COMMENTARY | By Andrew R. Holguin

Spirits of the Age: Prohibition Era Laws Hold Back County from Distillery Boom

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Over the past few years, craft alcoholic beverages have mushroomed in popularity. It seems like there is a craft brewery on every corner with craft distilled spirits and hard ciders, trending. We Baby Boomers remember when wine was the new craft beverage. I can recall my first introduction to this new beverage — it was Strawberry Hill by Boone’s Farm. (Though to call Strawberry Hill “a wine” is to do a disservice to all wines and winemakers alike) — as it was more marketing and factory chemistry than the age-old process of fine wine-making.

A few high school friends and I drank a number of bottles one night — which subsequently introduced me to nausea, vomiting and one horrible, but well-deserved, hangover.

But like today’s craft alcohol producers, our wine industry was started by connoisseurs, who wanted to see if their wines could compete with those from France — then the world’s leading producer.

That experiment turned into a multi-billion dollar industry which provides taxes, good-paying jobs and careers for literally hundreds of thousands of people. The Wine Institute in 2015 estimated that in California alone there are 4,600 bonded wineries, most are family-owned businesses, many are multi-generational.

California is now the world’s fourth leading wine producer and employees 375,000 people, generates $57.6 billion in economic activity, and pays $17.2 billion in wages and $7.6 billion in taxes.

The current craze is Craft Beer and, here too, California is also leader, This started when Fritz Maytag acquired the Anchor Brewing Company in 1965 and began brewing authentic handcrafted beers, along with Jack McAuliffe, who built a micro-brewery in Sonoma from scratch, and began selling New Albion ales in 1977.

All in all, the prevailing sentiment appears to be that there is nothing better than locally produced food washed down with locally produced wine, beer or distilled spirits.

By 1982, Governor Jerry Brown signed Assembly Bill 3610 to amend the state’s laws to remove the restriction on on-premises sales of craft beer. Following this change in law, California became the home to three of the first five brewpubs in the United States (California Craft Brewers Association). By 2014, the industry had an annual impact of $5.5 billion on the state’s economy; and supported more than 50,000 jobs, which in turn created billions of dollars in positive economic impact with more than 520 small, independently owned craft breweries. By 2016 there were over 700 craft brewers in California.

What’s trending now is, interestingly enough, craft distilled spirits. And again, it appears that California is leading the way. California has modernized its distilled spirits laws with the passage of the Craft Distillers Act of 2015 – AB 1295, which became effective on January 1, 2016. The legislation changes Prohibition Era laws for distillers to reflect the modern marketplace. The Bill “allows craft distillers to operate in a similar manner as wineries and breweries under existing law,” said bill sponsor, Assembly member Marc B. Levine (D-San Rafael). It allows the craft distillers’ to make, offer tastings and sell limited quantities of distilled spirits to consumers.

Locally, Ojai Valley is experiencing a renaissance of sorts in wine; with the newly open Topa Mountain Winery following the more established ranks of Ojai wineries: Ojai Vineyards, Majestic Oaks, Casa Barranca Winery, Old Creek Road Winery (the author’s own), and Topa Winery, etc.

Although, when it is compared to Central and Northern California, Ventura County long ago missed the boat. And now it appears the same slow, behind-the-times, process is going on with craft beer and distilled spirits.

Take for example the market for craft alcoholic beverages. The Los Angeles area is home to more than 18 million people, including hundreds of thousands of wine aficionados. Many of these people regularly visit the wine venues of California  — traveling up and down Highway 101 to Santa Ynez Valley in Santa Barbara County, Paso Robles in San Luis Obispo County and, for some, all the way to Napa Valley. Unfortunately, few consider the wine-tasting possibilities in their nearest neighbor: Ventura County.

You only have to visit these other locales to discover why: northern Santa Barbara County has more than 100 wineries and six official wine appellations (An appellation is a legally defined and protected geographical area used to identify where the grapes for a wine were grown). In Los Olivos alone, the wine industry has turned a sleepy, forgotten stagecoach stop into a thriving tourist center with 30 wineries within a five-block area. San Luis Obispo County has seven official appellations, the City of Paso Robles, which sits in the middle of the county, alone has more 300 wineries and four appellations. Napa Valley in northern California, an easy commute from San Francisco, is a world-renowned wine destination with over 14 official appellations and 400  wineries.

Ventura County has fewer than 10 wineries and a handful of wine-tasting rooms, only one of which is situated in a rural zone (the author’s own) and is listed only once in the Federal Register for Wine Appellations, and then only because we share an appellation, along the Malibu Coast, with Los Angeles County.

