Author Archives: Aerin Murphy

You may recall us discussing The Grape Escape event, which was cancelled this year after wineries refused to sign up, fearing that the ABC would be cracking down on retailer-sponsored events. At the previous year’s event, multiple wineries were cited for mentioning the retailer sponsor of the event. One winery, Renwood, decided to appeal the disciplinary action before an administrative law judge. The ALJ agreed with Renwood, issuing a decision that included a finding that there was “insufficient proof to conclude that any benefit inured to Save Mart Supermarkets through the posting of the Save Mart Grape Escape logo on Renwood’s Facebook page.” Consequently, the disciplinary action was dismissed.

Starting at the beginning of 2016, there will be at least a little bit more clarity regarding winery participation in events that have retailer sponsors. Wineries will now be permitted to donate and pour their product at events hosted by a bona fide non-profit organization, even if that event’s sponsor is a retailer. In addition, wineries may freely forward or share social media posts about the event, even if the retailer’s name appears on the post. However, other restrictions still apply– for example, if you share a post, you may not add any additional information specific to the retailer. This also does not include events where a retailer is the host of an event for the benefit of a non-profit. The entirety of the new legislation can be found here.

 


New Excise Tax Structure on the Horizon?

Most alcoholic beverage producers would agree taxes rank low on the list of their favorite things about their job. And it isn’t just the payments that stink; it’s figuring out who to pay, how much to pay, and when. New legislation introduced last week in the Senate is touting promises of reduced rates of excise tax on wine, and simplification of rules regarding records, statements, and returns.

Senate Bill 1562, informally called The Craft Beverage Modernization and Tax Reform Act, is an evolution of a number of similar pitches floating around throughout the alcohol industry. Bill 1562 would attempt to solve issues across the alcohol industry by covering taxpaying brewery, distillery, cidery, and winery operators.

In the winery world, the Bill would make the following notable changes:

  • Alcohol content for “table wine” would increase from 7-14% alcohol by volume to 7- 14.25%.
  • The Small Producers Tax Credit eligibility would increase in availability to wineries producing up to 250,000 gallons annually to 2,000,000 gallons produced annually.
  • A credit of $1.00 per gallon on the first 30,000 gallons of wine for all producers, excluding sparkling or carbonated wines.
  • A $.90 per gallon credit for all wine produced beyond 30,000 gallons and up to 100,000 gallons, if total production is less than 2,000,000 gallons per year. If production is between 1,000,000 and 2,000,000 gallons the credit is reduced 1% for every 10,000 gallons produced in excess of 1,000,000.

Bill 1562 would also allow wineries with tax liability of $50,000.00 or less to file their taxes on a quarterly basis, and would remove the bonding requirement. An additional change would allow annual tax filing for wineries expecting to owe less than $1,000.00 in excise tax.


Best Practices in Winery Tasting Rooms

If you have a tasting room, you know that following the letter of the law is the best way to stay under the radar (and off the naughty list) of the ABC. Violations, including serving minors or obviously intoxicated patrons, can have serious consequences, including jail time, criminal fines, administrative penalties, and civil liability. And you, as the owner, will always be held accountable for the actions of your employees, even if you were not present when a violation occurred. While insurance can cover general business liability, it never covers gross negligence, which is why it is so important to make sure that you and your team are trained in the best practices to avoid violations. In addition to or as a part of your employee training and handbook, here are a few things to keep in mind:

Do all of your employees know where your license is? The ABC requires you not only to be validly licensed, but to have your license posted. Every employee of your tasting room must know where that license is, and be ready to point it out to anyone who asks for it. If your business cannot produce a license, then the person serving alcohol is subject to arrest, and you as the owner are subject to an administrative penalty. In reality, the ABC is not likely to make an arrest until they have sufficient reason to believe that no valid license exists, but, even with a valid license, the posting is required, and the consequences are potentially severe.

