Sweeping Changes to CO Liquor Law to Phase-In Over 20 Years

Colorado has joined 27 other states in allowing spirits, beer and wine sales in grocery stores. Colorado Governor John Hickenlooper signed Senate Bill 16-197 that will phase-in the changes over the next 20 years in an effort to protect small businesses including small liquor stores and craft distilleries, breweries and wineries.

P.T. Wood, Owner and Head Alchemist of Wood’s High Mountain Distillery and President of the Colorado Distillers Guild released a statement that said, “The Colorado Distiller Guild is pleased to announce that Governor Hickenlooper has signed into law SB 16-197, the most sweeping change in Colorado liquor law since Prohibition. 197 was an unprecedented compromise that brought together virtually all of the vested interests in the state, we all got something and all gave up something. For the distillers of Colorado this bill will preserve our path to market by offering protections to our retail partners and requiring local buyers and warehousing at the grocery stores.”

He goes on to say, “SB16-143 …will reduce licensing fees (wholesale and manufacturing combined) by $625.00 this year and by $1250.00 every year after that. This was a break out year for the Colorado Distillers Guild at the State Capitol. We expect to continue to drive law at both the State and Federal levels that keeps Colorado at the leading edge of innovation in the craft distilling industry.”

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Local vs National Revenue that Stays in State

The larger grocery stores were asking for the restrictions on what they could sell and how many stores could sell distilled spirits, beer and wine to be removed completely. The concern was that large grocery chains like Walmart, Target, King Soopers, and Safeway would start to control the market by driving smaller locally owned liquor stores out of business and knocking out the small craft makers of distilled spirits, beer and wine by excluding them from store shelves and instead going only with large national brands.

According to analysis based on retail sales data from the Department of Revenue if the other proposals by the grocery chains were approved either by changes in the law or a public ballot, a significant percentage of revenue would transfer from small independent liquor stores to large grocery chains. At the same time, it would severely harm Colorado’s craft market as independent stores close and retail shelf space shrinks from local to national brands.

In a letter from Governor Hickenlooper he stated that since the repeal of Prohibition, “Colorado law governing beer, wine and distilled spirits sales has led to a thriving market of individually-owned retail liquor stores. In turn, this served as a catalyst for a vibrant, diverse, and flourishing industry of craft distilleries, breweries, and wineries throughout our state. Although imperfect and unplanned, this system has unquestionably benefited Colorado.” Incidentally, Hickenlooper was cofounder of the Wynkoop Brewing Company in Denver.

Law Phased in Over 20 Years

Current Colorado law limits large chain stores like Walmart, Target, King Soopers, and Safeway to one liquor store location in the state. The new law will allow them to expand sales with up to five locations in 2017, eight in 2022, 13 in 2027 and 20 in 2032 with protection for the smaller businesses being completely eliminated by 2037. For grocery stores and other major retailers to get those 20 licenses, they would have to buy up all the liquor-store licenses within 1,500 feet of each store, or 3,000 feet in licensing jurisdictions of less than 10,000 people.

A Can That Had Been Kicked Down the Road for Too Long

P.T. Wood of the Colorado Distillers Guild said, “This was a complex and challenging issue and I would say everyone but the large grocer’s would have preferred the law remained unchanged. That being said change is inevitable, the grocery store ballot initiative (requesting that grocers could sell everything right away) was polling consistently above 60%, there were also 5 additional initiatives that were tied to the original, the main one being an incredibly dangerous piece that would have drastically and permanently changed the landscape with no regard for the thousands of businesses in Colorado that were established under the existing law. Effectively putting as many as 70% of Colorado’s independent liquor stores out of business overnight and choking off Colorado’s craft beverage alcohol manufacturers path to market and decimating our industry. While 197 is not perfect it does a number of things that help preserve Colorado’s craft culture:

It is phased in over 20 years
It gives proximity protection to retailers that are near grocery stores
It requires a local buyer at each retail store and local warehousing
It gives value to existing retail licensees by requiring that grocery stores buy out two licenses before they can receive theirs.
Perhaps most importantly it keeps the law in the legislator where it has the opportunity to be modified as needed.

This was a can that had been kicked as far down the road as possible, the grocer interests are not going away. Perhaps the ballot initiative could have been defeated this year (very unlikely) but they would have redoubled their efforts next year or the year after until it was passed. Any initiative they would have put forth would be patently unfair and designed to give them an unfair advantage and eliminate competition.

So while 197 is not perfect it is historic and is an excellent starting point that minimizes the threat of unfair competition, helps even the playing field, providing the convenience Coloradans are asking for, looks after our craft culture and provides protections for small businesses as the rules change in the middle of the game.

With the majority of states allowing wine and beer sales (44) in grocery stores and a large number allowing liquor, wine and beer almost everyone involved including the Colorado Distillers Guild felt it was a matter of when not if this was going to happen and SB 16-197 was the proper vehicle to get out ahead of the issue.”

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