Last-Minute Senate Bill May Shape Colorado Craft's Future

Mike Laur - May 9, 2016
(UPDATE ON MAY 12, 2016 - THE COLORADO LEGISLATURE PASSED AN AMENDED VERSION OF SB 16-197 BEFORE THE 2016 SESSION ENDED YESTERDAY, AND THE BILL IS HEADED TO GOV. HICKENLOOPER'S DESK. SAFEWAY AND KROGER VOW TO CARRY ON WITH THEIR INITIATIVE PLANS ANYWAY. WE WILL CONTINUE TO PROVIDE UPDATES ON THIS INCREASINGLY CONTENTIOUS ISSUE. -ML)

.A historic moment and fundamental shift in Colorado liquor laws may be upon us.

Senate Bill 16-197, if approved in the final few remaining days of the Colorado legislature's 2016 session, would pave the way for grocery stores to sell full-strength beer, wine and spirits, eliminate 3.2% beer, and allow liquor stores to sell more than just alcohol for the first time in over 80 years.

It's got to happen fast, though - Colorado's legislature will close for business Wednesday May 11 at midnight. An amended version of the 33-page bill was passed unanimously through two committees on Friday afternoon. Senator Pat Steadman had proposed SB 197 only two weeks before, in an effort to bring sanity and provide legislative solutions to various competing booze-in-grocery-stores ballot initiatives being considered for Colorado's November ballot.

SB 197, in its amended form, is a compromise bill that addresses the concerns of many stakeholders in Colorado's alcohol business. Those stakeholders - including brewers, grocery stores, wine makers, large liquor stores, distributors, convenience stores, distillers, small liquor stores, petroleum retailers, and all their lobbyists - met during a tortuous and divisive week of discussions to reach agreement on the bill's language. "Brain-numbing", "an emotional roller coaster", "impossible" - all terms that stakeholders we spoke with used to describe the hours and hours of meetings that ultimately led to language in the amended bill now before the legislature.

"Pat Steadman may be the smartest guy in the Capitol building", one stakeholder offered, and indeed Senator Steadman has gone farther than anyone before him to bring real results to the decades-old battle grocery stores have waged to get "real" beer, wine and spirits inside their stores.

SB 197 may yet be amended again (you can read it all here), but it offers a bit of something to all the various stakeholders who each stand to gain and lose from its effects.

-- Grocery stores could purchase existing liquor store licenses, and combine two of those into one additional liquor licensed drugstore license - allowing grocery stores to sell beer, wine and spirits at multiple locations. Current law permits ownership of one and only one liquor license, and the new law would permit food stores to buy and covert additional licenses for up to 20 stores total, during a phase-in period for the next 20 years. After 2037, they can have as many licenses as they want.

-- Liquor store license holders would be able to have ownership in additional licenses as well, also phased in over the years for a total of four licenses.

-- Liquor stores could sell more than just alcohol and alcohol-related products - in fact just about anything as long as alcohol still made up 80% of total sales.

-- Grocery store liquor managers would be "encouraged" to buy products from Colorado producers and stock Colorado-made beer, wine and spirits on store shelves.

-- 3.2 beer would effectively be eliminated from store shelves in Colorado, and 3.2 beer licenses would become "real" beer licenses, as the definition and laws regarding 3.2 beer would change with the new bill's passage. This is still a bit squishy and may need some additional massaging by Department of Revenue before the law officially kicks in

-- Every Coloradan over 21 years of age gets to drink free on his or her birthday. (We made that one up, but we can always hope that provision makes it into the bill...)

Craft beverage producers and liquor store owners have opposed changing the laws that have allowed them to survive and even thrive in the (highly regulated) one-license, one-store free market created by existing, decades-old liquor laws. Today, thanks to those Colorado laws, small producers can sell direct to individual liquor stores, and that symbiotic relationship has encouraged the explosive growth of Colorado Craft.

Craft producers and store owners fear that the market monopoly created by hundreds of chain grocery stores would fundamentally change the beverage market in Colorado. Producers and retailers argue that grocers would stock a limited number of mostly national-brand products, use cut-rate pricing, market aggressively, and the results of more than doubling the number of locations where liquor is retailed would devastate existing small businesses.

Grocery and convenience stores have wanted to sell something other than 3.2 beer for a long, long time. After being shut off by the legislature with other bills that failed, this looked to be The Year they would take it to the voter. Your Choice Colorado, the grocery-store group behind Proposed Initiative 104 , has been collecting petition signatures for their cause. They signed on 70,000 supporters in their first week alone, and certainly have the funds to collect as many as needed to surpass the 98,000 needed to get their issue on the ballot.

Senator Steadman launched SB 16-197 to address the concerns of grocers (any many others) and in hopes of cutting off initiative efforts that would re-write the State Constitution. We said all along what a bad idea past efforts to re-write liquor laws have been - unless you're Safeway, Kroger or WalMart. It's not clear if all the grocers will, in fact, get behind SB 197, and in the long run we may still be in for a ballot fight if everyone does not agree with the new proposed laws and regulations.

We believe that the existing laws actually work pretty well, and that by design they favor and encourage the strong craft culture that makes Colorado a world-leader in beer, wine and spirits. If you're like us and enjoy variety, quality and fair prices, the existing regulations benefit craft consumers and craft culture. We think there are already enough retail locations to buy alcohol in Colorado, and by more than doubling the number of liquor outlets the proposed initiatives will hurt small businesses that have relied upon regulatory consistency for their existence.

SB 197 doesn't satisfy everyone, and that may be the best sort of praise one can give to it. Where many other past legislative efforts in Colorado have favored only grocery stores, SB 197 goes a long way to be inclusive and address the concerns of many stakeholders. It's not over yet. Some grocers grumble about the bill's complex arrangement for securing additional licenses, and chafe at the phased-in cap on license ownership. They may wind up asking voters to decide anyway.

Stay tuned, and no matter what you do: Support Your Local Brewery, Winery and Distillery!!
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