Do your employees know where people can and cannot consume alcohol on your premises? All permanent ABC licensees have submitted defined spaces for alcohol consumption to the ABC. Consumption of alcohol outside that defined space is a violation. For this reason, you should make sure that all of your employees know and enforce these limits. If your defined space does not include your parking lot, for example, then it is up to you and your employees to ensure that people are not walking out of the permitted area with a glass of wine. Even a bus stop on a public sidewalk in front of your tasting room may be your responsibility. It is important to remember that consumption outside the allowed boundaries, even if the alcohol was not provided by you, is a violation, and you can be cited. That means no tailgaters.

Do your employees follow a policy of checking identification? Serving alcohol to minors is the most common ABC violation. As a classy tasting room owner, the idea of teenagers trying to crash your business to get a sip of wine might sound absurd, but the truth is that it happens every day. Each employee should be required to check the identification of anyone who appears to be under 35 years old. You may want to take this a step further and require that all customer identification be checked before they can taste. Employees should be trained to look for six items in order to validate an ID: 1) the ID must be issued by the government; 2) name of ID owner; 3) date of birth corresponding to an age of 21; 4) description matching the person presenting the ID; 5) photograph matching the person presenting the ID; and 6) the ID must not be expired.

Do your employees know when to cut someone off? It is an ABC violation to serve alcohol to someone who is obviously intoxicated. For ABC’s purposes, “obviously intoxicated” has nothing to do with a 0.08% blood alcohol level, and has much more to do with common sense. While this description leaves some wiggle room, it is best to have in place policies so that you and your employees never have to worry about infringing. Train your employees to observe your customers. If someone appears to have had one too many, make sure that your employees have a game plan. For example, tell your employees to let another coworker or manager know about the customer so that there is backup. Employees should be courteous to the customer, and explain that the ABC won’t let the employee serve any more drinks. If the customer is rude or belligerent, the employee should be encouraged to contact authorities. The employee should never bargain with the customer or back down. If possible, the employee should provide water and arrange for a ride for the customer. Any incident where a customer is cut off or has their drink taken away should be documented.

Remember, nothing prohibits you from doing more than is required by the ABC. In order to avoid violations and keep the ABC at bay, the best tasting room policies and practices go above and beyond the compulsory conditions.


Placer County Considering Amending Winery Ordinance

Wine regulations can get complicated. Federal and state regulations must be followed, but one must also be aware that mandatory local ordinances can vary from county to county and city to city, adding further hurdles to the success of winemakers and wineries. Localized winery ordinances often regulate the size of tasting rooms, the number of events allowed, and other activities. One such ordinance affecting wineries that host events in Placer County is causing a stir.

As it currently exists, Placer County’s Ordinance 17.56.330 of the Planning and Zoning ordinances, adopted in 2008, is designed to “provide for the orderly development of wineries… encourage the economic development of the local agricultural industry, provide for the sampling and sales of value-added products, and protect the agricultural character and long-term agricultural production of agricultural lands.”  It includes provisions that keep special events and crowds to a minimum. All wineries are required to have a permit for up to six promotional events per year. Promotional events are limited to those that are related to producing wine at the facility, i.e. barrel tastings or relase parties of the host winery’s wines.

Recently, the Placer County Vintner’s Association has expressed concern that the ordinance is too restrictive, and has requested from the Planning Commission changes that would allow more leeway in holding larger and more diverse events.  According to the Association (and a County staff report on the issue), the current ordinance is more restrictive than the ordinances in neighboring Sacramento and Amador counties, and is the only ordinance in these three counties that requires promotional events to be specifically related to promoting the winery or its products. The Association’s goal is to have the ordinance amended to define promotional events more broadly to include private functions such as fundraisers and weddings, and to allow wineries to have more than six promotional events throughout the year. In addition, the Association would have any event with less than 75 people present labeled a “routine activity,” which would need no special permit. The Association argues that the proposed amendment will “help support the 20 wineries located on the Placer County Wine Trail, create local jobs, provide tax revenue to the city and county and keep our landscapes beautiful.”

