AB 774: Regulating the craft beer industry

As the craft beer industry grows and expands, so do the laws affecting it. Several new alcohol beverage laws that were passed by the California Legislature in 2015 took effect on Jan. 1. One new law, Assembly Bill 774 introduced by Assemblyman Mark Levine, makes important changes for breweries that put them on equal footing with wineries in two respects.

Beer Samples at Farmers' Markets

First, AB 774 allows breweries to offer beer samples at farmers' markets. In 2014, Gov. Jerry Brown had signed Assembly Bill 2004, which allowed breweries to obtain a license to sell their beer at certified farmers' markets (codified at Section 23399.45 of the Business and Professions Code). That law was based in part on Section 23399.4, which already allowed wineries to do the same. Wineries, unlike breweries, however, could offer samples of their wine at farmers' markets. But breweries were limited to selling packaged, sealed beer.

AB 774 amended Section 23399.45 to allow breweries to offer beer samples at farmers' markets as part of an instructional tasting. The samples must be consumed in a designated area, and only one brewery may offer instructional tastings at a single farmers' market. A brewery is also limited to pouring no more than eight ounces of beer per consumer per day.

Existing law also limits a brewery to selling beer at those farmers' markets that are in the same county as the brewery or in an adjacent county. A special license from the Department of Alcoholic Beverage Control is also needed to conduct such sales.

Beer Donations

Second, AB 774 allows nonprofit organizations ((501(c)(3) and 501(c)(6)) to sell beer bought by, or donated to, the nonprofit from a licensed beer manufacturer, such as for a fundraising event. These nonprofits previously could obtain a special temporary license to sell wine for consumption at or after a licensed event that had been bought by or donated to the nonprofit. This has been a popular way for wineries to support nonprofit organizations. But this same privilege did not extend to beer, until now.

AB 774 amended Section 24045.6 of the Business and Professions Code to allow nonprofits to sell both wine and beer at licensed events, for consumption at the event (on premises) or for consumption later (off premises). This gives nonprofits a new way to raise funds and take advantage of the rising popularity of craft beer.

Conclusion

These new laws will likely lead to more breweries deciding to participate at farmers' markets and donating more to support non-profit organizations. They also help establish a precedent for breweries to seek further changes in the law to have beer and wine treated equally. As craft beer's popularity continues to rise, the Legislature will likely be receptive to laws that help the industry grow.

Eugene Pak is a partner at Wendel, Rosen, Black & Dean LLP in Oakland, where his practice focuses on advising craft breweries on a range of business issues. You can reach him at (510) 834-6600 or epak@wendel.com. He also tweets @beerattorney.