Call to Order and Roll Call
The 3rd meeting of the Interim Joint Committee on Licensing and Occupations was held on Friday, September 10, 2010, 10:00 AM, at<MeetTime> Beam Global Spirits and Wine, Clermont, Kentucky. Senator Gary Tapp, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Gary Tapp, Co-Chair; Representative Dennis Keene, Co-Chair; Senators Perry B. Clark, Julie Denton, Denise Harper Angel, John Schickel, Dan "Malano" Seum, and Damon Thayer; Representatives Tom Burch, Larry Clark, Ron Crimm, Tim Firkins, David Floyd, Dennis Horlander, Adam Koenig, Reginald Meeks, Charles Miller, David Osborne, Darryl T. Owens, Sal Santoro, Arnold Simpson, and Susan Westrom.
Guests: Jim Morehead, Director of US Manufacturing, Steve Robinson, Vice President of Global Finance, and Jerry Summers, Director of Community Relations, Beam Global; Tony Dehner, Commissioner, Randy Fawns Deputy Commissioner, Peter Ervin, General Counsel and Virginia Davis, Legislative Liaison, Department of Alcoholic Beverage Control; Angela Criswell, Coordinator, Bluegrass Prevention Center, Tara Maguire, State Youth Program Coordinator, Mothers Against Drunk Driving.
LRC Staff: Tom Hewlett, Bryce Amburgey, Carrie Klaber, Michel Sanderson, and Susan Cunningham
Approval of minutes from July 9, 2010, Meeting
There was a motion from Representative Owens, followed by a second from Representative Firkins and the minutes were adopted by voice vote.
Welcome and remarks from representatives of Jim Beam Distillery
Jeff Conder, Vice President, Beam Global, American Operations told the committee that at its regular meeting the Board of Directors for the Kentucky Distillers Association had adopted a resolution honoring Senator Tapp. Mr. Conder read and presented the resolution to Senator Tapp.
Jim Morehead, Director of US Manufacturing, said Beam Global has Kentucky locations in Boston, Clermont, Frankfort, Loretto and Louisville. Most people do not know that Jim Beam and Makers Mark are connected. Currently there are 835 people employed by Beam in Kentucky, including 488 who belong to the United Food and Commercial Workers union. In 2008, the company acquired the Cruzan Rum label, creating more jobs at the Frankfort plant. Additionally, the bottling of Canadian Club, which had previously been done in Canada, was brought to Kentucky. Beam truly is a global company with operations in Calgary, Alberta, Canada; the Sauza plant in Guadalajara, Mexico; and two years ago Beam acquired the Cruzan plant in St. Croix, Virgin Islands. The DeKuyper plant in Cincinnati will close in 2011 transferring 120 jobs to the Frankfort plant.
Concerning the Kentucky facilities, Mr. Morehead said there are four site locations that are known as the Clermont operations sitting on 420 acres. The plant distills, warehouses, processes, bottles and ships case products worldwide, and on a small scale produces non-bourbon products. However, 40 percent of the company's business is being done at the Frankfort plant. The bottling facility in Frankfort is one of the most advanced in the country with nine bottling lines filling more than 23,000 cases per shift. The Maker's Mark distillery was founded in 1805 and is recognized in the Guinness Book of World Records for being the oldest operating bourbon distillery in the world. The site covers 618 acres with buildings on the National Register of Historic Places. It has a large collection of buildings over 100 years old and most of the property is treated as nature preserve. Makers Mark has significant export markets in Japan, Australia and the United Kingdom; however, projections for 2010 are to bottle and sell over 90 percent of its bourbon in the United States.
Mr. Morehead said the company was very proud to be an American company from the ground up. Barrels are purchased from companies located here in the state, Eastern Kentucky coal is used, and much of the grain used to produce the bourbon is raised in Kentucky. Tax revenue from the distillery contributes a total of $7.81 million dollars from property, ad valorem, sales and payroll tax. Additionally, $350 million dollars is paid in federal excise tax.
