Just a quick update for you all who have been following this issue on the blog here. From the Denver Business Journal: "House Bill 1284, sponsored by state Reps. Larry Liston, R-Colorado Springs, and Crisanta Duran, D-Denver, passed the House Economic and Business Development Committee on a 7-6 vote. It moves now to the House floor, where another contentious discussion is expected."
Mike Bristol wrote a letter for the Colorado Springs Independent about the bill. The post outlines Bristol's position, and it also has a well-balanced and long response that is interesting to read. Also, the Beer Drinkers Guide to Colorado wrote a pretty informative post as well that you all might want to read.
Readers of Focus on the Beer, myself included, fall on both sides of the discussion. If you haven't seen it yet, we had some really great responses to our posts on the matter. Check them out here and here.
Response Requested: Guy seeking more information..
ReplyDeleteOne thing missing from both sides of this debate is information related to the 'three tiered' alcohol distribution system as I've heard it referenced. I'd like to challenge the Independent, local beer blogs, liquor stores, and breweries to respond or provide links to these questions. I'm curious:
1. How does this system work? Info only here.. divorced from this debate.
2. From both perspectives, concerning the 3 tiered system, what factors are at play?
Then a third, potentially unrelated question I've not seen adequately addressed:
3. What, if anything, will prevent Colorado businesses from adjusting to this HB1284 if it passes? There is compelling evidence that has been presented by those supporting this bill regarding states that allow sales of beer over 3.2% at convenience/grocery stores. All examples reveal a competitive, thriving craft-beer market. Specific to this, what evidence exists that Colorado's market would respond in a different way?
As a Coloradan that cares about local beer markets, I'd like to be better informed. I'll contact representatives once I feel fully informed.
I love Bristol's beer offerings and their community involvement, and I'd appreciate if the opponents of this bill would offer more information regarding the above questions. I've heard very little in way of a exchange/debate. Instead I find each side repeating the same arguments. More dialogue please.
Cheers, daniel
Other markets were "born" in the environment of selling full strength beer in grocery stores. Colorado has four times the number of craft breweries per capita than California, so that's a lot of adjusting to do for small businesses that already have their personal assets on the line - like thier mortgages, etc. At least in times like these, Colorado's economy isn't worth experimenting with. South Dakota went through a similar "adjustment" and look at their experience. The link is a place to start. I know folks at the Colorado Brewers Guild, Bristol, economic development officials, etc. that would be happy to provide more information. The question is: what information are the people for HB 1284 providing besides "look at the other markets?" This shouldn't be a one size fits all approach. "Beer is beer" (which is what I've been hearing) isn't a good argument...I'm just saying. It's great that you are wanting to be better informed! http://www.bristolbrewing.com/cp_upload/Economic%20Impact%20Study%202010.pdf
ReplyDeleteThanks. That's a good point.. I'm sure that this change could produce unpredictable results, and it is not a fair assumption that the market here would be the same as Oregon for instance, since this change would occur under different circumstances. I was already familiar with that economic study. I'm confused as to why this study provides no methodology beyond stating its conclusions? Love the work the CBG, Bristol and others have put into advocating their positions, and I remain concerned that it seems the only source predicting the results of this change provides nothing in way of methodology. Call me a nerd, but I'd feel more comfortable if I knew exactly what measures and models were used to predict these outcomes, and how those were applied. Perhaps the methodology is completely appropriate and thorough.. there is no way to tell when it is omitted.
ReplyDeleteThanks again for the response, daniel
I emailed the people who did the survey, asking them about how they conducted it. I received a response that they will get back to me soon.
ReplyDeleteDan - sorry haven't addressed your 3-tier questions. I'll have something for you soon, just finding myself busier than I'd like to be.
ReplyDelete@Dan again - upon first glance, this seems to be a pretty thorough but easily readable piece about the 3-tier distribution system:
ReplyDeletehttp://www.fermentarium.com/industry/how-the-three-tiered-beer-distribution-system-works/
Ultimately, breweries have to go through distributors to get their beer in stores and bars. However in Colorado, if you make less than a certain amount of beer you are not required to use a distributor, you can work directly with the bars and stores. At least that's how I understand it.
Maybe a more lengthy post in the future would be good.
Thanks, reading the article now.. -d.
