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Major Changes to Beer Wholesaler Operations in California

Governor Brown approved a bill on September 19, 2018, that will impose a range of significant new restrictions on California-licensed beer wholesalers. The bill number is AB-2469.

The new section §23378.05 of the Business & Professions Code (B&PC) will require a beer wholesaler to:

- Own or lease at least one warehouse sufficient to store stocks of beer equal to 10% of the wholesaler’s annual wholesale beer volume (similar to existing warehouse requirements for spirits in 4 CCR §28).

- Actually maintain in at least one warehouse stock equal to no less than 5% of the wholesaler’s annual beer volume.

- Receive all beer at the wholesaler’s warehouse, “unload and maintain” it on the premises, record it into inventory records and for purposes of compliance with California recycling laws, prior to any sale or reloading.

- Only sell beer that the wholesaler owns and has in the wholesaler’s physical possession, that is not acquired, held or offered for sale on consignment.

- Only sell beer from the wholesaler’s licensed premises or per B&PC §23388 (allowing the sale of beer from wagons or trucks operated by the wholesaler).

- Make deliveries to retailers only with equipment that the wholesaler owns, leases, or rents.

- Sell generally to retailers, and not to a single retailer or retailers that have a direct or indirect interest in the wholesaler or in each other, and to retailers that are owned in whole or in part or managed or controlled directly or indirectly by the retailer or retailers.

It also includes reminders on two other, previously existing parts of the ABC Act, which require a wholesaler to: (1) have and file with the state territorial agreements with each of the wholesaler’s beer suppliers; and (2) price post.

The bill was sponsored by the California Beer and Beverage Distributors, and its stated purpose is to “bring parity to California law by setting forth qualifications for a beer wholesaler consistent with qualifications for brandy and distilled spirits wholesalers.”

The new law will go into effect on January 1, 2019. It contains no grandfathering provisions for existing licensees, or deferred effectivity provisions, so California beer wholesalers should review the new law and ensure they are in compliance by January 1, 2019.

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