, may not serve tastes unless they hold additional licenses. Wine and spirits for the tasting may be supplied by the “authorized licensee” or bought from the retailer at the original invoiced cost. Beer cannot be provided by an “authorized licensee”, but may be purchased from the retailer at invoice cost. Unused product must be removed at the conclusion of the tasting.

An “authorized licensee” must be present for the tasting, unless the event has been previously advertised and the “authorized licensee” can’t attend. On that note, the “authorized licensee” can advertise the retailer event in advance, subject to restrictions. Retailers are also allowed to advertise the events on their own initiative. Special rules apply if the off-sale retailer already has a Type 42 on-sale license for a tasting bar.

For the complete rules, see Cal. Bus. & Prof. Code §23396.6 and §25503.56.

If you would like assistance in applying for the instructional tasting license, please contact licensing paralegal Lindsay McCarthy at .(JavaScript must be enabled to view this email address).

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010 · All Rights Reserved ·


The Votes are In: Washington Remains a Control State

November 09, 2010

There was a lot of shake-up in Congress this election season, but things stay the same for Washington’s alcoholic beverage system. Washington remains one of 18 “control” states, which hold broad reign over the wholesale distribution of alcohol. Further, Washington remains one of 12 states that are involved in the retail distribution of alcohol.

Initiatives 1100 and 1105 would have privatized the state’s liquor distribution and sales system. Initiative 1100 would have made sweeping changes to Washington’s alcoholic beverage laws, not only privatizing liquor sales, but eliminating many of the state’s distribution regulations, including price controls, restrictions on volume discounts, and prohibitions against paying on credit for beer and wine sales. Initiative 1105 was less expansive. It called for a privatization of the liquor sales systems, but left most of the distribution laws regarding beer and wine intact, although it relaxed such distribution laws related to liquor.

The two campaigns were at odds with each other. Initiative 1100 was backed largely by Costco Wholesale Corp., while Initiative 1105 was backed mostly by beer and wine distributors. Unions, including the Washington State Council of Firefighters, came out against both initiatives, arguing they would result in more access to alcohol throughout the state and greater public safety concerns.

Both measures failed, though it was a close race for Initiative 1100. Initiative 1100 received a 53.21% “No” vote to 46.79% “Yes.” Initiative 1105 received a 64.51% “No” vote to 35.49% “Yes.” Despite what was surely a significant financial investment in both initiatives by their respective supporters, for the time being it’s business as usual in Washington State.

Imbiblog is published for general informational purposes only and is not intended as legal advice.


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