Not everyone is on board with the potential changes. Some local residents fear that additional events will cause more traffic, which can be especially scary on Placer County’s winding country roads. This fear increases with the idea that people will be consuming wine at the events.  Increased traffic also means increased road maintenance, and some residents are not interested in footing that bill. Increased noise from events is also a factor that the opposition wants considered. Marilyn Jasper, who represents the Sierra Club and Public Interest Coalition, said that current protections safeguard against “de facto conversion (of farmlands) to commercial uses,” and opposes the proposed amendments.

At the end of February, the Planning Commission decided to send the proposed amendments to municipal advisory councils for comments before revisiting the issue later in 2015. We will be looking out for final word later in the year.


Craft Beverages: Where Can Wine Fit In?

It’s no secret that the craft beverage industry is booming. In the past few years, hundreds of craft breweries have opened across the state, with over 40 now in the Sacramento region alone. The liquor industry is also getting on board, with specialty flavors, blends, and other creative concoctions designed to woo the growing number of consumers who have expressed a desire for smaller, more artistic beverages. The craft industry has gotten so popular that one beer industry giant paid millions of dollars to address the issue head-on in a Super Bowl ad. With all of the hype (and, naturally, dollars) involved with “craft,” why hasn’t wine joined the movement?

On January 29, 2015, I attended a seminar titled, “Understand the Marketing of ‘Craft’ and the Opportunities for the Wine Industry” at the Unified Symposium. The panel consisted of J.E. Paino, general manager of Ruhstaller Brewery in Sacramento (you may have seen their hops being grown on the side of Highway 80 in Dixon), Kellie Shevlin of the Craft Beverage Expo (Suzanne and I will be exhibitors this year), Adam Johnson from the Kentucky Bourbon Trail, and Cindy Molchany of Craft Beverage Media. The first point that was made involved the definition of craft itself– everyone on the panel agreed that there was no set definition (or a need for a set definition), but that authenticity, lack of pretentiousness, and transparency about methodology were foundations.

The panel discussed some of the challenges that wine faces in fitting in to the “craft” scene, the first being that wine is perceived as a very traditional, stuffy, established beverage. This is contrary to the modern, younger image often marketed in the craft world. Being creative with wine also comes with some regulatory hurdles. Although ingredient regulations also exist in the beer and liquor worlds, wine regulations are the most stringent. A list of allowable and prohibited additives to wine can be found here. As one frustrated commenter at the panel stated, “Wine isn’t like beer. I can’t just dump a bunch of honey and vanilla into my wine and call it craft!”

The panel offered some alternative methods to attract craft consumers, including the finishing of wine, and advertising and marketing strategies. First, the idea of using alternative barrels was presented. For example, used bourbon or whiskey barrels can create a unique flavor profile to wine, and offer the consumer something unexpected. In addition, the panel suggested that, contrary to the traditional, customary, ahem, boring(!), labels that we’re used to see plastered on wine bottles, labeling can be a little bit more fun and creative. If the winemaker is also an artist, for example, have them render an original work for the label, or, if there is a special method that the winemaker uses, showcase that on the label! If you have a tasting room, consider adding a tour, or other special service aimed at giving the consumer a more personal experience with your wine. When consumers are able to experience the wine making process from the soil to the glass, the transparency of the process, as well as the consumer’s association of your product with the craft of the industry, increases.

If you’re in the wine business, you know that wine making is certainly a craft, in addition to being a labor of love. It’s time that the industry showcase this artistry to consumers.

 


Unified Symposium Recap, Part One

Over the past three days, Suzanne and I attended the Unified Wine and Grape Symposium. It was well-attended, extremely informative, and exhausting! The daily seminars and three floors of exhibits kept us busy. Over the next few days, we will be reporting back here with some highlights.

On the first day, we attended the keynote presentation by Rick Tigner, the President of Jackson Family Wines. Prior to this event, I had seen an episode of Undercover Boss, where Rick disguised himself as a job-seeker, and investigated how his company was working from the eyes of his employees, including the laborers, truckers, and wine tasting staff. He came across as a genuine, caring person on the show, and I was excited to meet him in person.

