COVID-19 Update: California Breweries, Distilleries, Restaurants, and Wineries Regulatory Relief

The nation’s response to Covid-19 is rapidly evolving; we will do our best to update this alert with relevant developments. 

Late yesterday, the California Department of Alcoholic Beverage Control (“ABC”) issued a wide ranging Notice of Regulatory Relief (“Notice”) dramatically increasing the options for selling alcoholic beverages in the state.

While restaurants, bars, wineries, distilleries and breweries have seen a significant decline in customers, off-premise sales of alcohol beverages have surged. To adapt to these unique circumstances, clients have inquired about the regulations for delivering alcohol beverages directly to customers, as well as the legality of selling alcohol beverages to-go. The ABC’s Notice expands upon those options.

California already authorizes licensees with off-sale privileges to deliver alcohol to customers under the following conditions:

• Each delivery must be accompanied by a “delivery order” stating (at a minimum):
  • The Quantity, Brand, Proof and Price of each alcoholic beverage.
  • The Customer’s name and address.
  • The Licensee’s name and address.
• A copy of each delivery order must be kept on file for two years after the date of delivery.

In addition, sales and deliveries may only be made to those 21 and over. Accordingly, if you are making deliveries yourself, do not drop off the delivery unattended. Instead make sure it is delivered to the person named on the delivery order and confirm they are over 21 years of age. If you are using a third-party delivery service, confirm (preferably in writing) that they will confirm the delivery recipient’s age. Any violations they commit delivering for you can be imputed to your license.

The ABC’s Notice sets forth eight new avenues of regulatory relief.

1. Returns of Alcoholic Beverages

   Manufacturers and wholesalers may, but are not required to, accept returns of alcoholic beverages from retailers. If returns are going to be accepted, they cannot be conditioned on the future purchase of products. This gives retailers that are closed due to the shelter in place order the opportunity to return product and get a refund or credit.

   Additionally, this gives manufacturers flexibility in finding new retail partners, especially retailers that are uncertain how well a new alcoholic beverage will sell during these unusual times.

2. Retail-to-Retail Transactions

   Retailers with off-sale privileges may purchase alcoholic beverages from on-sale retailers. This allows businesses to source beverages from retailers that may not be able to fully operate under the states shelter in place order. The ABC’s express goal is to provide needed revenue to on-sale retailers and avoid wasteful inventory spoliation.

3. Extension of Credit

   Existing law¹ prohibits manufacturers, wholesalers, and other specified suppliers from extending credit to retailers beyond 30 days, carries statutory penalties on delinquent accounts. The ABC will not be enforcing these provisions. It will be up to the parties to determine appropriate credit terms during this time.

   Given this guidance, be especially cautious in offering extended credit terms. The ABC notes that any extended credit terms will be preempted once this regulatory relief is withdrawn.

4. On-Sale Retailers Exercising Off-Sale Privileges

   Licensees with on-sale privileges may sell those alcoholic beverages for off-sale consumption in manufacturer pre-packaged containers as to which their license permits on-sale consumption. Existing law allowed on-sale licenses to sell beer and wine for off-premises consumption unless the license was otherwise conditioned. Now any such condition is lifted for the duration of the temporary relief. Further, on-sale licenses that can sell spirits (i.e. type 47s), may now sell spirits for off-premise consumption in pre-packaged containers.

5. Sales of Alcoholic Beverages To Go

   In addition to selling manufacturer pre-packaged containers as provided above, bona fide eating places (i.e., restaurants) selling beer, wine, and pre-mixed drinks or cocktails for consumption off the licensed premises may do so when sold in conjunction with meals prepared for pick-up or delivery. Any such alcoholic beverages must be packaged in a container with a secure lid or cap and in a manner designed to prevent consumption without removal of the lid or cap (e.g., no lids with sipping holes or openings for straws). Further, any licensee selling such beverages for off-sale consumption shall prominently post² the following warning in a manner that puts consumers on notice of limitations regarding open container laws:

   Alcoholic beverages that are packaged by this establishment are open containers and may not be transported in a motor vehicle except in the vehicle’s trunk; or, if there is no trunk, the container may be kept in some other area of the vehicle that is not normally occupied by the driver or passengers (which does not include a utility compartment or glove compartment (Vehicle Code Section 23225)). Further, such beverages may not be consumed in public or in any other area where open containers are prohibited by law.

6. Off-Sale Transactions Through Pass-Out Windows

   The Department is suspending any conditions on licenses that prohibit licensees from making sales and deliveries of alcoholic beverages to persons in a motor vehicle or to persons outside the licensed premises through a pass-out window or a slide-out tray to the exterior of the premises.

7. Hours of Operation for Retail Sales

   The Department suspends enforcement of any license condition restricting the hours of sales and service for licensees exercising off-sale privileges consistent with this Notice of Relief. However, the Department will continue to enforce the 2:00 a.m. – 6:00 a.m. prohibition. This does not circumvent any local restrictions, so if your City requires you to close at Midnight, that restriction is unaffected.

8. Deliveries to Consumers

   The ABC confirms that existing law allows licensees who are permitted to sell off-sale to also deliver such alcoholic beverages to consumers. The Department is suspending enforcement of certain restrictions. As such, licensees who are authorized to sell alcoholic beverages to consumers for consumption off the licensed premises may accept payment, including cash, at the point of delivery. In addition, craft distillers may also deliver to consumers away from the licensed premises (however, they must still adhere to the maximum of 2.25 liters per consumer per day). Delivery to consumers immediately outside the licensed premises (often known as “curbside delivery”) is acceptable.

Limitations on Relief

Be aware that the relief provided by the Notice is temporary and may be withdrawn by the Department at any time. However, the Department intends, but does not promise, to provide a 10-day notice of the termination of any such relief.

The ABC reserves the right to rescind this relief to any licensee that is found to be abusing the relief provided by this Notice, or if the licensee’s actions jeopardize public health, safety, or welfare, the Department may summarily rescind the relief as to that licensee at any time.

Finally, this Notice does not exempt licensees from local ordinances, zoning restrictions, conditional use permits, and the like, over which the Department has no jurisdiction or control. That said, the Department will not consider any violation of such local controls to constitute a violation of the license issued by the Department.

If you have specific questions about how these changes affect your business, please contact a member of the Stoel Rives Beverage Team.

¹ Business and Professions Code § 25509
² “Post” means to prominently display on the premises, post online, or present in whatever manner is necessary to ensure that the consumer purchasing, or delivery person transporting, such beverages is given notice of this warning.