Assemblywoman Beth Gaines Checks on Legislative Change’s effect on Local Business

by Placerville Newswire / Apr 04, 2016 / comments

Many understand the way Wine Tasting Rooms function in El dorado County, but few understood that the playing field was not equal for distilled spirits, not since prohibition.  As Cris Steller said, California just went from 47th state to the top, referring to the first significant change in how distilled spirits can be distributed in California since prohibition in 1934.  Like Microbreweries for beer, we now have Microdistilleries! 

A major segment of El Dorado County’s economy is based on the wine grape growing, fermenting, bottling and sales within the county.  The standard business model is a vineyard grows desirable wine producing grapes, vintners turn these grapes into wine where they can be tasted and purchased on-site by wine drinkers.  Then the wine buyer can go to their local markets and ask that they stock and sell (Brand X) that they buy at the winery.

In the Market trade this is called “Demand Pull” and gives small businesses advantage against large operators that already have established distribution chains that Demand “Push” the brands being distributed to the retailers.  It is a bottom-up versis top-down effect where one is demanded by the consumer market and retailers stock it due to the demand “pulling” the item into the retail stream, as opposed to one where the distribution chain forces product selection on the consumer market.

Owners Gordon Helm and Cris Steller at Dry Diggings Distillery in El Dorado Hills have been working hard with the House Minority Whip, and local assemblywoman for El Dorado Hills, Beth Gaines, to advance Distillery distribution laws in California.

It turns out that California laws since the time of prohibition has locked-out small distilleries from being competitive due to restrictive distribution laws.  Unlike wineries, distilleries could not sell their own production to consumers.  

Making small distilleries a viable business in California required two steps that Assemblywoman Beth Gaines pushed through the state legislature recently.  The first was to allow small distilleries to have product sampling at all via AB 9337.  The second step was removing the restriction that distilled spirits could not be sold by the maker.  These two steps made small distilleries like Dry Diggings able to operate under an established business model used by many local vintners.

Assembly Bill 1295 removes a restriction in the law that prevented California distillers from selling their own products on site.  On March 24th, Assemblywoman Beth Gaines (R-El Dorado Hills) discussed the success of Assembly Bill 1295 at Dry Diggings Distillery in El Dorado Hills.  [Assemblywoman Beth Gaines represents the 6th Assembly District, which includes portions of Placer, El Dorado, and Sacramento counties.]

“Assembly Bill 1295 allows these California business owners to operate their business the best way they see fit,” said Assemblywoman Gaines. “The legislature should be doing more to free businesses to optimize their success, rather than further hampering their ability to innovate and stand out. This bill is a step in the right direction.”
Owners Gordon Helm and Cris Steller said, "We are thankful that this bill allows us to have the ability to make a direct connection with our consumer, so they can truly experience our brand."

Now consumers of fine distillery products can taste the product at the place of manufacture, and then buy some for take-home if they are so inspired.  Taking away the restrictive distribution chokehold can be appreciated by all that have produced a product and then had to get their product into the distribution chain.  All small producers understand the advantage that large producers have in the distribution supply chain with technical terms like, “Channel Captains” that decide if your product will even be distributed at all.

Prior to these changes, a distilled spirit had to be made by a distillery, then sold to a Distributor, then sold to a retailers, and then finally sold to the consumer.  Under the new laws, a small producer that make under 100,000 gallons a year can sell directly to the consumers.

“This is a huge victory for the industry,” Gaines said. “I hope the legislature takes this example to heart, and addresses the overregulation of business in all sectors of our economy.”

Owner Gordon Helm was quick to point out that this did not make Dry Diggings Distillery a bar.  During business operation a strict limit of 1.5 ounces per drinker was strictly mandated.  Gordon Helm took the opportunity to thank Assemblywoman Gaines, “I want to thank Beth for understanding small business.”  Beth and her husband Ted own a small insurance business.  Gaines replied that small businesses have always been close to her heart and her goal as the House Minority Whip was to promote Bills that are good for business and to kill those Bills that are bad for business.

Although the new law allows for enterprises like Dry Diggings Distillery to produce up to 100,000 gallons annually, Helm said that he was looking at a full production of 25,000-30,000 gallons annually, but with the caveat, it takes years to get to that level in saleable products that must be “Aged.”  

So even with the relaxed laws, fine small production spirits will still be in limited supply, at least for some time.

Dry Diggings Distillery Is at 5050 Robert J Mathews Pkwy, El Dorado Hills, CA 95762 and is open to the public on Friday from 4–7PM, and on Saturday and Sunday 12–5PM.