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Imbiblog is published for general informational purposes only and is not intended as legal advice.

FDA Food Facility Registration Renewal: How to Renew and What to Watch out For

October 30th, 2014 | Add a comment »

Under the Food Safety Modernization Act (“FSMA”), which was passed into law in 2011, all food facilities, including those where alcoholic beverages are produced or stored, are required to renew their FDA registrations by December 31, 2014. As we’ve previously blogged about here and here, the FSMA and related FDA laws include alcohol in the definition of “food,” and a “Food Facility” includes any “factory, warehouse, or establishment (including a factory, warehouse, or establishment of an importer) that manufactures, processes, packs, or holds food,” not including restaurants and other retail food establishments. Accordingly, many in the alcohol industry must register with the FDA, including wineries, breweries, distilled spirits plants, alcohol beverage distributors, importers, warehouses, and wholesalers. Note that foreign facilities that produce food or alcoholic beverages sent to the U.S. are among those required to register.

The FSMA requires that all registered food facilities renew their registrations every two years between October 1 and December 31 of every even-numbered year. That means that even if your facility was first registered with the FDA in 2013, or even in early 2014, renewal is required before December 31, 2014. Renewal won’t be required again until October 1 through December 31, 2016.

FDA registration and renewal is a simple process that can be completed online and there is no fee for either the initial registration process or renewal. The FDA does not issue a formal certificate once the process is completed, and instead simply issues a registration number to registered facilities, along with a PIN that all registrants should keep available for the renewal process. Many registrants may have received emails or other correspondence from third parties that may claim to be affiliated with the FDA and that attempt to collect fees for FDA registrations. The FDA has recently warned registrants that it is not affiliated with any third parties, and that registration is always free, so be on the lookout for emails requesting a fee or other information related to FDA registration. More information on FDA registration and renewal can be found here.

Contact one of the attorneys at Strike & Techel if you have any questions about FDA registration or related issues.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Custom Crush vs. Alternating Proprietorship: Starting a Cheaper Wine Business

October 13th, 2014 | Add a comment »

There is a long running joke that it is easy to make a million dollars in the wine industry, you just start with two million dollars. Joking aside, there are relatively low cost ways that you can get started in the wine business, without having to invest in planting your own vines and building your own winery. These options allow you to get started making and building your brand without having the considerable overhead of vineyards and winery buildings. Two ways exist of doing this: you can enter into a custom crush relationship with an existing winery to make wine for you, or you can get your own winery license, based at an existing licensed winery, in what is referred to as an alternating proprietorship or AP arrangement. In both cases, you own and develop your own wine brand or brands. We have put together some information on both systems here, and also recommend that you read the full Industry Circular from the Alcohol and Tobacco Tax and Trade Bureau (TTB) on the differences between them.

Custom Crush

In a custom crush situation, you contract with a winery to make wine for you. Even if the grapes that are used for the wine are grown or purchased by you, the produced wine belongs to the winery until state and federal excise taxes are paid and it is sold to another properly licensed entity. The winery gets the label approval and maintains all records and reports. You, as the brand owner, generally obtain a wholesale license so that you can buy the tax-paid wine from the winery and then resell it to wholesalers and retailers, depending on your state licensing. Each state has a different way of managing this. In Oregon, for example, custom crush customers often get a state winery license alongside a federal wholesale license. In California, it is possible for a wholesaler to also obtain a retail license and market wine direct to consumers, although shipping to other states with such a license is limited to the small number of states which allow an out-of-state retailer to ship to their residents.

Alternating Proprietorship (AP)

