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SIDESWIPED BY NEW CALIFORNIA ALCOHOL LAW


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Today we found out that on Sept. 21, Governor Brown signed into law, Senate Bill 32. This legislation, which took less than 30 days to propose and pass into law, supposedly updates the widespread practice of infusing alcohol with fruits, vegatables, etc... What this law really does is it gives bars and restaurants the ability to legally infuse ANY AMOUNT of their own spirits for use in tastings or cocktails without having to go through the strict TTB distilled spirits formulation approval process that we ALL have to go through when you alter the taste and character or any spirit.

Essentially bars and restaurants are now unlicensed rectifiers, except they didnt have to go the application process of becoming a licensed DSP, which many here know exactly how difficult and frustrating it could be. Aside from the obvious and the fact that a portion of our manufacturing rights were stripped away from us, another problem we DSP's in California have is that we are still not allowed to conduct spirits tastings and sales on our own premises. Most of us would not have a problem wth SB 32, if we could at least be able to operate a tasting room and sell our product in it. I believe a FAIR COMPROMISE.

So, why am I posting this? Well... we need your support. We are attempting amend the tastings bill, which would allow us a fair and level playing field. We have set-up a petition website and would appreciate any support you fellow distiller's or aspiring distillers or just those of you like AMERICAN-MADE products to please click the link below and enter your name. You wont be contacted and you wont get any spam as emails are not required. This is an "informal" petition to take to our state legislators.

Thank you all!

CLICK FOR PETITION.

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Well, I'm not sure how much this makes a difference. From what I know, and bars I frequent, they have been infusing and selling this stuff for decades, but only recently in the past few years someone, I guess the TTB, came down on bars and such. So I suppose this bill just re-allows them to do what they've been doing all along.

I.E. One place I visit makes a batch in a very large pickle jar of vodka and pineapple. Then the crack down came and they were forced to stop. But I never really saw it as a threat.

I'll have to re-read the law and see if it makes any changes to what has already been happening for a long time.

On a side note I've been wondering about the whole tasting room thing in California so I emailed the ABC and this is the response I got.

Type 02 Wine Grower

Type 03 Brandy Manuf.

Type 04 Distilled Spirits Manuf.

Type 06 Still

A Type 03 licensee may NOT give away tastes of brandy but may sell both wine and brandy to consumers for consumption off the licensed premises.

A Type 04 licensee may give away tastes of distilled spirits to consumers at the production premises. However, a Type 04 licensee may not sell distilled spirits to anyone other than a distilled spirits wholesaler, a rectifier or another distilled spirits manufacturer.

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I don't understand, how can state law override federal law? In other words, if the bars and restaurants were violating the TTB before, they still are now. The old California law would had to have been more restrictive than the federal for this to legally be of consequence, which it well may have been?

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First of all, infusing isn't distilling. I think there is also a distinction to be made here between an infusion that is made and consumed on the premises of a restaurant or bar; vs. one that is actually packaged and sold. It seems the new CA law allows the former, but probably not the latter.

If you're doing it with tax-paid spirits purchased at retail, then serving it to your customers, all in one location, that strikes me as just an extension of typical culinary practices.

As a practical matter, chefs make infusions all the time. I don't see how that could be easily regulated or stopped.

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Much ado about nothing? As most here probably know, some bars have been doing this for many years. An infusion made in a bar is no more than a cocktail that took a long time to make. Complaining that bars and restaurants should need a TTB license to do this is ridiculous. I don't see how your manufacturing rights were stripped away. However, I do agree that distillers should be allowed to do tastings and sales to consumers on their premises. Parity with wine and beer manufacturers is only fair.

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I think your petition is fine and needed. I think all distilleries should be allowed to do controlled tastings of their products, as well as retail sales for off premise consumption. Also that a distillery should be allowed to operate a restaurant or bar that allows for on premise consumption.

But attacking the bill in the way you do in your post here doesn't cut it. Your first two paragraphs are inflammatory and slanted.

This isn't mass production with bottle sales here. It's making cocktails and I support it 100%. I'm a distiller, I have issues with the NY State laws concerning tastings and sales; but I'm also a cocktail consultant/mixologist, and Education Chair of the NY chapter of the US Bartenders Guild. What is happening in bars and restaurants has nothing to do with distilling or rectification. It's simple infusing of fruits or botanicals, (sometimes animal products in a process call fat washing, like bacon infused bourbon) The bill doesn't allow bottling for off premise sales, distribution, etc. Just infusing wines or spirits for on premise consumption.

