LEX VINI

5 Tips for Alcohol Beverage Suppliers Participating in Events & Festivals

Festival season approaches, and many promoters reach out to supplier-side licensees (including wineries and breweries) asking them to participate in or sponsor such events.  Here are five important tips to keep in mind when participating in, or deciding whether to participate in, such events held in California:

1) Make sure your sponsorship is legal.

Who?  California ABC Act has strict provisions that govern alcohol supplier’s ability to sponsor events.  In general sponsorships by suppliers are only permitted where (1) the sponsorship is of a nonprofit organization that will be holding the ABC license for the event (so long as the event does not benefit a permanent retail licensee); (2) the sponsorship is of a contest, race, tournament, and other similar activity and where the sponsorship is only in the form of “monetary payments to bona fide amateur or professional organizations established for the encouragement and promotion of the activities involved”; or (3) where there is an exception in the ABC Act that specifically allows the sponsorship of a certain entity or at a certain venue.

What? The ABC Act defines what types of sponsorship are permitted and how the sponsorships can be funded. For example, sponsorships of nonprofits can be accomplished with both monetary payments and/or the donation of goods or services (such as the donation of wine or assistance of the nonprofit at the event), whereas sponsorships of certain organizations at contests or races described in item 2 above are limited to only monetary payments.

How? The ABC Act details how sponsorships can be structured and what can be included. For example, most sponsorships cannot require or be tied to the purchase or sale of any alcoholic beverages and cannot require that the sponsor’s products be exclusively served at a venue. As noted above, there may be specific exceptions based on the event or venue in the ABC Act and these must be considered.

2) Make sure the correct entity holds the ABC license.

If the sponsorship is of a event being held by a nonprofit, the nonprofit should be obtaining a temporary one day (or multiple day) license for the event. If the sponsorship is of another entity specifically permitted by the ABC Act (as noted above), then that entity or a licensed concessionaire typically will hold the license.

3) Make sure all sales are being made by the license holder for the event.

All sales of alcoholic beverages at festivals or events must be made by the license holder for the event. If a supplier (such as a winery or brewery) is permitted to participate at the event by pouring or educating consumers on the products (for example, at a nonprofit event or where such participation is specifically permitted by the ABC Act), that supplier is not permitted to make any sales at the event. Order forms can be filled out, but all sales and order processing must be completed back at the supplier’s licensed premises. No sales on an Ipad or other mobile device are permitted.

4) Make sure that your presence at, and participation in, the event itself is permitted.

The ABC Act contains very strict rules regarding the ability of a supplier to advertise and participate at events. Suppliers needs to ensure that both their presence and activities at the event (pouring, educating consumers, providing tastings, etc.) and all of their advertising at and about the event (banners, signs, etc.) are in full compliance with the ABC Act.

Typically, suppliers such as wineries and breweries are only permitted to pour, participate and have signage at events where the event is being held by the nonprofit and they are simply assisting the nonprofit. Such participation and signage may be permitted at contest/races or where there is a specific code exception allowing the sponsorship, but that must be determined on a case by case basis. Supplier participation and signage at events held at retail locations (such as restaurants and bars) need to be given careful consideration, since they are only permitted under very limited circumstances.

Note that the type of license held (whether it’s a nonprofit license versus a retail concessionaire license) will impact the rights of the supplier at the event itself and should be carefully considered.

5) Make sure you are complying at all times with your obligations as a licensee.

Suppliers sponsoring an event are still required to comply with all of their obligations as a licensee. For example, this means that no free goods can be given away unless explicitly otherwise permitted by the ABC Act. So, while donations to a nonprofit are permitted, donations to other entities are not unless specifically permitted by the Act. And while giveaways of consumer advertising specialties (as limited by the ABC Act) may be permitted, other free goods typically are not. You should also ensure that no payments, donations or advertisements made in connection with the sponsorship that would violate the tied-house laws.

Sponsorships and events are extremely complicated and the points above are just the “tip” of the iceberg when it comes to the issues that need to be considered by suppliers.

For more information on the rules and regulations governing sponsorships and events, please contact Bahaneh Hobel at bhobel@dpf-law.com.

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