Cocktails to go, delivery stings in a post-pandemic world
July 06, 2021
Rebecca Stamey-White is a partner in the San Francisco law firm of Hinman & Carmichael LLP and heads the group's cannabis and alcohol marketing practices. Founded in 1991, the firm has long represented U.S. wineries and other entities that sell alcoholic beverages and, in recent years, has expanded its practice to cover the fast-developing legal and compliance issues surrounding medical and recreational marijuana.
Stamey-White provides advice on licensing, distribution, compliance and trade practice business for regulated industries and defends clients in state agency protest and accusation hearings and federal alcohol investigations. Prior to Hinman & Carmichael, Stamey-White was an associate in the San Francisco litigation group of Kirkland & Ellis LLP. She received her law degree from Northwestern University in 2008. Stamey-White spoke with the Wine Analytics Report for the June issue on regulatory changes stemming from the COVID-19 pandemic.
Q: Within California, what are some major regulatory changes that were enacted because of the pandemic and which will be kept in place as the state reopens?
Stamey-White: On June 3 the state Alcoholic Beverage Control (ABC) issued a final notice of regulatory relief in California to basically extend some of the changes until Dec. 31 and drop some of the changes on June 30. The regulatory relief that will keep going through the end of the year are basically giving on-sale retailers off-sale privileges: the ability of restaurants and bars to sell closed containers of alcohol to-go, sales of cocktails to-go and deliveries to consumers that was expanded more than it was previously and the ability to offer free delivery.
Also the expansion of the license footprint for the outdoor areas that were not part of the permanent license, allowing bars and tasting rooms, too, without kitchen facilities, to keep working with either food trucks or other food providers to be able to provide meals with alcohol to-go. Wineries can also continue to offer virtual "meet the winemaker" dinners, where you basically partner with a restaurant that sells this experience with a winemaker that provides education. Also expanded is the relief for commercial co-ventures. Those are the charitable promotions in sales.
Q: The state then is allowing expanded outside seating areas to continue, but it will be up to local officials to make any permanent changes?
Stamey-White: Yes, right now the state has provisions for basically sidewalk extensions. You might have restaurants that have tables on a public sidewalk, so you have to get authority from the locality to do that. In the context of a winery, it's the same deal: If they are extending their license premises, maybe a tasting room that's in a town square, for example, they would eventually have to get that approved by the locality. I think the challenge is balancing that expanded seating with the local neighbors. They didn't have an opportunity to provide their input on these expanded seating areas. I think every locality is going to have to balance the interest in stimulating the local economy with also having input from the community.
Q: What were the major compliance or regulatory questions that your winery clients had during the pandemic?
Stamey-White: Early on, there definitely was a lot of desire to help out retailers to be able to take returns back, to be able to do different charitable promotions for relief. I do think the ABC responded to a lot of those requests and really tried to get creative to allow folks, who were continuing to sell to wine club members and e-commerce, to be able to provide that relief, especially to the on-premises sector.
I definitely fielded a lot of questions regarding "to-go" offerings and shipments to consumers. Many clients were thinking about options for partnering with food trucks or different food providers to be able to add meal preparation kits in connection with wine. Just thinking of different creative ways to serve their customer base that was now spending a lot of time at home.
Q: How would you characterize how much change the pandemic brought in terms of regulations on the wine industry?
Stamey-White: if you think about how little this industry has changed over the years, I think this has been a lot of change. Certainly, the cocktails and drinks to-go is something that I would not have predicted. I think we're also seeing a lot of interesting legislative proposals in the different states, including opening up cocktails to-go more permanently and easing DtC restrictions.
I've talked to a lot of people who were doing cocktail kits and cocktails to-go, and I do think that there is renewed interest in DtC options for other product categories. It's not huge stuff — like getting rid of ”tied house” laws or completely streamlining everything — but I do think in the context of how the industry normally works, this was pretty fast and substantial change for the industry.
Q: Early in the pandemic the ABC reported a concerning level of non-compliance in terms of ensuring adult signatures for alcohol deliveries. How did the agency respond to that issue?
Stamey-White: What the ABC found — I think this was exacerbated by social distancing and a lot of customers wanting touchless delivery — was something like 70% of deliveries did not wait for an adult signature. What the ABC ended up doing is they adopted some emergency rulemaking that allowed it to conduct minor decoy operations in this context.
A minor could go onto a website and input an adult age that would permit them to purchase alcohol, then it was basically on the delivery person to verify ID upon delivery. We have seen there was a period of several months where the ABC was issuing warning letters. They had started doing minor decoy investigations, but instead of filing full-blown accusations and seeking license suspensions or fines, they just issued warning letters. They are now doing accusations, and I'm sure, in addition to starting back up the more traditional, in-person decoy operations, they will continue to do these online operations.
Q: And these stings are primarily focused on on-premises accounts that make cocktail deliveries?
Stamey-White: It's not just cocktails. It also includes a winery that is shipping wine club shipments as well. If the ABC has a minor go onto a wine club site, place an order for a couple bottles of wine, they can click through the age verification; and if that ID isn't checked by whatever carrier delivers the wine, that's a violation against the winery.
Q: Have there been many of those issued this year?
Stamey-White: I've gotten a few calls about them. I haven't gotten them from wineries yet, but they certainly could be coming. It just depends on the ABC's enforcement priorities, and usually it's driven by complaints. Sometimes they will do different investigations. They'll choose a locality: they'll partner with the local sheriff or police department, use criminal justice students that are interning at a police department as minor decoys and run these operations.
The Wine Analytics Report is a monthly, digital report on the U.S. wine industry produced by the editorial team at Wines Vines Analytics and based on information from proprietary databases and data supplied by partner research firms. The report and Wines Vines Analytics are part of the Wine Communications Group that also publishes Wine Business Monthly.