Here's the bill.

http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_0001-0050/sb_32_bill_20110921_chaptered.pdf

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Essentially bars and restaurants are now unlicensed rectifiers, except they didnt have to go the application process of becoming a licensed DSP, which many here know exactly how difficult and frustrating it could be. Aside from the obvious and the fact that a portion of our manufacturing rights were stripped away from us

To claim your manufacturing rights were stripped by the consumer using the product in a way YOU didn't envision is ludicrous. The license we distillers work so hard to obtain permits us the ability to experiment, create and produce tax-free (yes, taxes are paid, but only when sell-able product leaves the bonded area). Point to any section of 27 CFR, and the purpose of the paragraph can be traced back to "protection of the revenue". Once the tax is paid (on all levels), the consumer is "free" to use it how they wish. But that "freedom" comes at the disadvantage of paying all levels of tax, and working with a tiny volume (relative to your operation) each time. You have a severe advantage over bars or restaurants in creating new or flavored spirits, especially in terms of the cost of raw materials and any economies of scale. I agree with Jonathon that attacking the bill the way you do in your post isn't the way to make positive change.

-Scott

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I wonder, although we are focussed on distilling, as we should be, do we want to include discussion on the forum on rectification (in the TTB sense) and flavoring? And if so, should it be separate from the distillation discussion for different types of spirits?

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First of all, infusing isn't distilling.

I have to disagree with you there. Infusing is part of the whole art of distilling and distilled spirits manufacturing in general. The TTB requires an infuser/rectifier (TYPE 7 in CA) to obtain a Federal DSP permit in order to conduct business, in the same exact way all DSP's in any state or required to do - whether they distill on premis or not.

If states start allowing bars and restaurants to infuse spirits and thus alter the taste and character of that spirit without having to go through the same formulation approval the TTB requires for us DSP's how is that fair? Now, if the bars did'nt turn around and sell their spirits to consumers, then I for one wouldnt care, but they do. Is one thing to infuse for your own personal use, but its another to infuse with the intent to sell, without having to go through the same licensing procedures and formulation requirements that others must adhere to.

Our agruement is that is not fair, not that they shouldnt be allowed with the proper licensing.

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I would like to point out that bars and restaurants and pharmacists have been doing this for hundreds of years. This isn't something new. It was only that laws put into effect for Prohibition weren't relaxed in California until recently. It was one of the few states that didn't change those laws some time ago.

I work with bars and restaurants creating tinctures, syrups, etc. for the past five years. I personally have 180 botanicals in tincture as of today. And I love that bars are playing with these things again as they haven't since before Prohibition.

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To claim your manufacturing rights were stripped by the consumer using the product in a way YOU didn't envision is ludicrous. Once the tax is paid (on all levels), the consumer is "free" to use it how they wish.

We didnt claim manufacturing rights were stripped away from the consumer. Please re-read the post. We are referring to bars and restaurants who are now allowed to infuse and sell spirits without having to get a federal DSP permit or formulation approval after alterning the taste, color and character of the spirit they infused....something you/we as a DSP must do. You are correct in that a consumer has all the right to buy a bottle of vodka and make for instance, limoncello, at home and give it away as gifts or consume it...like I used to do, so they are ALMOST free to do whatever they wish. In other words, they cannot SELL the infused product, whether by the glass or bottle. Our arguement is that bars and restaurants should'nt be able to do the same thing we do without proper or additional licenensing requirements since they are producing with the intent to SELL.

In the state of California DSP's are not allowed to taste or sell products at the distillery. We are just seeking a level playing field and in all honestly if we were allowed tasting/sales priveledges, we wouldnt care as much.

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I would like to point out that bars and restaurants and pharmacists have been doing this for hundreds of years. This isn't something new. It was only that laws put into effect for Prohibition weren't relaxed in California until recently. It was one of the few states that didn't change those laws some time ago.

I work with bars and restaurants creating tinctures, syrups, etc. for the past five years. I personally have 180 botanicals in tincture as of today. And I love that bars are playing with these things again as they haven't since before Prohibition.

No problem, as long as they have to adhere to the same licensing and regulatory procedures that DSP's are subject to. We are not against the act of infusion, we upset at the fairness of play.

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"I wonder, although we are focused on distilling, as we should be, do we want to include discussion on the forum on rectification (in the TTB sense) and flavoring? And if so, should it be separate from the distillation discussion for different types of spirits? "

I think rectification and flavoring is a valuable topic area and I think we need to set up a board for it. Artisanal spirit production is more than just distillation. That's why a few of us would like to see something along the lines of Artisanal Spirits Producers of America formed, not just a artisanal distillers group. There is so much more to creating and producing fine spirits based products than just distilling.

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I'm baffled by this approach of treating the bars and restaurants as competition instead of as consumers. The point of the original post best i can make out: "Bars making infusions should be considered as manufacturers/rectifiers, and therefore should have additional regs governing the resale of said infusions, or distilleries should be allowed to serve at their distillery."

