The primary statute governing California brewpubs was recently amended by SB 1283, resulting in several changes for brewpubs that go into effect on January 1, 2019. The primary changes include heightened beer production requirements, the ability to sell beer produced by the brewpub for off-premises consumption, and the inclusion of brewpubs among on-sale licensees subject to quota restrictions beginning in 2020. The following are among the new provisions of California Business & Professions Code Section 23396.3 as a result of SB 1283:

• The brewpub licensee must have a minimum commercial brewing system located permanently onsite that is capable of producing at least seven barrels of beer per brewing cycle. The law already requires minimum seven-barrel capacity, but the revision clarifies that the system must be capable of producing at least seven barrels per brewing cycle, and requires the system be permanently installed on site.
• Minimum required production on the premises will increase from 100 barrels to 200 barrels per year. Maximum allowable production remains at 5,000 barrels per year.
• Existing law allows the brewpub licensee to sell beer to, and buy beer from licensed wholesalers but prohibits them from selling, furnishing or exchanging alcoholic beverages with any other brewpub licensee or retailer in California. The revisions clarify that the brewpub licensee also may not buy beer from, or sell beer to, any holder of a beer manufacturer license, nor may a brewpub produce and sell beer under a trademark used on beers made by any other beer manufacturer.
• Current law requires the licensee to make beer, and “authorizes” the licensee to offer it for sale for on-premises consumption. The revised law states that beer made on the premises “shall” be offered to consumers in a “bona fide manner.”
• Licensees must keep records on a monthly or quarterly basis that are sufficient to establish compliance with the production and sale requirements. These records must be kept for at least three years. ABC recently investigated brewpub licensees in the state and determined that many were not producing beer under the license, so licensees should anticipate that ABC will be monitoring them for compliance with the brewpub production and sale requirements going forward.

Amendments to Section 23396.3 also expand the brewpub licensees’ privileges in a couple of beneficial ways:

• Brewpub licensees may now sell beer made on the premises directly to consumers for off-sale consumption, and they can refill “any container” with beer made on site, i.e., growler fills are allowed.
• Licensees can donate beer made at the premises to non-profit organizations pursuant to the requirements of Section 25503.9, but that beer does not count toward the 200 gallon minimum production requirement.

Note that brewpub licensees are still required to sell canned, bottled and draft beer made by others and bought from a licensed wholesaler, but cannot sell those products to consumers for off-premises consumption. Similarly, the brewpub can (but is not required to) sell wine and
spirits bought from winegrowers or wholesalers for on-sale consumption only.

The license fee for a brewpub license is the same as for an on-sale general license, but the brewpub license is not currently subject to the license quota that limits the number of on-sale general licenses (ABC can only issue one such license in a county per every 2,000 inhabitants of that county). As a result, brewpub licenses have been significantly less expensive than on-sale general licenses, which must be purchased from an existing licensee in the event the county license limit has already been met. However, beginning with license applications submitted on or after December 31, 2019, the quota restrictions will apply to brewpub licenses.

SB 1283 brings significant operational and licensing changes for California brewpubs. If you have any questions about brewpub licensing or operations, contact Strike Kerr & Johns.

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