The TTB will allow licensed premises to alternate between owners, such as in an AP agreement where more than one winery is licensed in the same location. Premises can also alternate between types of licenses, so that a facility can alternate between a winery and a brewery or distillery, for example. In an AP situation, the TTB will allow more than one licensee to operate a winery in the same location, and even for some of the same staff to be used, provided that each owner makes independent decisions evidencing authority and control over the winemaking process. The TTB requires and will review the written AP agreement between the parties, often referred to as “host” and “tenant,” to make sure that each licensee has a bona fide plan to conduct its own winery operations. Although an AP arrangement involves more permitting and recordkeeping than the custom crush approach, it carries some significant benefits. First, the AP tenant is licensed as a winery and will be able to benefit from the rights of a winery licensee in that state. These can include being able to sell direct to consumer in almost all states, operate one or more tasting rooms, and produce or blend other types of alcohol. Second, an AP tenant is likely to be eligible for the small domestic producer tax credit, as production is based only on the AP tenant’s production, which is not likely to exceed 250,000 gallons in the start-up phase (note that there are no minimum federal production requirements for a winery but California, for example, requires at least 201 gallons of wine a year to be made by a licensed winery). It should be noted that winery licensing under an AP agreement may trigger some grape sourcing requirements that you should be aware of, and you will need to research local planning issues more closely in an AP structure than a custom crush relationship.

If you are interested in learning more about custom crush and alternating proprietorships in California or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

California Revises On-Premises Wine & Spirits Consumer Tasting Law

October 1st, 2014 | Add a comment »

On September 30, 2014, the California Governor signed into law Assembly Bill 520, which revises the state’s laws on consumer instructional tastings at on-premises licensed retailers (i.e., bars and restaurants). Prior to the revision, Cal. Bus. & Prof. Code § 25503.5(c) permitted winegrowers, distilled spirits manufacturers, or an “authorized agent” of those licensees to conduct consumer tastings. The new legislation removes the consumer tasting provisions from Section 25503.5 (which now deals only with tastings for licensees and their employees) and creates a stand-alone consumer tasting statute in new Section 25503.57. The new law contains the same essential provisions as the old law, e.g., the event should be instructional in nature and can include information about the history, characteristics, and methods of serving the product; limited to 3 tastings per person, per day; tasting size limited to ¼ oz. for spirits and 1 oz. for wine.

The new law expands the list of licensees authorized to conduct consumer tastings to include a “winegrower, California winegrower’s agent, beer and wine importer general, beer and wine wholesaler, wine rectifier, distilled spirits manufacturer, distilled spirits manufacturer’s agent, distilled spirits importer general, distilled spirits rectifier, distilled spirits general rectifier, rectifier, out-of-state distilled spirits shipper’s certificate holder, distilled spirits wholesaler, brandy manufacturer, brandy importer, or California brandy wholesaler.” The authorized licensee may also use a “designated representative” to conduct a tasting. The law expressly excludes wholesaler/retailer combination licensees (Type 9/17/20) and limited off-sale wine retailer licensees (Type 85).

The new law also clarifies that both authorized licensees and retailers can advertise the events in advance, subject to the usual restrictions (suppliers cannot list prices or include laudatory statements about the retailer – name and address only – and cannot pay for the retailer’s ads). Only one licensee’s products can be promoted at any one time and a “designated representative” can only represent one licensee at a tasting. The new law takes effect January 1, 2015.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Selling Alcohol to California Consumers Online

September 4th, 2014 | Add a comment »

Traditionally a customer wanting a bottle of alcohol in California would go to their local package or grocery store to get it or, if they were lucky enough to be in wine country, directly to a winery. In recent years, with consumers actively experimenting and looking for more variety, and with the boom in online shopping generally, consumers have a lot more options to find that elusive boutique wine, craft beer or small batch spirit brand that they have heard about and have been looking for. All of this means that consumers are turning more and more to the internet to find the alcohol that they want to serve at home. A quick Google search of internet alcohol sales in California yields more than 10 million results.

SPIRITS: Only a California Type 21 off-sale general licensee can sell a bottle of distilled spirits direct to consumer (DTC). Although a distiller can host a customer at the distillery to taste the products that are made there, a distiller cannot sell a bottle of spirits to a customer to take home.

BEER: There is a bit more leeway for beer with brewers being able to offer tastings and sell beer to customers. The CA law was revised just this year to make it very clear that a brewer can only sell its own beer to customers, and not beer made by other brewers, unless it gets a retail license. As a matter of policy, the ABC will allow a beer manufacturer to also make an online sale of its beer to a consumer. An on-premises retailer like a restaurant or a bar can also sell beer to customers to take home, and by the same ABC policy can sell online.  Off-sale retailers like grocery stores can sell beer to consumers online.

