Restaurants, distilleries bracing for changes in alcohol distribution, consumption laws

The new year will bring changes to how alcohol can be sold, delivered and distributed for California restaurants, bars and distilleries.

Senate Bill 389, which deals with retail on-site and off-site sale of alcoholic beverages, was signed into law in October and will take effect on New Year’s Day.

The law replaces the temporary loosening of restrictions offered to restaurants and bars at the start of the COVID-19 pandemic; that move opened new revenue streams through expanded alcohol sales to help businesses stay afloat while dine-in operations were suspended.

The bill is similar to the prior regulatory relief, with some key changes. The good news for the restaurant industry is that it looks like to-go cocktails, beer and wine are here to stay through 2026, with limitations.

Restaurants and bars can continue to deliver beer and wine in sealed cans or bottles, deemed “manufacturer-sealed containers,” for off-site consumption through 2026. If a customer wants their local pizzeria to deliver a couple cans of beer with their meal purchase, they can continue to do so.

Distilled spirits and mixed drinks can still be purchased “to go,” but they must be ordered and picked up directly from the restaurant, bar or distillery by the consumer, who must show a valid I.D. Drinks containing hard liquor may no longer be delivered. The same restriction applies to single-serving glasses of wine.

There are several other caveats. The mixed drink must be in a sealed, single-serving container and it must be sold with a “bona fide meal,” which does not include side dishes, snacks, appetizers or desserts.

Each drink can’t contain more than 4.5 ounces of distilled spirit, a limit of two to-go drinks may be sold per meal, and the mixed drink must be “conspicuously labeled” to show that it contains alcohol. Once it’s picked up, the beverage is considered an open container and must be stored in the trunk of the vehicle transporting it until it reaches its destination.

For restaurants like Hula’s Island Grill in Santa Cruz, that means customers can still get to-go house-made cocktails like mai tais and the signature Pink Bikini Martinis with their takeout orders, as long as they pick them up with a meal from the downtown restaurant.

General manager Liza Wadstein said the restaurant relied on takeout, including to-go cocktails, last winter when the pandemic was at a peak and in-person service wasn’t available. She says takeout orders are tapering off now that Hula’s is open for indoor and outdoor dining, but she’s glad takeout cocktails are here to stay for the foreseeable future.

“It’s obviously a good thing that we can continue to do that,” Wadstein said, “because some people are driven by the idea that, oh, I can pick up cocktails and dinner all in one stop and take it home. That’s appealing to many guests.”

The restaurant, which serves island-inspired fare, does not use delivery services like Grubhub or DoorDash, and won’t be affected by the changes regarding delivery service.

One factor that contributed to the prohibition of liquor delivery once again was a high rate of delivery to minors. The state’s Department of Alcohol Beverage Control conducted delivery driver decoy operations beginning in early 2020 as delivery of alcoholic beverages became more commonplace.

In April 2020, for example, 30 of 38 drivers delivered alcohol to minor decoys, a 79% violation rate. Violation rates of 21% to 53% persisted through 2020. Violations decreased in 2021 after the ABC conducted outreach and education for both ABC licensees and delivery companies, but remained significant, hovering between 14% and 17% throughout the year.

Proponents of the law say the new restrictions aim to further curb delivery to minors while continuing to support affected businesses’ ongoing economic challenges.

Shipping ends for California craft spirits

SB 389 brings some bad news for craft distilleries. During the pandemic, craft distilleries like Venus Spirits in Santa Cruz were able to ship their products to customers throughout the state. As of Jan. 1, craft distilleries will lose that ability entirely when the privilege expires and the law against liquor distribution returns.

That means Venus Spirits will no longer be able to ship its distilled spirits or canned craft cocktails to fans in San Francisco, Sacramento or San Diego.

Owner Sean Venus said the company took advantage of the relaxed law when its tasting room closed at the start of the pandemic. At one point, it was sending out 50 or 60 shipments a day, although that’s dwindled now to five or six a day.

Venus said enrollment in the distillery’s Spirit Club, which distributes quarterly shipments of one to three bottles, jumped at the onset of the pandemic. Now, he estimates about 25% of members rely on shipping to receive their allotments.

Venus says the biggest problem will be explaining to customers who have grown accustomed to deliveries that they will no longer be able to receive them, and he expects to lose some club members.

“They expect it. It doesn’t make sense to them that they can purchase from BevMo or some other distributor but they can’t get it from us,” he said.

Still, Venus said he isn’t too worried about any negative impacts to his bottom line. It was a fairly new addition to the business, which was founded in 2012 and has grown to include a tasting room, distribution facility for its bottled spirits and canned craft cocktails, as well as a restaurant. He does worry about the effect it will have on newer distilleries in the state, who might not have multiple revenue sources and have grown to rely on shipping.

While Venus is relieved that privileges like outdoor dining have been extended for the next five years, he’s frustrated that the shipping privilege wasn’t extended in order to help businesses like weather the challenges put upon them by the pandemic.

“We’re not out of COVID. The face of COVID is pretty similar to what it was a year ago,” he said. “I don’t know what lawmakers think has changed as far as its impact on business, but we’re in a very similar place to where we were a year ago.”

For more information on SB 389, visit abc.ca.gov.