Mr. Morehead told the committee that Beam's tourism industry was also being expanded at Maker's Mark and the Jim Beam American Outpost. The Maker's Mark program was a model for other distillery's and that 100,000 visitors will pass through the Loretto site in 2010. The Bourbon Trail is very important to the visitor's experience. Taking a leadership role in social responsibility is important to Jim Beam, adding that Beam is proud to be the leader in the industry in working with all aspects of the community to correct irresponsible uses of alcohol.
Senator Tapp said the Jim Beam company has a bright future and he appreciated the contributions that they have made to the state through new jobs and for their corporate integrity and responsibility.
Department overview for the Department of Alcoholic Beverage Control
Tony Dehner, the Alcoholic Beverage Control Commissioner, told committee members that department employees provide a high level of service to the alcoholic beverage industry. The department has undertaken a special focus to combat youth access to alcohol and tobacco products by using specific programs to regulate the alcoholic beverage and tobacco industry. These programs educate the public through outreach and enforcement. Operation Zero Tolerance is conducted with underage investigative aides working with investigators to determine if a retailer is selling alcoholic beverage products to customers under 21 years of age. With this program in place, compliance is at ninety-four percent. Targeted Enforcement Details is a program that places investigators at special events such as the Barbeque Festival in Owensboro, the Kentucky Derby Festival in Louisville, Keeneland Race Course in Lexington and at tailgating events around college campuses. He said the effect of this program is based on the number of citations issued for each detail involving underage drinking. Violations range from minors buying, possessing or attempting to buy alcoholic beverages, to possession of drugs and selling drugs. Cops N Shops is another program. Its main objective is to stop the sales of alcoholic beverages to minors and to combat underage drinking. This program utilizes undercover law enforcement investigators who pose as servers or clerks in convenience stores, package liquor stores, restaurants and bars.
Mr. Dehner said that the department has four areas of responsibility regarding tobacco product enforcement; stopping illegal sales of tobacco products to minors, conducting an annual survey of retail sales, compliance with the Master Settlement Agreement, and compliance with regulations that prohibit sales of cigarettes and smokeless tobacco to anyone under the age of eighteen.
Mr. Dehner told the committee members that KRS Chapters 241 – 244 and KRS Chapter 43B authorize the department to regulate and oversee the alcoholic beverage industry and to adjudicate and levy fines for tobacco violations. Out of 326 cases initiated, 267 have been settled, the department has issued 13 warning letters and 17 cases were dismissed. He said that the total amount of money from fines deposited in the General Fund account are $435,050 for alcohol related cases and $6,950 from tobacco related cases.
Mr. Dehner said the Servers Training in Alcohol Regulations (STAR) program trains and educates people who work with, sell, and serve alcohol. The main goals of the STAR program are to reduce alcohol sales to minors, reduce sales to intoxicated people, provide information on statutes relating to alcohol sales, and to inform servers of legal liabilities when serving or selling alcoholic beverages. Participation in the program results in better-trained and informed servers in retail establishments. Classes are held at various statewide locations to provide accessibility to all retailers and their employees. The participants attend a four hour course that certifies them for three years. Forty-seven counties have adopted local ordinances mandating that each server or seller of alcoholic beverages in their community shall be trained in this alcohol awareness program. Currently there are 22 contract trainers throughout the state to provide STAR classes. Positive feedback from attendees show that this approach has substantial merit.
Mr. Dehner said that the licensing division of ABC issues and assists with over 13,000 active licenses statewide. This number includes licenses for distilled spirits, wine and beer. Licensing personnel work with licensees, and the general public as well as those from the legal field, state, local and federal government agencies and numerous other individuals that assist the alcoholic beverage in Kentucky. The average amount of time to process a license is 44 days. Annual fees collected for licenses totals approximately $5 million. There are 84 license types under statute. Each license type has its own set of rules and regulations.