The wine industry has been a godsend to many counties in Central and Northern California; in addition to a healthy tax base and jobs in agriculture, the industry has provided their respective areas with many secondary and tertiary benefits, e.g. contract winery service jobs: wine maker, wine techs, transportation and laboratories all servicing the local wineries; additional jobs at craft beverage equipment suppliers, wine tour operators, excursion companies, fine restaurants, bars, and hotels all catering to a healthy and robust tourist industry.

The current unemployment rate for counties that have strong wine industries is well below five percent (SB 4.6 percent, SLO 4.3 percent, Napa Valley 4.1  percent) while Ventura County is still stuck over 5 percent.

Why has Ventura County failed to produce a vibrant wine industry, much less a craft beer and distilled spirit industry, like our northern neighbors? It is because of our antiquated zoning ordinances. These ordinances have held the industry back, and all but eliminated the possibility of other craft alcoholic beverage industries developing.

Currently, Ventura County’s Non-Coastal Zoning Ordinance, maintains Prohibition-Era zoning regulations related to the production of alcoholic beverages. The zoning ordinance limits alcohol production and/or processing to Heavy Manufacturing Zones (M-3 Zones). M-3 Zones are designed to house the heaviest of heavy industry: refineries, steel mills, and large-volume alcoholic beverage plants that churn out millions of bottles of alcoholic beverages per year for the national and international market.

These zones are not designed for small-volume, craft alcohol producers offering tastings and sales direct to the consumer. They hinder the industry from developing in any significant way.

For example, Ventura Spirits, a local company producing high-quality distilled spirits, is sited on Ventura Avenue, a dusty industrial zone, just north of the City of Ventura, in the middle of the  Avenue’s oilfields and just south of an abandoned refinery. Luckily, at least wineries have been given an exception to these antiqued laws, but even wineries must have a Conditional Use Permit (CUP) and deal with tons of bureaucracy before one can be built, even in a rural agricultural zones.

The local craft-brewery business, with its less rigorous land requirements, has been able to take advantage  of the more liberal city ordinances, and a vibrant craft brewing industry is growing within the Ventura city limits.

But it is the agricultural sector, in the unincorporated area of Ventura County, that is under a lot of stress: lack of sufficient, affordable water, high and unforgiving property taxes, hard-to-find farm labor and high (and rising) labor costs as California increases the minimum wage and mandates new overtime and sick-time laws. The industry is hurting and it has nowhere to turn since Ventura County strictly limits what can be done in farmland.

Alcoholic beverages are all products of the agricultural zone: grapes are used to produce wine; malt, grains and other ingredients to produce beer and various fermented agricultural products (grapes, peaches, other fruits, grains,  potatoes, etc) to produce distilled spirits. In each case the agricultural product is mashed, water added, usually heated to release their sugars and inoculated with a yeast then allowed to ferment. Through the biological activity of fermentation, yeast converts the sugars in the mash to alcohol. The resultant beer or wine or fermented mash with 5 percent to no more than 15 percent alcohol can be further refined to a distilled spirit with the use of a still. Stills boil off the alcohol, while leaving the water behind.

It makes sense that alcoholic beverages should be allowed in agricultural zones  — just as vineyards and wine-tasting rooms are now. A new industry would then be encouraged in Ventura County, turning some of our marginal farmlands into very viable businesses.

California and many of its counties have modernized their laws and ordinances as related to wineries and craft alcohol production; their economies are booming because of it. Ventura County should do the same.

The newly passed Ventura County, SOAR initiative (Save Our Agricultural Resources is a possible mechanism by which the zoning restrictions could be liberalized. Alcohol is considered a food under Ventura County definitions, and the county, by allowing alcohol production, processing, tastings and sales on ag-lands, would perfectly align with the goals of the SOAR Initiative, which are to:

•  Encourage the continuation and development of facilities and programs that support agricultural production and enhance the marketing of county-grown agricultural products;
• Promote the economic viability of agricultural lands;
•  Encourage agricultural land to remain in farming and related uses; and
• Encourage opportunities for Ventura County residents to buy local agricultural products.

My winery, Old Creek Ranch Winery, is currently working with Ventura County to change these antiquated regulations, not only for ourselves but for craft alcohol industry in general, because a healthy industry will attract more visitors and create better business for everyone.

Our dream is to sell fine-crafted wine, beer and spirits in a relaxing environment to our guests.

There is a tsunami of change occurring with craft breweries and distilled spirits: how they are viewed, regulated and where and how these beverages can be produced. Ventura County should acknowledge that their anachronistic alcohol regulations are quashing the viability of a local industry, and permit craft beverage makers to make and sell their local refreshments, for the public to have the opportunity to eat and drink and enjoy these products. This effort will create thousands of good-paying jobs and careers to the local economy.