Battle brewing over beer in supermarkets

Priola bill would expand licenses from one to five for retailers
The Colorado Statesman

Another legislative brouhaha is brewing this year over whether to allow more supermarkets and convenience stores in Colorado to sell full-strength beer, wine and liquor.

The battle is nothing new to the legislature. This year would mark the fifth most recent attempt at allowing grocery and convenience stores to sell full-strength beer. The last effort was in 2011 when two bills that would have allowed the sale died.

It is a polarizing issue, with supermarkets and convenience stores on one side of the fence, and craft brewers and liquor stores on the other side. But Rep. Kevin Priola, R-Henderson, said he is forging ahead this year with a measured plan to allow more grocery and convenience stores in Colorado to sell full-strength beer, wine and liquor.

Rather than open the sale up to all supermarkets and convenience stores, Priola would like to first expand the current cap from one to five on liquor licenses offered to retailers.

Current Colorado law prohibits the sale of full strength beer, wine and liquor in most supermarkets and convenience stores. But state law permits owners to hold one liquor license, which is why so-called “big-box stores” like Target and Rite Aid, have one flagship location where they sell full-strength alcoholic products. All the other locations are restricted to selling 3.2 percent or lower beer, known as “near beer.”

After The Colorado Statesman first wrote about Priola’s bill last month, some statehouse observers believed that the Adams County lawmaker would introduce the legislation as one of his first three bills. But Priola said bill drafters put the measure on paper before it was ready. He plans on introducing the bill in the next two weeks.

“Full-strength beer is in supermarkets, it’s just one license,” commented Priola. “The additional licenses affects more than just grocery stores. It also would help out folks like Applejack [Wine and Spirits] and Argonaut [Liquor], as well as many other small business persons who want to have more than one location.”

Priola would not disclose whether he had been approached by anyone to draft the bill, such as by the supermarket or convenience store lobby. He said he is working with all sides on the issue.

“Overall, the goal I’ve had is to come to some piece of legislation that helps here, helps there, and in the end leaves most folks relatively harmless,” said Priola.

“I’ve sat in business for four years, I’ve heard the issue over and over, I feel like I know more about the issue than most,” Priola added, noting his past committee assignments to the House Business Affairs and Labor Committee, and then to the House Economic and Business Development Committee. “I can kind of cut through the BS that you hear from both sides on what will and what will not happen.”

Bill frustrates craft beer industry

But Priola will surely face another heated exchange. He is already receiving resistance from the craft brew industry and from smaller package stores. They are fearful that expanding licenses would tilt the playing field and put them out of business.

The Colorado Brewers Guild, the Wine and Spirits Wholesalers Association of Colorado and the Colorado Licensed Beverage Association have all told The Statesman that they have concerns about the legislation, but they are waiting until a measure is introduced before officially supporting or opposing the proposal.

Priola is attempting to gain their support by including language that focuses on smaller craft breweries. His measure would allow breweries that produce only a limited number of barrels per year to sell their product in all supermarkets and convenience stores in the state. The lawmaker said he is still working on a gallon-production limit to qualify.

The legislation would also ban the sale of caffeinated alcoholic beverages and place an alcohol limit of 10 percent on so-called “alcopops,” or flavored alcoholic beverages, that can be sold in grocery and convenience stores.

Brian Dunn, owner of Great Divide Brewing Company in Denver, believes the measure is a backdoor, small step to allowing full-strength beer in all supermarkets and convenience stores in Colorado. He said the current model works for his industry, noting double-digit growth, and he was reluctant to see change.

“We don’t like it,” lamented Dunn, who sat down with Priola to discuss the bill. “Craft is growing well enough without being in grocery stores, we don’t feel like we need it.”

Sales of craft beers rose 14 percent in the first half of 2012 over the same period in 2011, and production rose by 12 percent, according to the Boulder-based Brewers Association. The industry also saw revenue growth of 12 percent in 2010 and 15 percent in 2011.

Colorado ranks second for the most number of breweries, and it ranks third in breweries per capita. There are 161 licensed craft breweries in Colorado, with over 60 in planning, according to the Colorado Brewers Guild.

Since opening in 1994, Great Divide has seen unprecedented growth. Last year the brewery saw a 24 percent increase in barrel production, and the year before that there was a spike of nearly 30 percent. In Colorado alone, the craft beer company grew by nearly 50 percent, marking multiple years of similar growth, said Dunn.

“We’re growing fine in Colorado,” he said. “We don’t need Priola’s bill to help us grow.”

“You didn’t ask us before you wrote the bill,” Dunn continued of Priola’s effort. “We’re not in favor of it. I’m quite sure the big brewers won’t be in favor because they’re excluded. What are you doing? Nobody likes this bill, except for grocery stores.”

Grocers and retailers get behind effort

And indeed grocery stores are supporting the proposal. Kris Staaf, regional director of public affairs and government relations at Safeway, said expanding the cap allows supermarkets and convenience stores to show what small growth might look like.

She also pointed out that the bill would be subject to local government and community approval, which does not guarantee that supermarkets would be allowed to quickly expand their alcohol sales.

Safeway’s flagship location for selling alcohol is located in Littleton at Broadway and Mineral. Staaf said a study has shown that since the store started selling full-strength beer, wine and liquor five years ago, there has not been a negative impact to surrounding package stores.

“There was a lot of doom and gloom, people predicted all these worst case scenarios when that store went up with liquor,” said Staaf. “I can tell you that the businesses around it, the liquor stores around it, we still have them in the same radius that we did before.”

“There’s one that if you walk out the front door and turn to the right, you can actually see it from the front door,” she continued. “But also other liquor stores have opened their doors in the area since we’ve been open.”

Staaf also tried to expel fears that larger chains would not stock smaller craft brews, noting that the Safeway store in Littleton carries a wide selection of Colorado beer and wine.

“From the smaller guys to the larger brewers, it’s a really nice, healthy mix,” she said. “So, if you look at the crystal ball, are we going to carry every single product? Probably not. But what we’re going to try to do is if we were able to do something where we can sell like we do in the Littleton store, I think you can look at a nice product mix.”

Chris Howes, president of the Colorado Retail Council, said the issue comes down to consumer convenience and bringing Colorado in line with other states.

“We’d like to eventually bring Colorado up to speed and modernize its liquor licensing so that we look like the rest of the country,” said Howes, whose organization has been lobbying for years to extend alcohol sales to all grocery and convenience stores.

Howes does not believe that Priola’s bill offers a backdoor to extending alcohol sales in Colorado.

“I think it’s a front door,” he said. “It’s a small door, but definitely the front door.”

“Any step to bring a popular product to our members’ stores is a positive one,” Howes added. “We’d like to see eventually all of our grocers be able to sell these popular products.”