In favor of long paragraphs:

1.) Bars and restaurants are consumers. I'd go so far as to say Important consumers. Wanting them to jump through additional hoops is only going to alienate you/your brand from their circle. Offering a "Petition" suggests the entire industry feels this way (the fact that a petition exists means there is some movement underway. nobody is going to count the names and say, "oh, it's only a tiny movement"). Personally, I'd embrace the new liberty the bars and restaurants have, and ride that energy bubble as a new relevant reason to talk about your product. I've discovered people saturated with the same-old will usually eat up any "new relevant reasons" out there.....

2.) The standards of identity are the reason for the formula and COLA requirements. This "protection" is to ensure that your 100 Proof Bonded Bourbon is in fact bourbon with at least 50% Alcohol By Volume. They are inplace to protect the public, a necessity immediately following prohibition perhaps, but now-a-days not as big of an issue. The recent growth of small batch operations coupled with big player R&D into flavors has certainly pushed the limits of the current 13 classes. But, once a bev is approved as a proper Vodka, or proper Blue Agave Tequila, their (the regulation's and regulator's) job is done. And the system, as bloated and red-tape-heavy as it is, works. If any bar or restaurant developed an infusion flavor that was so good they just had to bottle it, you can be sure they'd go through all of the regulations and licensing requirements you did.

3.) Volume (or Qty of final servings) is the only distinguishing factor I can think of when comparing the act of infusing vs mixing a cocktail. Legislation will never be written to limit the activity of one, without leaving too much undefined grey area giving freedom to the other.

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This is an interesting discussion!

Personally, I'd embrace the new liberty the bars and restaurants have, and ride that energy bubble as a new relevant reason to talk about your product. I've discovered people saturated with the same-old will usually eat up any "new relevant reasons" out there.....

But if a bar can buy a few cases of NGS (Everclear), charcoal filter it, infuse it, and sell it by the glass to their customers at a high profit margin, wouldn't they be less interested in stocking your concoctions?

If any bar or restaurant developed an infusion flavor that was so good they just had to bottle it, you can be sure they'd go through all of the regulations and licensing requirements you did.

But then again, why would they need to go that far? They know what they're in business for -- to be a popular bar, not a producer. Given the capabilities I described above, that should suit their purposes just fine, and with better profit margins and less oversight/regulation too!

I wonder if we're going to start seeing "infusion bars" open up... places that offer nothing but their own "home made" infusions. After all, if there is a growing market for new and unique tastes, that should work out to be a lucrative niche.

Am I missing the point here? As much as I am actually in favor of bars offering their own infusions, doesn't it seem like DSPs are given the short end of the stick here? If you're not a bar and you want to sell infused spirits, you must be licensed. If you're licensed, you can't give tastings (in California). You also can't own a bar. You can't even accept investment from a bar owner. You can't sell directly to bars or to consumers -- you need a middleman distributor to mark up your price. And if you are a licensed producer of infused spirits, now some bars can/will do without your product, since they can openly produce and sell it themselves.

I understand the economic value of encouraging growth of on-premise sales, but am I wrong here?

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I have to disagree with you there. Infusing is part of the whole art of distilling and distilled spirits manufacturing in general. The TTB requires an infuser/rectifier (TYPE 7 in CA) to obtain a Federal DSP permit in order to conduct business,

I find your response is rather hair-splitting. A part isn't the whole. Once again, the bars doing the infusing aren't bottling and selling it outside their bars. If we want to define a divide between culinary practice and actual manufacturing, infusing, in this instance, is the former, rather than the latter.

If you think what they're doing is contrary to Federal law, then the TTB could shut down all the infusing, as Federal law trumps state law. (Just look at how the IRS is now getting into shutting down CA MJ dispensaries for an example of how this works.)

Regarding the larger picture, this looks like more of an opportunity for you than anything else, as now you could market and sell a high proof "infusion spirit" and take advantage of the law.

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--------, you must be licensed. If you're licensed, you can't give tastings (in California). You also can't own a bar. You can't even accept investment from a bar owner. You can't sell directly to bars or to consumers -- you need a middleman distributor to mark up your price.

In Tasmania we could not get a license for a small still until about 15 years ago.

Our rules are now fairly lenient.

We can give or sell tastings at our distilleries, we can own a bar as well, we could accept investment from a bar owner, we can sell directly to bars and consumers, we don't need a middleman if that is what we choose.

Also we don't have to submit a formula for approval if we wish to make another product

Our main negative is the HUGE amount of excise we pay.

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But if a bar can buy a few cases of NGS (Everclear), charcoal filter it, infuse it, and sell it by the glass to their customers at a high profit margin, wouldn't they be less interested in stocking your concoctions?