Rick’s talk focused on key issues affecting wine companies, and especially California wine companies. One point I found especially interesting is that California wines do not seem to be doing enough on the international scale to make a name for themselves. California wine shelf space abroad is limited, and California wine companies need to take on the challenge of educating the global consumer about what makes California wines unique and worth purchasing. In addition, Rick discussed some of the looming challenges specific to the wine industry, including water issues and sustainability. Rick touted Jackson Family Wines’ commitment to sustainability, and boasted about their recent achievements in reducing the amount of water used from vines to wines. Rick’s talk was engaging and entertaining. I was glad to see that he was as friendly in person as he appeared on television.


2015 Unified Wine and Grape Symposium

We are very excited to be attending the 2015 Unified Wine and Grape Symposium from January 27 to 29, 2015 at the Sacramento Convention Center. We are scheduled to attend exciting seminars including:

  • Keynote speech by Rick Tigner, President of Jackson Family Wines
  • Preparing Your Wine Business for a Transition or Sale
  • A discussion on the state of the winegrape industry
  • Wine Trends or Fads?
  • Regulatory Hurdles for DTC, Social Media, and Third Party Sales Channels
  • Future Proofing Your Business
  • Understanding the Marketing of “Craft” and the Opportunities for the Wine Industry
  • Sustainability Certification in a Global Market
  • Is California Special and Can it Stay that Way? Understanding California’s Position in the Global Wine Market

If you’ll be at the conference, we hope to meet you there! Look out for our summaries and reviews following the conference.


Shipping Wine In, Out, and Around California

Are you considering shipping your wine within California, or even out of state? Like everything else in the wine industry, shipping can be complicated and difficult to stay up to date with. This article is written as a guideline for wineries to use prior to shipping any bottle to anyone. Please note, it is illegal in every state for any consumer to ship wine to any other consumer. This article is written as a guide for licensed wineries to ship wine to consumers.

Within the state of California:

The ability of California wineries to make retail wine shipments to adult California consumers is a basic privilege for a California Winegrower Licensee (Type 02 license designation). However, just because you have the privilege of shipping wine does not mean that any shipper will allow it. The United States Postal Service does not accept packages containing alcohol. UPS provides wine shipping services to wineries with valid Type 02 licenses. However, this is on a contract basis only. FedEx has a similar service, with stringent regulations for wine shipping containers. Regional carriers, such a Golden State Overnight, provide similar services, and can often beat the national carrier prices. No matter what carrier, all deliveries must have a person over age 21 sign for the package.

From outside of California to California:

Non-California wineries may ship retail wine to California residents over the age of 21, provided they have a Wine Direct Shipper Permit, available through the ABC. This is a Type 82 license designation. The permit application (Form ABC-248) is $10 per year, and can be found here. Once the California Board of Equalization receives the permit application, the non-California winery must provide the Board with a Certificate of Use Tax, and other reporting as required by the Board. If a non-California winery fails to report their sales, the Board will notify the ABC for further action.

From California to a state other than California:

California wineries do have the ability to ship wine to many non-California adults, but there are restrictions and exceptions, and regulations vary from state to state. For example, for the state of Tennessee generally, California wineries may ship a maximum of one case per month, not to exceed three cases per year, directly to individual consumers. And, as in many other states, Tennessee requires a one-time non-refundable application fee of $300.00, in addition to the annual license fee of $150.00, which is pretty hefty if you only have a few customers in the state. Other states, like Utah, prohibit California wineries from shipping any wine direct to consumers. This is why it’s so important to check the local laws and regulations for any state to which you are considering doing direct-to-consumer shipping.

For more information about shipping wine in and out of California, or for specific information about your needs, contact the author of this article.


TTB Font and Sizing Label Requirements

A major hurdle that most wine producers hit is the dreaded label design. Although information about TTB requirements is readily available, it can sometimes feel like the regulations are written in a foreign language. Certain TTB terms and font sizing requirements can be tricky. This article is intended to take some mystery out of this aspect of label design for American wines. Of course, exceptions apply, and this article should be read as a foundation of knowledge, and not as specific legal advice for your individual label design. For assistance with your label’s compliance, or to discuss your label’s design, contact us.

