NBI Brewery & Distillery Law

NBI Brewery & Distillery Law

William A. Adams, APCNorton, Moore, & Adams, LLP

525 B Street, Suite 1500San Diego, CA 92101

619-233-8200wadams@nmalawfirm.com

www.calbevlaw.com

Regulatory Tiers

1) Federal: Alcohol & Tobacco Trade and Tax Bureau (TTB)

2) State: ABC3) Municipal: Land use / zoning

Brewery License Types•License Types•01 Beer Manufacturer•23 Small Beer Manufacturer •75 On-Sale General Brew-Pub

Distillery License Types•License Types•03 Brandy Manufacturer•04 Distilled Spirits Manufacturer•06 Still•07 Rectifier•74 Craft Distiller

Brewery License Types• 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

Brewery License Types• 23 SMALL BEER MANUFACTURER - (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. <60k barrels/yr. Licensee may hold up to 6 other retail licenses without tied house violation. (None for Type 1)

Brewery License Types• 75 ON SALE GENERAL – BREWPUB - (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 (no growlers). Minors are allowed on the premises.

Distillery License Types• 03 BRANDY MANUFACTURER - The following pertains to brandy

manufacturers' licenses, and to duplicate brandy manufacturer's licenses issued after September 17, 1965. This license authorizes the holder to manufacture only brandy and not other distilled spirits (Section 23014). Brandy made by the distillation of wine or fermented fruit.

Distillery License Types• 04 DISTILLED SPIRITS MANUFACTURER - The following pertains to new

distilled spirits manufacturer's licenses issued after September 18, 1959. The Act defines a distilled spirits manufacturer as "...any person who produces distilled spirits from naturally fermented materials or in any other manner" (Section 23015). The functions of this type of license, in addition to that of production, include packaging, bottling, rectifying, flavoring and others as found within Section 23356. The functions apply only to distilled spirits; they do not include wine or beer.

Distillery License Types• 06 STILL – For the making of alcoholic beverages or capable of such

use. A still is "...any apparatus capable of being used for separating alcohol, or alcoholic vapors or solutions from alcohol or alcoholic solutions or mixtures ..." *This license is required in conjunction with a type 4 or 74 license.

Distillery License Types• 07 RECTIFIER - also permits the rectification of wine. This license to cut,

blend, rectify, mix, flavor and color distilled spirits and wine upon which excise tax has been paid and, whether rectified by the licensee or another person, to package, label, export and sell the products to persons holding licenses authorizing the sale of distilled spirits (Sections 23016 and 23368). This licensee may sell distilled spirits and wine without the need for any other license, but he/she may not sell wine to a person who does not hold a license that also authorizes the sale of distilled spirits. A rectifier may also elect to function as a distilled spirits wholesaler, but when doing so, he/she must comply with all of the provisions applicable to a distilled spirits wholesaler (Section 23371).

Distillery License Types• 74 - Craft Distiller - Authorizes the licensee to: Manufacturer up to 100,000

gallons of distilled spirits per fiscal year; Package, rectify, mix, flavor, color, label, and export distilled spirits manufactured by licensee; Only sell it’s distilled spirits to a licensed wholesaler, manufacturer, winegrowers, manufacturer’s agent, or rectifier; Sell up to 2.25 liters of distilled spirits manufactured by the licensee to a consumer attending an instructional tasting; May sell all beers, wines, brandies, or distilled spirits to consumers for consumption on the premises in a bona fide eating place located on the licensed premises; May have upon its licensed premises all beers, wines, and distilled spirits, regardless of source, for sale or service only to guests during private events not open to the general public; Serve a total of one and one-half ounces of distilled spirits per individual per day to be as tastes.

Brewery Tasting Rooms (Duplicate Licenses)• Brewery “branch office locations” Limit 6 (2 restaurants) B&P Code

23389• Minors (children) can come into a premises with a duplicate brewery

license but not a bar license.• Tied house restrictions exception. (Section 25500, et seq., Business &

Professions Code.) I.e., the brewery can supply the beer directly to its duplicate license location. • Exempt from Health & Safety regs. applicable to retail food facilities• Distilleries – no offsite, limited to type 74 premises• Wineries (type 2) – 1 offsite tasting room

retail food facilitie retail food facilitie

Zoning - Don’t find out too late

Application Review Process

https://www.abc.ca.gov/legal/Protest_Process/Protest%20Process001.pdf

Application Review Process

Public convenience OR necessity (PCN) (90 days)

Discretionary permit (NUP, CUP, PDP, ec.)

Alcoholic Beverage Control (ABC)

Application Review Process

Public Convenience or Necessity•Bus. & Prof. Code sec. 23988.4: •ABC: nonretail license, a retail on-sale bona fide

eating place license, a retail license issued for a hotel, motel, or other lodging establishment, a retail license issued in conjunction with a beer manufacturer’s license, or a winegrower’s license. • Local Gov. (Police Dept. or CUP): All others

(Distillery tasting room duplicates)

Public Convenience or Necessity•Retail vs. non-retail;•Public convenience or necessity – integrated vs

separate;• If local gov. agency: 90 days from filing of both PCN

and ABC; •Appeal denial – hearing;

Discretionary Permit•Retail trigger, e.g., tasting rooms: SDMC §141.0507

“Retail Tasting Stores”• “Limited Use”• Industrial zones and commercial zones•Commercial broker•www.d6beer.com

ABC Disciplinary Process• Violation of Statute• Serving minor • Administrative• Criminal

• Serving intoxicated person• Drug sales• Disorderly House• Hours• Tied house• Etc.

• Violation of License Condition• Hours• Noise• Dancing and entertainment• Etc.