Mr. Dehner said that in 2000, Kentucky began to see a significant change in the increase in wet territories. Legislation passed prior to that time allows for local option elections at the precinct level to permit limited sales of alcohol in restaurants, at golf courses, qualified historic sites and small farm wineries. This provides additional revenue for cities that collect a regulatory tax on the sale of alcoholic beverages. There have been 110 local option elections, 75 of which resulted in a wet vote.
Mr. Dehner said the department's IT team is currently working to implement online registration and tracking for STAR classes. In addition, the IT division is working on a precinct level wet/dry database, which they hope to have on-line in the future. They also plan on enabling the public to submit complaints, apply, or renew an ABC license on-line, and to search for wet/dry areas.
Alco-pops.
Angela Criswell, Alcohol Prevention Enhancement Site Coordinator, with the Bluegrass Regional Prevention Center told members her job was to assist community coalitions and organizations in their effort to craft effective strategies to prevent underage drinking and to reduce high risk drinking among adults. Public health professionals, mental health professionals and community members are concerned with the issue of underage drinking, and alcopops is a part of that effort. Typically, the focus in alcohol prevention programs is on drunk driving; however, data from the Kentucky Incentives for Prevention (KIP) survey shows that if too much focus is placed on drunk driving, information regarding underage alcohol and drug use goes unrecognized. Underage drinking is a particular concern because the brain continues to develop into your mid-twenties and alcohol effects the structure and function of the brain as it is developing. In particular, the neuro connections in the brain's reward pathway are affected. Research also shows that drinking before the age of fifteen has a high degree of association with alcohol dependence at some point in a person's lifetime. Ms. Criswell said alcopops are sometimes called "flavored malt beverages" or FMBs or "ready to drink" RTDs. However, alcopops are highly sweetened, malt beverages and energy drinks that closely resemble the packaging of non-alcoholic beverages. As an example, Rockstar Energy drink has both a malt beverage and a non-alcoholic drink. Similar packaging promotes confusion among parents, retailers and even law enforcement, and makes the product familiar and inviting to youth, easing the transition to try alcohol. Combining the malt beverage with highly caffeinated drinks masks the feeling of intoxication but does not reduce impairment. As a result, youth drink even more of the product, lowering inhibitions and allowing for high risk behavior. In 2008 a publication noted college students who combine caffeine with alcohol were twice as likely to ride with a person who was impaired.
Ms. Criswell told members the alcopop drinks contain high levels of alcohol, as much as 12 percent per volume. Most drinks are purchased in 24 ounce cans with approximately four serving per can. Binge drinking is defined as four to five drinks, therefore the alcopop drink was a binge in a can. Also, prices are typically lower in malt-beverage energy drinks that the non-alcoholic drinks. Not only are they price-accessible, the drinks are also retail-accessible because they are not limited to liquor stores, but are sold in grocery stores, and convenience stores.
Tara Maguire, State Youth Program Coordinator for Mothers Against Drunk Driving (MADD) told committee members that she works with youth all around the state. Youth are very aware of the difference between the malt beverages and the non-alcoholic drinks; however, most adults are not. The American Medical Association identifies these beverages as "girly drinks" stating that the percentage of girls who drink is on the rise. Drinks are sold in flavors that appeal to young people. Alcopops are produced by spirits and beer companies that market attractive packaging to youth who see a branded product as a status symbol. Two national studies reveal that eight in ten teenagers reported that these drinks taste like soda or lemonade. The Center for Alcohol Marketing in Youth (CAMY) found that some alcohol companies' websites are particularly targeted to youth. Jim Beam is cited by CAMY as a model company that does not advertise to a young market.
In response to a question from Representative Reginald Meeks, Ms. Criswell said the manufacturers of alcopops are generally small scale companies. Rock Star is packaged by United Brands and Four Loko is packaged by Drinkfour. A person must be 21 to purchase these malt beverages; however, they are sold in convenience stores.
After Ms. Maguire's presentation Senator Tapp said there was a plant tour available for anyone interested.
There being no further business the meeting was adjourned by voice vote at 11:33 a.m.