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Alcohol Regulatory Roundup: Honor Mexico Edition

In honor of Cinco de Mayo I'll start today's alcohol regulatory roundup with some international news from Mexico:

People are up in arms over big macro breweries' bad behavior in Mexico. According to SABMiller, Grupo Modelo (makers of Corona) and Heineken (seller of Dos Equis and Sol) have been offering loans, upfront payments, and swag, such as refrigerators to bars and restaurants that agree not serve other brands. SABMiller claims this prevents variety for consumers. In the USA such pay-to-play is illegal, but in Mexico it seems to occur without consequence—at least to the big brewers. On the other hand, the restaurants who think they’re getting a steal by making these deals aren’t as crafty as they might think. Demand for craft beer is growing all over the world, even in Mexico. Bar owners who lock themselves out of this burgeoning business may find their customers and profits drying up.

National News: An intriguing idea to help the flailing postal service: let them ship beer and wine! Great idea, but as I wrote last month over at Michigan Capitol Confidential, the big and powerful wholesalers lobby have been fighting such a development for years and aren’t likely to give up their shipping monopoly easily.

Also in National News: The FTC is beginning a study of alcohol advertising online.

Alabama: Two good news items coming out of Alabama this week. First, the “Gourmet Bottle Bill” (SB 294) was on the state House calendar this week. The state of Alabama currently restricts beer to bottles no larger than 16 ounces. If the bill passes in the House (it has already been approved by the state Senate) beer could be sold in bottles as large as 25.4 ounces as well as 750 ml, but still bans 40-ounce bottles.  

Also in Alabama, the House passed a bill decriminalizing home-brewing. If the bill passes in the Senate and is signed by the Governor, only Mississippi will remain as the lone state maintaining a ban on home-brewing.

California: A court of appeals in the Golden State sided with beer manufacturers who asserted that the Board of Equalization was out of line in 2007 when it changed the definition of “flavored malt beverage” (i.e. Mike’s Hard Lemonade) from a beer drink to spirit simply so they could charge a 1550% higher tax on the drinks. The court overturned a previous decision, agreeing with drink-producers that only the ABC has jurisdiction to classify alcoholic beverages in California.

Connecticut: The State House approved a measure that would overturn the prohibition-era ban on Sunday alcohol sales and the Senate responded about a week later approving a similar bill. Once Governor Malloy signs the bill (which he has said he will), Sunday sales will be allowed effective immediately. That leaves Indiana and D.C. left holding the ban, so to speak.

District of Columbia: As I have written about much more extensively, the fight over D.C. Sunday sales is getting ugly. While Mayor Grey and others believe increasing the days and hours that alcohol can be sold in the city will invigorate the economy and bring needed revenue to the budget, some, like Council member Jim Graham of ward 1 are dead set against those proposals. He claims that the changes would create excess noise for his constituents. Instead, he wants to raise revenue by increasing the excise tax on alcohol. As I noted in my blog post and letter to the Washington Times regarding the issues, this will backfire in a big way and hurt the small bars and wait staff the most.

Maryland: As the MD legislative season comes to a close, alcohol freedom fighters are left with a few wins and more fights for the next season. Here’s what did and did not happen:

1. Corkage becomes legal as of July 1st at restaurants, hotels and private clubs that choose to allow it.

2. “Rectifiers” or those people who blend whiskey or other spirits, can now offer tours, samples and sell product on site.

3. Distillers did not get the right to give distillery tours and samples.

4. Farm breweries gained the right to brew on site with crops from their farms. Farmer-wineries earned the right to give tours, samples, and sales.

5. Micro-breweries and brew-pubs unfortunately did not gain the right to give samples at brewery tours or self-distribute their beer. Here’s looking ahead to 2013.

6. Growlers are now allowed in Baltimore City and Howard County, Md.

7. The Maryland Zoo in Baltimore City can now obtain a liquor license to sell beer, wine and liquor.

Minnesota: Governor Mark Dayton signed the “Four Firkins bill” allowing liquor stores to sell store-branded T-shirts and other merchandise

Nebraska: While “alcopops” in California escaped the categorization as a liquor and the higher taxes that come with it, manufacturers in Nebraska weren’t as lucky. The Nebraska Supreme court ruled that flavored malt beverages like Mike’s Hard Lemonade can be taxed as liquor instead of beer. State taxes on spirits are $3.75 per gallon compared with 31 cents per gallon for beer.

New York: The good news: Governor Andrew Cuomo may consider a common-sense bill to fix the out of date and onerous rules governing the relationship between brewers and their wholesalers.

Currently, when a brewer signs a contract with a wholesaler to distribute his or her product to New York bars, restaurants, and stores, the contract is perpetually renewable at the distributor’s discretion. A brewer can’t get out of this contract unless the wholesalers agrees to the break or the brewer can prove (through a very expensive legal process) that the wholesaler is under performing.

A new law under consideration in the legislature would allow small brewers (making less than 300,000 barrels a year) to break the contracts without needing to provide “just cause” so long as they make up no more than 3 percent of the wholesaler’s business.

The bad news: A state court has declared unconstitutional two state tax exemptions that helped small brewers save thousands of dollars a year. That means the State Liquor Authority which previously waived the label registration fees and beer excise taxes for small brewers will now collect a tax of $8.06 per barrel for beers brewed in New York state that are sold in New York City.

Brewers, distributors, and bars say this means the cost of a beer in New York could rise as much as a $1 per glass as a result.  As the blogger Brew New York points out, though, the actual tax at its highest level works out to only about 3 cents per pint or 15 cents per six-pack. So, if the cost goes up by a dollar someone is taking advantage of a bad situation.

The change in law is the result of a lawsuit filed by out-of-state Shelton Brothers Brewery who asserted the tax scheme was discriminatory against those smaller brewers outside of New York. As they explain in their response to the massive backlash from NY drinkers and brewers, their intention was to get the same low rates as in state brewers, but the state decided instead to nix the tax break for everyone. Don’t waste time bashing the brewery that pointed out the discrimination, advocate for the elimination of the tax for all brewers with your local lawmakers.

New Jersey: Momentum is building in New Jersey to update state laws regarding beer brewing in an attempt to aid the state’s flourishing craft beer movement. Senate Bill 641 was approved by the Senate Law and Public Safety Committee in early March and awaits a full Senate vote. The bill would:

Allow brewpubs to increase production from 3,000 barrels a year up to 10,000 barrels.

Allow brewpubs to sell their beer to wholesalers for distribution at liquor stores and restaurants (currently they may only sell at the brewpub).

increase the number of outlets a brewpub chain can open in the state from 2 to 10.

Allow brewpubs to offer samples of their beer on site and

Allow microbrewers to sell their beer at brewery tours for consumption on-site as well as a limited amount for take-away.