A little-noticed bill that slipped through the Legislature this year is sending a chill through the state's small but growing hard cider industry.
The bill, known as AB 779, makes a seemingly minor technical change to the state's alcohol licensing laws. It allows large beer brewers, those producing more than 1.9 million gallons per year, to produce and sell cider at their facilities without obtaining a separate license.
Normally beer and cider makers require separate licenses, since cider is considered a form of wine under both state and federal law.
Cider makers say it's too early to determine whether the new law poses a threat to their business, but they expressed outrage about discovering the rules had been changed to favor another industry breaking into the market.
"When I saw it, I thought 'Oh, great now can I make beer?'" said Ellen Cavalli, co-owner of Tilted Shed, a small cidery in Sebastopol. The bill does not, in fact, allow cider makers to make beer.
"I don't see how this is fair," she said. "The competitive disadvantage is just so unfair."
The law could also accelerate a worrisome trend for cider producers, at least five of which are headquartered in apple-rich Sonoma County. The large beer companies, including Anheuser-Busch, are moving strongly into their market, which is one of the fastest-growing segments of the alcoholic beverage industry.
"Cider is hot as a pistol right now and everybody and his brother wants to get in," said Jeffrey House, head of Sebastopol-based California Cider Company, maker of the Ace Cider line, one of the largest independently owned cideries in the country.
Cider makers say they were completely unaware of the bill until The Press Democrat called to inquire about it, despite the fact that it passed the state Senate and Assembly with no opposition and was signed by the governor on Sept. 27.
Mike Faul, owner of Sunnyvale-based Red Branch Cider, said he worries that well-financed breweries will use their marketing muscle to dominate the emerging cider market and limit the ability of craft producers to find space on store shelves or bar taps.
"Most cider producers have been working at this for 10, 15, 20 years in order to get people to re-understand what cider is, what craft hard cider is," he said. Big brewers "are going to come out and saturate the market with junk."
Cider was once a major portion of the alcohol consumed by Americans, but after Prohibition, the cider market became nearly extinct until a small-scale artisan revival in recent decades. It remains a small market, with the top 20 cider companies posting only about $105 million in sales in 2012, according to a survey by Beverage World magazine, but growth was explosive, up 81 percent from 2011.
Major companies such as Anheuser-Busch InBev, Heineken and MillerCoors have moved into the market with brands such as Strongbow, Fox Barrel and Crispin. Boston Beer Company, maker of Sam Adams beer, jumped in two years ago with the Angry Orchard brand and leapt to number two on the Beverage World list in just a year, with almost $25 million in sales.
The new bill was suggested by Anheuser-Busch, which wants to use its plant in Southern California to make cider, particularly the new "Cidre," a cider associated with the Stella Artois beer brand.
"It's a very small but growing segment of the market that consumers are looking for," company spokesman Andrew Baldonado said.
But details of how and why the bill came to be, or even how it would work in practice, are hazy at best.
Assemblyman Raul Bocanegra, a Pacoima Democrat who sponsored the bill, has no breweries at all in his district. Staff said he was motivated to introduce the legislation because many employees of the nearby Anheuser-Busch plant live in his district.
"He is certainly committed to job creation and streamlining regulation," chief of staff Ben Golombek said.
Nor is it entirely clear why it applies only to such large breweries. Bocanegra's staff was unable to explain specifically but said he was open to extending the privilege to smaller brewers as well. The state's association of craft brewers blamed distributors for cutting out smaller brewers, but the California Beer and Beverage Distributors Association says it had nothing to do with the bill and has no objection to small breweries making cider.
Baldonado, meanwhile, said Anheuser-Busch has no objection to seeing the smaller brewers included and had nothing to do with the size limit.
Cider industry representatives, meanwhile, wonder openly how such a state law could be reconciled with federal licensing rules, which continue to regulate cideries as wineries and which appear to ban producers from mixing the two products in the same facility.
A call to the Treasury Department office that handles liquor licensing was not returned this week. The office is largely shut down by the federal budget impasse.
Bocanegra's staff said none of the lawyers or staff for the Legislature or state government had flagged any possible conflicts with federal law.
The state's craft brewers association says it will return to Sacramento next year asking for the cider-making privilege to be extended to all breweries.
That, however, could create tension with artisan cider makers, who had previously been political allies with brewers on regulatory issues. It would be particularly troublesome if brewers were to enter the market carelessly and damage the hard-won reputation of dedicated cider makers.
"To see someone come in and be opportunistic about it, to see it as a revenue stream because you're in an oversaturated market," Cavalli said, "that is not going to befriend you to the cider makers."
UPDATED: Please read and follow our commenting policy: