Tuesday, August 20, 2019
THE LEGAL COMMUNITY
By RALPH BARAT SALTSMAN, STEPHEN WARREN SOLOMON and STEPHEN ALLEN JAMIESON
To some craft beer aficionados the taste comparisons of “big beer” to hogwash, horse trough and swill are too close to ignore. For them the contemporaneous arrival of beer and animal husbandry is no coincidence. Of course, there are “big beer” fans worldwide, but the number of small artisanal beer breweries is quickly growing and there are plenty of consumers to support the movement. Discussing craft breweries doesn’t stop in the greater LA area but spreads along the coast from Northern California on through to San Diego.
Craft brewers are today’s alchemists who flee the sterility of big breweries and follow their passion in developing and brewing specialty beers. These artisans know the quality of the water, the barley (or other special grains) and hops. They understand the flavor effect local bacteria and yeast in the neighborhood air will yield in their products. However, brewers must acknowledge that passion must co-exist with the law.
In just five or so years, the number of craft breweries in California has doubled to a number now approaching 1000. Craft brewers are among those who build their own love of experimentation from home brewing to business enterprise all of which is regulated by the California Department of Alcoholic Beverage Control.
In California the Department (ABC) oversees the manufacture, importation, sales, service and consumption of alcoholic beverages. Craft breweries must be licensed by the Department. The agency receives applications, conducts investigations into the qualifications of the applicants and the proposed licensed premises. There are three basic license types issued by the Department to enable breweries to operate as commercial enterprises. Home brewers are restricted in volume to 100 gallons per year for on adult in the household and 200 gallons for two or more adults. Removal of product from the premises is possible but restricted. (See Business and Professions Code Section 23356.2)
There are really two fundamental designations by the ABC:
Quoting from the ABC license designation list, licensed breweries by nature and extent are identified as:
License Type 01: BEER MANUFACTURER – (Large Brewery) Authorizes the sale of beer to any person holding a license authorizing the sale of beer and to consumers for consumption on or off the manufacturer’s licensed premises. Without any additional licenses, may sell beer and wine, regardless of source, to consumers for consumption at a bona fide public eating place on the manufacturer’s licensed premises or at a bona fide eating place contiguous to the manufacturer’s licensed premises. May conduct beer tastings under specified conditions (Section 23357.3) Minors are allowed on the premises.
The second basic beer designation is the small beer manufacturer (Type 23). There is a modified version of the small beer manufacturer. The On-Sale General Brew Pub (Type 75) – (Brew Pub or Micro-brewery) Authorizes the same privileges and restrictions as a Type 01. A brewpub is typically a very small brewery with a restaurant. A micro-brewery is a small-scale brewery operation that typically is dedicated solely to the production of specialty beers, although some do have a restaurant or pub on their manufacturing plant.
Type 23 Brew-Pub and Micro-Breweries are limited to 60,000 barrels per year. (Restaurant) Authorizes the sale of beer, wine and distilled spirits for consumption on a bona fide eating place plus a limited amount of brewing of beer. This license does not authorize the sale of alcoholic beverages for consumption off the premises where sold. Minors are allowed on the premises.
Type 75 licenses are also small beer manufacturers who must operate as a bona fide eating place with operational kitchen facilities. Type 75 licensees may sell distilled spirits for on-site consumption. Type 75 licensees must maintain brewing equipment with at least a seven (7) barrel brewing capacity. Sales to ultimate consumers for off-site consumption is not allowed with a Type 75 license, but these licensees call sell product to licensed wholesalers. Any alcoholic beverage not produced at the Type 75 brewery but sold at said premises must be purchased from a licensed wholesaler. Type 75 licensees must produce not less than 100 barrels annually and not more than 5,000 barrels annually.
With restrictions, licensed brewers can hold and sell beer not produced at the licensed brewery but only when purchased from a licensed wholesaler and sold at a bona fide eating place on the licensed premises or contiguous premises.
A brewery license authorizes the licensee to conduct off premises tastings and, subject to ABC rules, give away samples of beer which is produced or bottled for or by the brewery. Section 23386(a): “Any manufacturer’s … license also authorizes the giving away of samples of the alcoholic beverages that are authorized to be sold by the license under the rules that may be prescribed by the Department.”
Licensed beer manufacturers can apply to the ABC for a certified farmers’ market sales permit. Such permits would also allow instructional tasting at that farmers’ market. (Restrictions are found in Section 23399.45)
Licensed brewers can also apply to the Department for a brewery event permit which would authorize the sale of beer produced by the licensee for consumption on property contiguous and adjacent to the licensed premises. Authorization by the ABC is subject to approval by local law enforcement.
Manufacturers’ names may not be obliterated without written consent of that manufacturer.
The ABC Act prohibits beer manufacturers from 1) holding ownership, directly or indirectly of any interest in any on-sale license; 2) furnishing, giving or lending any money or other thing of value to anyone engaged in, operating, owning or maintaining any on-sale premises; and, 3) owning any interest directly or indirectly, in the business, furniture, fixtures, refrigeration equipment, signs (with exceptions) or lease in any premises operated or maintained under any on-sale license.
Subject to restrictions, a brewery can instruct consumers and may conduct courses on the subject of beer. The instruction can take place at the premises of a retail on-sale licensee authorized to sell beer. Such instruction may include tastings. The tasting at any single course of instruction shall not exceed eight (8) ounces of beer per person per day. The tasting event cannot exceed one hour at any individual licensed retail premises. The tasting may be served from an individual glass or cup but not from an original container and may be conducted only by an employee of the on-sale licensee. The brewer may hold not more than six (6) courses per calendar year at any individual on-sale retail licensed premises. A representative of the brewery must be present and shall be responsible for paying the retailer for the tastes of beer served during the instruction course. Finally, the retailer cannot require such instructional tasting by a brewer as a condition for carrying that brewer’s beer.
At the end of the analysis, the brewer whose passion carries him or her from home brewing to a desire to brew commercially and sell beer to an ever-growing discerning audience thirsty for creative product has to be familiar with the regulatory structure set out in the Alcoholic Beverage Control Act. The application process before the ABC is onerous. In most cities, a local discretionary permit must be obtained before the ABC can issue a license. That entitlement process enacted in each separate municipality or county may be challenging. Some cities are longing for well operated small breweries. Some cities would rather not partake. All of these unique factors must be considered when exploration for a small brewery (Type 23 or 75) is undertaken. But for the micro-brewer who wants to pursue that dream, all may be possible. The flight from hogwash, horse trough and swill continues.
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