ABC Disciplinary Process - Enforcement

•Undercover ABC•Police / Sheriff’s Dept.•Advertising

Adams – ABC Disciplinary Process

POIC?

ABC Disciplinary Process Adjudication•ALJs – Division of ABC• Only ABC matters• Limited tolerance and leeway• Openings and closings – brief• Esoteric

Municipal Disciplinary Process•CUP Hearing•Deemed Approved Hearing

“Tied House”• Prohibits vertical integration•Manufacturer• Distributor / Wholesaler• Retailer• 27 CFR 6 et seq., Business & Prof. Code § 24076 §§ 25500

et seq.• Prohibits horizontal integration • Things of value • Exceptions

Liens

•The law prohibits a licensee from pledging the license as security for a loan or as security for the fulfillment of any agreement. Business & Prof. Code § 24076

Summary of Esoteric Concepts

•Tied House•Liens•Escrow•Previous Conforming Use / ABC 90 days

ABC Trade Enforcement UnitBrett MusselmanSupervising Agent in ChargeBrett.Musselman@abc.ca.gov

(916) 419-2507 ABC Headquarters

Lee RieglerSupervising Agent lee.riegler@abc.ca.gov

(916) 419-2575 ABC Headquarters

Diana Villanuevadiana.villanueva@abc.ca.gov

ABC Act, Constitution, & Regs

(916) 419-2571

https://www.abc.ca.gov/forms/ABCAct_2015.pdf

ABC Headquarters:Price Posting, Beer Labels, Shipping Certificates

Multi-state • UTAH: Distribution Licenses• Certificate of Approval

Out of State Brewer, Importer, or Supplier of Beer, Heavy Beer, and Flavored Malt Beverages• Brewers located outside of Utah, and importers or suppliers of beer, heavy beer, and

flavored malt beverages must obtain a “Certificate of Approval” from the department before selling or delivering beer to a beer wholesaler in Utah or a flavored malt beverage to the department or a military installation. If the brewer located outside of Utah is a small brewer, it must obtain a “Certificate of Approval” before selling or delivering beer in Utah to a beer wholesaler, a beer retailer, or an event permitee.

• The license year runs from January 1 to December 31.• Fees

Initial fee - $300Application fee - $75License Fee Schedule

TTB Label Application Process

COLA - certificate of label approval – online faster: www.ttbonline.gov

TTB Label Application Process• “1. 3 months out from the bottling date the label design and

details should be decided.2. Once this is finished the completed label proofs are given to the person responsible for submitting the label approval applications. They look them over for all required items and details and submit.3. In 2 to 6 weeks time the approval (hopefully) comes back.4. The go ahead can be given to the printer to process.” • www.winecompliancealliance.com

TTB Label Content• BEER: brand name, the class designation (such as draught or lager),

volume / contents, its country of origin, if it is a light beer, and the name and address of the bottler or importer; if over 0.5 oz., alcohol content and government warning label• DISTILLED SPIRITS: Brand name, the name and address of the bottler

or importer, its country of origin, the net contents stated in metric units, alcohol content, and the class or type of the spirit; government warning label. • Type size.

TTB Label Content• GOVERNMENT WARNING:• (1) According to the Surgeon General, women should not drink

alcoholic beverages during pregnancy because of the risk of birth defects.• (2) Consumption of alcoholic beverages impairs your ability to drive a

car or operate machinery, and may cause health problems.

Summary• What are They? – type of license• Mfrg / how much?• Distrib’r• Retailer• Other products / makers• Ownership in other alc

retailers• Zoning / Municipal• Planning / Development svcs• Police• Waste

• ABC• Census tract – crime / # of existing

licenses• Ownership• Proximity to residences, parks,

schools, churches• Protestants• Public notice• Hearing• Time / cost

Compliance• Labels TTB• Tied House - marketing• Operations• ABC / PD

• Complaints• Cal. OSHA, DLSE-DIR, EEOC, etc.

Contracts• Territory• Exclusivity / Term• Performance standards and expectations• Termination• For cause / default / cure• Voluntary • Notice• Liquidated damages / Buy out

• Indemnification

Contracts• Distributor Agreements: Manufacturer – Distributor/

wholesaler• Contract Brewing: Manufacturer – Retail; Mfr - Mfr

• http://contracts.onecle.com/hansen/rello.mfg.2000.03.23.shtml

• Alternating Proprietorships• Agreements with Suppliers• Licensing Agreements• Equipment, Retail, Production and Distribution Space Leases

Licensing Agreements• Intellectual property•World Beer Cup licensing agreement:

www.worldbeercup.org

Alternating Proprietorships• Looking For a Brewery Location on the West Coast? – Paso Robles CA.

*We are seeking a Brewery from outside the area who wants a presence in California.* This location is within several miles of Firestone Brewery. We are purchasing the building and have more space than we can use for our Brewery Operations.* The available remaining square footage is 34,000 +/- sq. ft.* First years lease, $3.00 (per annum/per foot NNN), the second year $6 with negotiated long term rates or option to buy space.* Contact Burt @ FusionBrewery@gmail.com or phone 805-441-1867 **

Leases• Land / Building – triple net• Contingency period (90 days)• Extension

• Commercial broker• Zoning• Retail component?

• Tenant improvements / free rent• Environmental – esp. wastewater

• ADA, Indemnification, Seismic, Environmental

The End

• (ABC FAQs)

• www.slideshare.net/williamaadams92101/nbi-brewery-amp-distillery-law

• www.slideshare.net/williamaadams92101/abc-craft-distiller-faqs

• www.calbevlaw.com