Ugh, everclear. The gimmick of all gimmick products out there. Everclear is as good at infusing as a shotgun is at removing a mole on your face. Point being, it will get the job done, but it is not "designed" for that purpose. With that said, many out there do infuse with everclear. I submit there is a better alternative, but that's a discussion for a new thread. Infusing with everclear has it's limitations, specifically in the rum, tequila, and aged whiskey categories. These spirits are just as likely candidates for infusing, and as we all know, "Junk in = Junk out". If you make a non-clear artisan spirit, and it is truly quality, it will infuse better than the non quality product. Developing a simple to make infusion recipe that 1.) taste great and 2.) uses your product is what I'm speaking of when I say embrace the new energy.

But then again, why would they need to go that far? They know what they're in business for -- to be a popular bar, not a producer. Given the capabilities I described above, that should suit their purposes just fine, and with better profit margins and less oversight/regulation too!

Why would they need to go that far? Because their reach is limited by the number of bar stools they own. I, as a distiller, do not have that limitation. I'd say hooter's wing sauce or a bucket of Chi-Chi's margarita mix as the examples of brands growing too big for their brick and mortar footprint and expanding into the world of shelf-placement. That expansion (if beverage alcohol based) comes at a price that each of us as distillers has already paid.

And I'd also submit that all this talk about huge gigantic unfair profit margins is a lot of nonsense. I know when I walk into a bar to sell my product, it comes down to a pennies-per-ounce game. If you are looking to point the finger at unfair markups and profits, let's rant and rave about the mandatory middlemen of our industry....

-Scott

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Ugh, everclear. The gimmick of all gimmick products out there. Everclear is as good at infusing as a shotgun is at removing a mole on your face. Point being, it will get the job done, but it is not "designed" for that purpose. With that said, many out there do infuse with everclear. I submit there is a better alternative, but that's a discussion for a new thread.

True... I can think of at least one better alternative, Scott. ;)

All good points... thanks...

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Wow, California folks, there is a world outside your state.

A world where bars are allowed to infuse and sell drinks to their customers. A world where most of them don't because they can't be bothered. A world where some bars do it for a while then abandon it. A world where small producers are sold right along side, without a problem. A world where some producers actually supply the infusion container to the bar, with the brand logo on it.

Welcome to the world.

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While I'd like to respond to some individual comments made on this thread, I dont have the time to pick apart each post and answer so I'd like to just reaffirm a few points about this topic and make some general comments.

1) We DSP's in California are not upset at bars and restaurants, after all, what they're doing is legal. We are upset at our state legislatures for allowing bars and restaurants to do some of the things we DSP's do (and have to get state and federal permits for), without subjecting them to the same state and federal regulations we go through.

2) Infusing and Blending is part of the art and craft of distilled spirits manufacturing. If you think otherwise, chances are you do not now or have ever operated a DSP. Oh and yes.... a part does make a whole.

3) If you think this new law is "no big deal" to CA DSP's, then chances are either you do not operate a DSP in California (or perhaps anywhere for that matter) in which case you may really not fully understand and/or truly relate to this topic or ... you operate a DSP in a state with much more liberal laws relating to the manufacturing, tasting and sales of alcohol where your state law allows you to have a tasting room and then sell your product to consumers directly, which we in California are not allowed to do, even through liquor stores, supermarkets, wineries, breweries and now bars and restaurants are allowed to do.

4) In California, a Bar or a Restaurant is not a direct consumer to a DSP. They are "accounts" shared by our distributors not a consumer like someone here stated. We have to sell through distributors, unlike some of you. In California we cannot sell directly to a consumer, which I catagorize as an individual that holds no type of alcohol license and purchases retail from our accounts, so to us, a consumer is more of an "end user" of our product and not our direct consumer, until we are allowed to sell to them directly.

The restrictions that the CA ABC puts on CA DSP's makes doing business here sometimes difficult and now this new law has the potential to make it even harder for some of us here. We must distribute through a third party distributor, we cannot operate a tasting room and sell directly to consumers like wineries, breweries or a brandy manufacturer (go try and figure that one out). While a supermarket can operate a tasting room, we cannot. Im trying to point out that until you fully understand the challenges of operating a DSP, especially in California, dont assume that this law is no big deal. It is. Not just from a business standpoint, but as a principle!

Every single DSP in California is unhappy about this new law. Perhaps if we had some of the privleges that some DSP's in other states may take for granted, we would'nt be upset at this law.

I appreciate all the comments here and thank everyone for their support for our right to showcase our products and defend our manufacturing rights given to us by state and federal authorities which we worked so hard to get.

Cheers!!

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