Starting a Craft Brewery – The Regulatory Process, Part 1

Huge craft beer selection at Krisp in downtown San DiegoMaking beer in California is regulated by local, state, and federal government agencies. This first of a series of articles examines the state licenses applicable to making and selling beers. The key word here is “making” since there are several additional licenses for persons who simply want to sell beer (or other alcoholic beverages) such as those applicable to restaurants, bars, or distributors.  Additionally,

“[a]n exception under State and Federal law allows a person to produce up to 100 gallons of beer a year for his/her own consumption (maximum of 200 gallons per household).” In other words, no license is required for persons fitting into this exception.

While the California Department of Alcoholic Beverage Control (ABC) typically segregates licenses according to the segment of the supply chain at issue, i.e., manufacturing, distributing, or retailing, brewing licenses all have some hybrid (manufacturing and retailing) privileges.  The ABC also makes a distinction between alcoholic beverages sold for drinking while at the business (“on-premises consumption”) such as in a restaurant or bar versus beverages sold in containers for drinking at home or elsewhere (“off-premises comsumption”) such as in a grocery store or liquor store.

It is also important to note that while these California licenses are the most well known portion of the regulatory process applicable to brewing beer, they are not the first step, nor even the most important step.  The first step, and perhaps the most critical step, in obtaining the right to brew and sell, starts at the local (city or county) government level, which will be covered in a subsequent article.

 

License Types:

01 Beer Manufacturer – “(Large Brewery) Authorizes the sale of beer to any person holding a license authorizing the sale of beer, and to consumers for consumption on or off the manufacturer’s licensed premises. Without any additional licenses, may sell beer and wine, regardless of source, to consumers for consumption at a bona fide public eating place on the manufacturer’s licensed premises or at a bona fide eating place contiguous to the manufacturer’s licensed premises. May conduct beer tastings under specified conditions (Section 23357.3). Minors are allowed on the premises.”

23 Small Beer Manufacturer – “(Brew Pub or Micro-brewery) Authorizes the same privileges and restrictions as a Type 01. A brewpub is typically a very small brewery with a restaurant. A micro-brewery is a small-scale brewery operation that typically is dedicated solely to the production of specialty beers, although some do have a restaurant or pub on their manufacturing plant.”

75 Brewpub – “(Restaurant) Authorizes the sale of beer, wine and distilled spirits for consumption on a bona fide eating place plus a limited amount of brewing of beer. Also authorizes the sale of beer and wine only for consumption off the premises where sold. Minors are allowed on the premises.”

Additional Things to note:

The type 01 licensee can operate as a beer “store.” That is, the licensee doesn’t need to brew beer at the licensed location as long as it brews beer at another licensed premises.  Additionally, it doesn’t need to operate as a restaurant at such a location, as long as it’s beer sales are limited to its own beers.

A type 75 requires the licensed premises to be a restaurant but can sell all types of alcohol, including distilled spirits, for consumption on the licensed premises.  It can sell beer and wine but not distilled spirits for off-premises consumption, even beer and wine it doesn’t make.

Type 1 and type 23 licenses, in contrast to a type 75, don’t require a restaurant but don’t allow the sale of distilled spirits for on-premises consumption.

Type 75 shall have a minimum seven-barrel brewing capacity, and the licensee shall produce not less than 100 barrels nor more than 5,000 barrels of beer annually on the licensed premises. Type 23 is limited to 60,000 barrels a year.

Cost: Annual fees (2014): type 1 – $1379, type 23 – $171, and type 75 – $876. Also types 1 and 23 have a $100 issuance fee whereas type 75 licenses are limited in number and have a $12,000 original issuance fee or must be purchased from another licensee.

Source Documents:

Non-Retail ABC License Types and Their Basic Privileges, ABC-616-NR (rev. 01/11)

Common ABC License Types and Their Basic Privileges, ABC-616 (09/11)

 

About William Adams

Attorney at Norton, Moore, & Adams, LLP.
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  1. Pingback: Santa Monica Lawmaker Wants to Make April California Craft Brew Month | Santa Monica Next

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