AB 1246 amends Section 23358 to expand what licensed California winegrowers may do on their premises. The bill authorizes winegrowers to produce “spirits of wine,” blend those spirits into wine they produce, and sell those spirits to industrial alcohol dealers or to holders of licenses that allow manufacture or rectification of distilled spirits; it also clarifies possession and on‑ and off‑sale rules for brandy and wine in tasting rooms and bona fide eating places.
The law adds a detailed, conditional regime for open containers in designated entertainment zones, preserves a requirement that at least half of wines sold on a winegrower’s premises be produced there, keeps wholesaler sourcing requirements for non‑producer products, and leaves local land‑use authority intact. For wineries, wholesalers, distillers, and local governments, the bill reshapes commercial options and compliance obligations while raising questions about enforcement, labeling, and inter‑industry competition.
At a Glance
What It Does
The bill expands winery privileges to include producing distilled 'spirits of wine,' blending those spirits into the winery’s product, and selling such spirits only to industrial alcohol dealers or licensees authorized to manufacture or rectify distilled spirits. It also enumerates when and how consumers may leave a licensed premises with open containers inside a municipal entertainment zone and preserves purchaser/sourcing rules and local land‑use authority.
Who It Affects
Primary impacts fall on licensed winegrowers and their tasting‑room operations, licensed wholesalers that supply non‑producer products, industrial alcohol dealers and distillers who may buy winery‑produced spirits, and local governments that operate entertainment‑zone ordinances. Enforcement agencies and compliance officers at wineries will face new recordkeeping and notice duties.
Why It Matters
The measure blurs a long-standing line between winemaking and distillation, creating new revenue and product options for wineries while introducing regulatory frictions around excise, labeling, and marketplace competition. The entertainment‑zone framework also creates localized exceptions to open‑container rules that will require precise operational controls.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
AB 1246 keeps the familiar set of tasting‑room privileges for California winegrowers but adds two meaningful capabilities: (1) the right to produce ‘spirits of wine’ on site and either blend those spirits into their own wine or sell them — not to consumers, but to industrial alcohol dealers or to licensees authorized to manufacture or rectify distilled spirits; and (2) explicit permission to possess and transport brandy for the purpose of aging it on the winegrower’s premises. Those additions do not convert a winery into a full distilled spirits manufacturer under the bill’s text, because sales of distilled spirits to consumers are not authorized and transfers must go to appropriately licensed buyers.
The bill also specifies how wine, brandy, and beer can be sold on site: it preserves the ability to sell for on‑site and off‑site consumption in various configurations, allows bona fide eating places contiguous to the licensed premises to serve beer, wine and brandy regardless of source, and permits winegrowers to offer other producers’ alcoholic products at private events provided those products are purchased from licensed wholesalers. Notably, the bill keeps a production floor: at least 50 percent of the wine sold to consumers on a winegrower’s premises (and any licensed branch) must be produced there by conversion of grapes, berries, or other fruit.For public‑facing consumption outside the premises, AB 1246 creates a tightly conditioned open‑container exception inside municipal entertainment zones.
A licensee may allow patrons to leave with open containers only if the premises sits inside an entertainment zone, the local ordinance authorizes that type of beverage, departures are within the hours set by the ordinance, patrons exit directly into the zone, all beverages consumed in the zone were purchased inside the zone, and the licensee files an annual notice of intent to participate. The bill also prohibits in‑zone deliveries by the licensee or third‑party services except to residential buildings or private businesses that are not licensees.Finally, the Department retains authority to deny on‑sale privileges for public welfare reasons in sensitive locations (for example, a bona fide eating place whose main entrance is within 200 feet of a school or church), and the statute explicitly preserves local land‑use regulatory power to restrict—but not eliminate—the privileges enumerated in the section.
The Five Things You Need to Know
The bill authorizes winegrowers to produce 'spirits of wine' and either blend those spirits into their wines or sell them, but only to industrial alcohol dealers or licensees authorized to manufacture or rectify distilled spirits — not directly to consumers.
A winegrower may possess and transport brandy specifically for the purpose of storing and aging that brandy on the licensed premises.
Licensees may allow patrons to leave with open containers inside a designated entertainment zone only if a list of conditions is met, including that patrons exit directly into the entertainment zone and the licensee files an annual notice of intent to participate.
Wineries must ensure at least 50% of all wines sold to consumers on their licensed premises (and any licensed branch) are actually produced on those premises by conversion of fruit.
Products not produced or bottled by the winegrower that are sold at the premises must be purchased from a licensed wholesaler, and the department may deny on‑sale privileges within 200 feet of a school or church for public welfare reasons.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Routine on‑ and off‑sale privileges and bona fide eating places
These paragraphs reiterate and clarify long‑standing tasting‑room privileges: winegrowers may sell wine and brandy to other licensees, sell bottled wine and brandy for off‑premises consumption, and sell wine for on‑site consumption. They also allow a bona fide eating place owned and operated by the licensee (or on contiguous premises) to serve beers, wines and brandies from any source and to use them in food preparation. Practically, this preserves a winery’s ability to operate a restaurant or café adjacent to production facilities without source restrictions for the restaurant’s beverage program.
Open‑container rules inside entertainment zones
This paragraph creates a conditional exception to the usual prohibition on leaving a licensed premises with open alcoholic containers, but only inside an ordinance‑created entertainment zone and subject to multiple operational limits: the local ordinance must authorize that beverage type and the hours; patrons must exit directly into the zone; all in‑zone alcohol must originate from zone licensees; the licensee must forbid open containers bought elsewhere; deliveries into the zone by the licensee or third‑party services are barred except to residences or private non‑licensee businesses; and the licensee must file an annual notice with the department. For compliance teams, the provision imposes a detailed checklist of territorial, timing, and sourcing requirements that will require coordination with local governments and recordkeeping for the annual notice.