ReplyDeleteDaniel,
ReplyDeleteSorry it took a little while to post answers to your questions. I'll respond in two parts to comply with the length requirement for comments
1. The 3-tier system was set up largely in response to organized crime and its involvement with alcohol during prohibition. The system requires that the production, distribution, and retail of alcohol not be controlled by a single entity. This was thought to give fair market access and has largely succeeded since prohibition. There is a good entry on Wikipedia on the subject at http://en.wikipedia.org/wiki/Three-tier_(alcohol_distribution). Colorado, along with many other states, has made exceptions to the system as necessary. For example, in Colorado, small brewers can distribute beer themselves as long as they hold a wholesalers license. The most common exception is the brewpub, which produces and retails without the need for a distributor. There are pros and cons to the 3-tier system which are beyond the scope of this post, but I hope that gives you an idea.
2. Initially, I don't see the 3-tier system at play much in this debate. Down the road it will come into play. The large grocery and big box stores don't like the distributor as a middle man. The more power we give to these large corporations the more likely it is they will try and dismantle the system to their benefit. The best example so far is Costco v. State of Washington - you should research the case if you are interested. Basically, Costco wanted to buy direct from the large brewers and bypass the distributor. This may seem like a more efficient system, but it opens up many questions about state control of alcohol, excise taxes, fair access to market, etc. Again, the analysis is beyond the scope of a post, but there is much written about it online.
Hope that helps. Answer to question 3 following.
Mike Bristol
Daniel,
ReplyDeleteSecond part of response.
3. I'm sure all liquor stores and craft brewers would try to adjust to the ramifications of HB1284 if it were to pass. These adjustments may include downsizing, closing altogether (primarily smaller liquor stores and breweries), raising prices, stopping production of specialty and seasonal beers, reducing in-kind and monetary support to the community, and sending beer out of state. The landscape of the industry will change significantly because the regulatory system we have built our businesses around will have changed in the middle of the game.
As to the "compelling evidence by supporters regarding other states" it's important to separate the spin from the facts. There really isn't a compelling example for comparison. For example, in other states such as California, the craft brewing industry evolved with grocery and convenience store beer sales already in place. The rules were set before the game began. If you look closely, the beer culture in other states is actually quite different than Colorado's—fewer breweries, higher prices, and much less diversity and selection. That's why Colorado—not California, not Oregon, not Texas—is known as "the Napa Valley of Beer."
Having said that, the only state in the last 25 years to authorize grocery/convenience store sales was Iowa (1986) and because it was a state-controlled market before, it isn't really applicable here. The closest comparison might be South Dakota. In 1987 SD increased the number of licenses per owner from 1 to 3 (with a sweetener for grocery stores - an additional 3 liquor store licenses for them). Remember, Colorado has a 1 license per owner system - anyone can own 1 liquor store license including grocery and convenience stores. The impact in South Dakota is as follows:
US Census 1985 - South Dakota - 383 independent liquor stores, 262 convenience stores/grocery stores
US Census 1990 - South Dakota - 159 independent liquor stores, 533 convenience stores/grocery stores
US Census 2005 - South Dakota - 116 independent liquor stores, 608 convenience stores/grocery stores
If this gives us any indication, the estimate of 900 liquor store closings in Colorado may be low. And while some may think of this as just the cost of making this transition, they're ignoring the fact that even liquor store owners have families to support, and their life savings are likely wrapped up in their businesses.
The other thing to remember is that this proposal doesn't create an even environment in which the liquor stores can compete. As originally written, HB1284 doesn't change any of the current requirements for liquor stores - they would still not be able to sell food, they could still only hold 1 license, they would still require approval by the local licensing authority. None of these requirements would apply to grocery/convenience stores. It's my understanding that there have been a couple of amendments proposed that would allow liquor stores to sell non-perishable food and have additional licenses as long as the stores were less than 5,000 square feet. I don't see how that helps them to compete - I'm not even sure what non-perishable food is and I don't know how a liquor store will compete with a big box store if they're limited to 5,000 square feet. It's clear from these amendments that the grocery store lobby is not interested in an even playing field.
Thanks for the good questions.
Mike Bristol
Mike, thanks for the responses. The local beer crowd here has been an important community here for me. Honestly, I enjoy the beer, but I've enjoyed the people that make and support the local beer industry here in the Springs even more.. the community is something worth preserving.
ReplyDeleteThanks again, daniel