Iowa: Alcohol changes advance as wholesalers, distillers reach compromise

Source: Des Moines Register

Brianne Pfannenstiel

March 9, 2017

Many of Iowa’s craft liquor distillers would be able to mix cocktails and pour drinks for their patrons under a bill advancing in the Iowa House of Representatives.

Garrett Burchett, owner of Mississippi River Distillery in Le Claire, said the legislation marks a significant compromise between distilleries and the Iowa Wholesale Beer Distributors Association, which have remained at odds for years over whether to allow drinks by the glass at local distilleries.

“We’re thrilled,” Burchett said. “We’re basically getting some things that give us some parity with states around us and parity with breweries and wineries.”

Burchett and other Iowa distillers have argued that they face unnecessary and unfair regulations compared with the state’s beer and wine producers. Breweries and wineries, for example, already are able to sell their product by the glass on site, but distilleries are not. Distillers say the ability to open onsite tasting rooms and cocktail lounges would mean a boom in business.

They’ve pushed for change for five years at the Iowa Capitol but have been opposed primarily by the Iowa Wholesale Beer Distributors Association, which has contended the change would violate a regulatory framework known as the three-tier system.

It’s a system made up of alcohol manufacturers, distributors and retailers, and each must retain some degree of separation. That means manufacturers can’t also sell their products without jumping through a number of regulatory hoops to maintain separation.

It’s a complex system that dates back to Prohibition, but proponents say it creates a safe marketplace for what can sometimes be a dangerous product.

Gov. Terry Branstad last year ordered a review of the state’s alcohol laws in an effort to remedy some of the disparities that have resulted over years of exemptions and carve-outs intended to accommodate a changing industry. The group issued its recommendations earlier this year and the Alcoholic Beverages Division proposed legislation at the start of the session.

Until recently, it appeared the legislation might again fall by the wayside with stakeholders unable to come to an agreement about the proposed changes. But during a subcommittee meeting Thursday they unveiled a compromise, agreeing to limit large distilleries that make more than 100,000 proof-barrels of liquor a year from pouring drinks by the glass.

“I appreciate all the people in this room that worked together to make this happen,” said Rep. Ken Rizer, R-Cedar Rapids, who led the meeting. “Because I’ll tell you, a month or two ago I didn’t think we were going to get there.”

Andy Anderson, representing Templeton Rye, called the resulting bill a “win-win solution.”

“It was hard, and we’ve all kind of given on this,” he said.

Nathan Cooper, executive director of the Iowa Wholesale Beer Distributors Association, said he believes his organization was able to find common ground with the distillers.

“I’m incredibly happy to have this issue resolved,” he said. “We were glad to find resolution among the industry.”

Robert Bailey, communications director for the state’s Alcoholic Beverages Division, said the bill is the “result of months of discussion.”

“Much of this bill is about fairness and equity,” he said. “Everyone should be allowed the chance to grow their business without being blocked by aging or irrelevant laws.”

House File 521 was advanced out of a Ways and Means subcommittee Thursday and heads to a full committee.