All wine labels must include the wine’s brand name, class, name and address of the bottler or packer, net contents, FTC yellow dye #5 (if applicable), color additives (if applicable), sulfites declaration (if applicable), alcohol content statement, and the government warning statement. While all of these categories have their own special substantive requirements, font size and spacing requirements also exist.

BRAND, CLASS, NAME and ADDRESS, NET CONTENTS, DYES, ADDITIVES, and SULFITES:

For wine containers up to 187 ml (splits), the brand, class, name and address, net contents (as opposed to alcohol content), FTC yellow dye, and sulfites declaration must be, “in script, type, or printing not smaller than 1 millimeter, unless contained among other descriptive or explanatory information, in which case the script, type, or printing of the mandatory information must be of a size substantially more conspicuous than that of the descriptive or explanatory information.” For wine containers larger than 187 ml up to 3 liters (half bottles, bottles, magnums, double magnums, etc.), and wine containers larger than 3 liters, the requirements are identical, except that the millimeter size is increased from 1 to 2.

So what does this mean? Let’s start with “script, type or printing.” Script is a way to describe handwriting. Most people think of this as cursive writing, but it actually encompasses any font that has the appearance of being lettered by hand, even if the letters are not in cursive. Type and print both refer to using block lettering, one by hand and one with either a typewriter or printer. Easy enough so far.

Next comes sizing, which is a bit trickier. The 1 millimeter measurement refers to the space between the baseline and cap-height. The baseline is the location that the letters appear to sit on. Think of the lines on lined paper. The cap-height is the height from the baseline to the top of an uppercase letter. Fontshop.com’s handy glossary graphic provides a picture for those of us who are more visual:

_Header

If a wine label has lower case lettering, even the lower case letters need to meet the minimum height standards. For wine containers up to 187 ml, this information has to be presented in a font that is at least 1 millimeter tall. For larger wine containers, the size increases to 2 millimeters.

The next section, beginning with the dreaded “UNLESS” is actually pretty simple. If contained among other descriptive or explanatory information, the brand, class, name and address, net contents, yellow dye, and sulfite declaration must be “substantially more conspicuous” than that of the descriptive or explanatory information. By providing this non-specific requirement, the TTB actually gives label designers some discretion. For example, if this information is included among a flowery description of the wine, the required information must be set apart with larger, bolder, or otherwise more noticeable font.

ALCOHOL CONTENT STATEMENT

Next things next. The alcohol content statement tells the consumer what percent of alcohol the wine contains. Per the TTB, “Alcoholic content statements must not appear in script, type, or printing larger or more conspicuous than 3 millimeters nor smaller than 1 millimeter on labels of containers having a capacity of 5 liters or less.” Even though it’s worded a little differently, the alcohol content statement must be in script, type, or print. So, for bottles 5L or less (all the usual sized, and most of the very large bottles), the size requirement on the alcohol content text is between 1millimeter and 3millimeters in height and readable.

GOVERNMENT WARNING STATEMENT

This label requirement is the most direct, and allows for zero creativity.  For all wine container sizes, TTB requires that the first two words of this statement appear in all caps and bold, i.e. “GOVERNMENT WARNING.” The rest of the description does not have to be bold, but should stay in all caps. For wine containers up to 187 ml, the type must be at least 1 millimeter tall. For wine containers between 188 ml and up to 3 liters, the font size increases to at least 2 millimeters. For wine containers larger than 3 liters the minimum font height is 3 millimeters.

In addition to the font height requirement, there is also a linear text requirement to ensure that this portion of the label isn’t smashed together. For containers up to 187 ml, this part of the label may have a maximum of 40 characters per inch. Characters include letters, numbers, and marks (including punctuation). Spaces are excluded. For 188 ml to 3 L, the spacing becomes 25 characters per inch. For larger wine containers, the spacing increases to 12 characters per inch.

Clearly, there is a lot to know, font and size requirements are just the tip on the wine label iceberg. Regulations and restrictions of content will be the subject of future posts.