WINE: As with other alcohol, wine can be sold DTC by off-sale retailers. An on-sale retailer can also sell wine online, under ABC policy allowing online sales by retailers. A winery can also sell wine DTC, both at the winery and online, including through wine clubs. The state also offers two opportunities for the online retail sale of wine without a traditional brick and mortar store. The first of these is with a 17/20 wholesale and retail combination, or a 9/17/20 import/wholesale/retail combination. In both cases, wine can be sold online to customers and indeed can only be sold by direct mail, telephone or the internet from a location which is not open to the public. The license combination is often located right at the warehouse, enabling the licensee to easily pick and pack and ship out customer orders. The 17/20 combination allows the holder to sell directly to retailers as well as consumers and, with the addition of the type 9, the licensee can bring in wine from out-of-state and get it all the way to a consumer without passing through any other licensee’s hands. The second option is more recent and consists of a type 85 license, which gives the licensee the ability to sell wine at retail without the added wholesale or import rights. The chief distinction between the 85 and the 17/20 combination is that the 17/20 licensees have a wholesale license so they are required to make sales to retailers in addition to consumers, whereas the type 85 licensee sells only to consumers.

OUT-OF-STATE SELLERS: If you are a seller of alcohol located out-of-state, only wine can be sold DTC to California consumers and only under certain circumstances. A licensed winery in another U.S. state can get a direct shipper’s permit to sell DTC. For a licensed retailer in another state, the laws are murkier. California has a “reciprocity” statute which only permits out-of-state retail sales from states which allow a California retailer to ship to that state’s consumers. Currently, only thirteen states and the District of Columbia allow such sales. However, the concept of “reciprocity” was criticized by the Supreme Court in its 2005 decision in Granholm v. Heald, 544 U.S. 460, with specific reference to this California law. The law itself has not been challenged and thus the limitation remains on the books.

If you are interested in learning more about direct shipping laws in California or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

Supplier-Funded Instant Rebates No Longer Permitted on Beer in California

August 7th, 2014 | Add a comment »

On July 18th, California Governor Jerry Brown signed into law Section 25600.3 of the Business and Professions Code, which expressly prohibits beer manufacturers, importers, and wholesalers from offering, funding, sponsoring, or furnishing any type of coupon whereby a consumer gets an instant discount on beer, cider or perry, at the time of purchase. Prohibited coupons include instantly redeemable coupons (IRCs) of all kinds, whether paper, digital or electronic. The bill also prohibits retail licensees from accepting or possessing any such coupon funded by a beer wholesaler or manufacturer, although it does not prevent a retailer from offering its own coupons as set out below.

Per the bill sponsor, beer IRCs have been targets for fraud and have created liability issues for beer suppliers, as well as creating an imbalance in the beer marketplace among major breweries and the burgeoning craft beer market. The bill received major support from MillerCoors and Anheuser-Busch.

Not affected by the law are mail-in rebates, retailer-sponsored coupons, instant coupons for distilled spirits and wine (provided the coupons do not also discount beer), and instant rebates offered by beer manufacturers at the production facility or other premises owned or operated by the manufacturer. This last exception keeps the door open for small brewers licensed with a Type 23 license to offer instant rebates at brew-pubs owned and operated by the brewery.

Suppliers and retailers should be careful with all beer, cider and perry coupons as they may be affected by the new prohibition. We have put together a chart below to show what coupons are caught by the law. You should check each license that is held by the sponsor to see if the law prevents the coupon.

California IRCs  by Alcohol and ABC License Type

            

 

 

Beer Manufacturer (CA or out-of-state)

Beer and Wine Wholesaler

Beer and Wine Importer

Winegrower (if wholly owned by a Beer Manufacturer)

Winegrower (not owned by Beer Manufacturer)

Retailer

Malt beverages (incl. beer)

No

No

No

No

N/A

Yes

Cider

No

No

No

No

Yes

Yes

Perry

No

No

No

No

Yes

Yes

Wine/spirits

N/A

Yes

Yes

Yes

Yes

Yes

Rebate regulations vary from state to state. For more information on coupon laws for wine, beer, and distilled spirits, contact an attorney at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·