Produce spirits of wine; store and age brandy on site
These new clauses let winegrowers distill 'spirits of wine' and either incorporate those spirits into their own wine or sell them to industrial alcohol dealers or to parties holding licenses to manufacture or rectify distilled spirits. Separately, winegrowers may possess and transport brandy for the specific purpose of aging it on their premises. The mechanics imply winegrowers may add a limited distillation and aging function to their operations, but the text confines commercial outbound transfers of distilled spirits to appropriately licensed entities, which preserves a separation from retail spirit sales.
Private events and wholesaler sourcing requirement
Subsection (b) allows winegrowers to stock beers, wines and brandies from any source for sale or service only to guests at private events not open to the public, but requires that alcoholic products not produced or bottled by the winegrower be purchased from a licensed wholesaler. That sourcing rule preserves the distributor tier for non‑producer inventory and creates a traceable procurement obligation for private functions — a point compliance officers should bake into vendor contracts and inventory systems.
On‑site production minimum for wines sold
Paragraph (c) imposes a concrete production test: at least 50 percent of the wines sold to consumers on the winegrower’s licensed premises and any licensed branch must be actually produced on the licensee’s premises through conversion of grapes, berries or other fruit. This requirement limits the extent to which wineries can rely solely on wholesale purchases to stock tasting rooms and helps preserve the identity of a winegrower license by tying sales to on‑site production.
Department denial power and local land‑use preservation
Subdivision (d) gives the Department of Alcoholic Beverage Control authority to deny on‑sale privileges for good cause if those privileges would be contrary to public welfare or morals, specifically flagging bona fide eating places with main entrances within 200 feet of schools or churches. Subdivision (e) confirms that nothing in this section overrides a county or city’s land‑use authority to impose restrictions (short of eliminating the statutory privileges). Together these clauses insert an administrative safety valve and preserve municipal planning control, so regulatory approvals may still require separate land‑use review or local conditions.
This bill is one of many.
Codify tracks hundreds of bills on Economy across all five countries.
Explore Economy in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Licensed winegrowers — Gain new revenue and product flexibility by producing 'spirits of wine,' blending them into wines, aging brandy on site, and accessing conditional open‑container consumer experiences in entertainment zones.
- Industrial alcohol dealers and distillers with manufacture/rectifier licenses — Obtain an additional, potentially local source of spirits‑of‑wine for further processing or blending.
- Tasting‑room and hospitality operators in entertainment zones — Can offer customers an on‑premises drinking experience that continues into a controlled entertainment district, potentially increasing foot traffic and per‑customer spend.
- Consumers in entertainment zones — Receive more permissive, localized open‑container experiences and access to a broader variety of on‑site curated beverages at winery venues.
Who Bears the Cost
- Licensed wholesalers — Face competition friction because wineries may produce or source certain products in‑house; they also gain compliance obligations because winegrowers must buy non‑producer products from wholesalers, creating administrative tracking.
- Distilled spirits manufacturers and retailers — May face competitive pressure if wineries supply spirits‑of‑wine to industrial dealers or enter adjacent markets through blending or local sales channels.
- Enforcement agencies and winery compliance officers — Must monitor entertainment‑zone conditions, annual notices, sourcing records, and the separation between winery distillation and commercial spirit sales; this raises inspection and recordkeeping burdens.
- Local governments and land‑use planners — Will need to reconcile entertainment‑zone ordinances with existing zoning and school/church buffers, and may face political pressure when permitting open‑container schemes.
Key Issues
The Core Tension
AB 1246 intends to broaden economic opportunities for winegrowers and enliven local hospitality districts, but it simultaneously risks eroding the regulatory and commercial boundaries that separate winemaking from distillation and complicates enforcement of public‑safety and tax regimes — a trade‑off between expanding producer flexibility and maintaining clear, enforceable regulatory categories.
The bill expands winery authority in ways that are operationally straightforward but regulatorily porous. Allowing wineries to distill 'spirits of wine' and sell them to industrial alcohol dealers creates practical questions about how excise taxes, labeling, proof, and product categorization will be handled between the wine and spirit regulatory frameworks.
The statute restricts outbound sales of spirits to licensed manufacturers or dealers, but it does not define the specific production, reporting, or bonding requirements those distillation activities should follow — opening the door to interpretive disputes between the Department and licensees.
The entertainment‑zone carveout is precise but administratively intensive. The bag of conditions (hours, direct exit into the zone, sourcing limits, outright delivery prohibitions into the zone, and an annual notice) will require coordination between local governments and licensees and leave enforcement margins thin: who certifies a patron exited 'directly into' the zone, how do inspectors verify in‑zone purchases were only made at zone licensees, and how will delivery platforms be policed?
Further, the 50 percent production requirement protects the identity of a winegrower license but could also push small or regionally focused producers to alter sourcing practices or scale production artificially to meet the threshold.
Finally, preserving local land‑use authority while expanding statewide privileges sets up predictable frictions. Municipalities retain the power to restrict winery activities via zoning even though the statute broadens commercial capacities, which may lead to uneven implementation across jurisdictions.
Ambiguities left in definitions (for example, 'spirits of wine' and what constitutes 'industrial alcohol dealer') and gaps in operational detail (tax treatment, bottle‑labeling rules, and distillation safety standards) will compel administrative rulemaking or litigation to fill in how the new authorities operate in practice.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.