CCBA Legislative Update: DTC Shipping, Pandemic-Driven To-Go Sales

California Craft Brewers Association (CCBA) executive director Lori Ajax and lobbyist Chris Walker shared the progress the organization has made on behalf of the state’s craft breweries yesterday during what board chair Lynne Weaver called the “second and hopefully last” virtual conference.

California is home to 958 craft breweries, which produced 3.3 million barrels in 2020, making it No. 1 in craft beer production nationwide, according to recently released data from the Brewers Association (BA). The state has had some of the country’s strictest regulations during the COVID-19 pandemic, with on-premise restrictions lasting longer than most other states. Earlier this month, Gov. Gavin Newsom announced that the state will roll back many regulations on June 15 if vaccine supply is sufficient and hospitalization rates stabilize.

“In so many ways this pandemic has hit everyone hard, and it’s impacted your businesses, all of California’s businesses, our family and friends, and it’s even really sort of threatened our way of life,” Ajax said. “With the pending reopening of the state on June 15, I know all of us are excited to try and put 2020 behind and look forward to the future.”

Ajax took the CCBA’s helm in early January after the retirement of long-time executive director Tom McCormick.

In addition to the rollback of business regulations, Dee Dee Myers, senior adviser to Newsom and director of the Governor’s Office of Business and Economic Development (GO-Biz), detailed business grants, tax credits and regulations for in-person events during her address to conference attendees.

At present, large-scale indoor events can include a maximum of 200 people unless organizers ensure that attendees are vaccinated or tested.

“You can grow the capacity for those events if everyone is tested and particularly vaccinated,” Myers said.

The California Small Business Relief Grant Program, a $2.5 billion fund that provides grants between $5,000-$25,000 to businesses with revenue of less than $2.5 million, will open a final round of applications on April 28, Myers said. The state is also offering businesses support via a $775 million jobs initiative and the Cal Competes Tax Credit program, which provides $430 million in tax credits for businesses.

“Tax relief, a little regulatory relief, a little grants, a little loans — or hopefully more than a little — a lot of all of those things to help you all not only recover but to thrive and have the resources and support that you need to move forward,” Myers said.

Walker, long-time CCBA lobbyist and founder of Sacramento-based Walker Strategies, discussed the bills the organization is following at the statehouse, many of which will have committee hearings on April 22.

Here are some highlights of the CCBA’s legislative watchlist:

Permanence of Pandemic-Driven To-Go Sales

As the state looks to make permanent the alcohol to-go sales privileges on-premise retailers were granted during the pandemic through a bill (AB 1242) colloquially known as “Cocktails To-Go,” Walker and Ajax lobbied legislators to ensure that bars and restaurants would only be permitted to sell beer in its original manufacturers’ packaging with the goal of protecting breweries’ “sole privilege to refill growlers,” Walker said.

“Beer can be included in Cocktails To-Go, but only in the form of the original manufacturer packaging, so bottles and cans, how you provide it to your on-sale licensee or your distributor provides it,” he said. “That’s how they may sell it to-go, they cannot refill Tupperware or single servings or growlers, it will have to be in a manufactured package bottle or can.”

Another proposed tweak to the state’s revised to-go sales rights would permit breweries that operate bonafide eateries to sell guest brands of beer and wine to-go.

Tied House Upheld in Proposed Umbrella Gift Bill

An early legislative win was the amending of AB 1070, a bill supported by Diageo that would have allowed any beer, wine or spirits supplier to provide on-premise establishments with up to 12 branded umbrellas costing up to $250 each for their patios.

“This is a huge blow-the-doors-off-the-barn on tied house,” Walker said. “The good intentions were to help these licensees, but we engaged and worked with Diageo, worked with the author’s office, and due to our opposition, they removed beer.”

The bill’s current version would permit spirits brands to provide 12 umbrellas up to $150 each. Retailers would be required to keep records of all umbrellas received for a three-year period.

Expanding Direct-to-Consumer Shipping to Out-of-State Breweries

In-state DTC shipping buoyed many of California’s 958 craft breweries throughout 2020, which breweries have “long had under the existing laws” but used “fairly infrequently,” Walker said.

“COVID made it very clear how important this privilege was,” he added.

However, because California does not permit its brewers to ship out of state or out-of-state brewers to ship to Californians, the privilege is at risk under precedent set by the commerce clause of the U.S. Constitution.

“The way we remedy that is to run legislation that would permit people to get a beer shippers’ permit — breweries in other states — and that would protect us under any federal complaint in a court of law,” Walker said.

California’s distillers had a similar bill in the works, so the two industries have combined forces behind one bill (SB 260) that would allow “a person licensed in this state or any other state as a beer manufacturer, regardless of the specific type of license, who obtains a beer direct shipper permit to sell and ship beer directly to a resident of California, who is 21 years of age or older, for the resident’s personal use and not for resale,” and equivalent privileges for out-of-state distillers.

“Wine’s had this protection since 2006,” Walker said. “We’re simply taking what the wine folks did and applying it to beer.”

However, spirits distributors have opposed the bill, and lawmakers have put it on hold until January 2022 for further discussion and potential compromises.

Non-Profit Fundraisers Through Alcohol Sales

Another bill (AB 1267) would permit alcoholic beverage manufacturers and licensees to connect sales to donations to non-profit organizations — a commonplace practice in most other states, but prohibited in California.

“A lot of people have been doing special brews for non-profits, but they’ve been told by the ABC [Alcoholic Beverage Control] that that’s illegal that a portion of your sales will go to a nonprofit,” Walker said.

The bill “will finally allow that to be legal,” he added.