Impacts of 2016 market shifting liquor bill still to come…along with more bills

SB 16-197 more than grocery stores selling liquor

The background in brief

In the waning days of the 2016 legislative session, powerful alcohol beverage industry lobbyists gathered behind closed doors in the Colorado State Capitol. They labored to come to a fast (think six days) compromise that averted an expensive fight over a proposed ballot initiative to put beer and wine in any grocery store that wanted to sell it, instead of being restricted to 3.2 beer (fermented malt beverages). Had the initiative gone forward, the fight was sure to continue throughout the summer and fall and get quite expensive.

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Grocery stores, which had tried for years to find a means to be able to sell at least beer and wine, had banded together to push the initiated statute onto the fall ballot. Retail liquor stores pushed back hard, fearful of the impact on them if grocery stores were able to sell two of their main products. Liquor store interests blinked first, and a series of complicated, if not poorly conceived compromises were woven into SB 16-197. Everyone cheered, patted themselves on the back, and the bill was signed into law by Gov. John Hickenlooper on June 10, 2016.

Gov. Hickenlooper said at the time that he “preferred the status quo” that was “unlikely to remain” – referring to the ballot measures waiting in the wings. He signed the bill saying that it “implements inevitable change in a measured and reasonable process,” having no reason to think that within a few months, some of the parties to the so-called compromise began to dispute the practical effect of some of the language to which they agreed.

In effect, the legislation:

  • Halted the issuance of any new retail liquor store licenses that were within 1500’ of an existing license (3000’ in municipalities under 10,000 population)
  • Allowed multiple liquor licensed drugstore (LLDS) licenses to be acquired by grocery stores, provided:
    • No retail liquor stores were located within 2500’ of the location
    • A grocery store acquired by purchase two retail liquor store (RLS) licenses within the same jurisdiction (or adjacent jurisdiction if one or both licenses were not available)
  • Set December 31, 2018 as the last day in which grocery stores that did not convert and convenience stores holding fermented malt beverage (FMB) licenses would be restricted to selling only 3.2% fermented malt liquor and allowing the sale of full-strength malt liquor.
  • Created a working group to talk about processes related mostly to #3, but also to investigate and recommend updates to alcohol beverage tastings statutes, whether or not RLS licensees should be able to fill growlers, and other miscellaneous items.

(For more comprehensive information on all the elements of SB 16-197, the Colorado Liquor Enforcement Division (LED) has a page dedicated to resources and bulletins on the bill and its implications)

Slow rollout since passage

A recent check showed that only two municipalities have been notified by a grocery store that it had begun the process of attempting to purchase two retail liquor store licenses in order to be able to acquire an additional LLDS license, as required by SB 197. It is still too early to tell, but the cumbersome and expensive process may be a limitation on new LLDS licenses. Score one for the retail liquor stores.

Regardless, the biggest impact of SB 197 has nothing to do with additional LLDS licenses, and it was an element hidden in plain sight in the bill that subsequently caused some of the parties to “the deal” to dispute whether the plain meaning in the bill was actually the intent. It matters little because – barring a change in the statute – the biggest change comes with the change in definition of “fermented malt beverage” effective on January 1, 2019 to include “malt liquor.” The result is that any FMB licensee may sell full-strength beer and any other beverage that is considered malt liquor.

That single issue dominated the discussions of the working group assembled by the LED, as directed by SB 197. It was clear from an early stage (late 2016) that liquor stores had realized the allowance for convenience stores and grocery stores to sell the same beer they sell was going to shift the market. At first, there was complete denial of the legal implications of the statute, followed by acceptance and proposals for a complicated new licensing scheme for FMB licensees. The League countered with a proposal that would change the licensing parameters for new FMB licenses but leave untouched those that were in place. In essence, the proposal was to treat new FMB licenses like retail liquor stores as it pertains to distance restrictions from schools, daycares, and higher education institutions. In the end, no one proposal was embraced.

What to expect in 2018

As the 2018 session draws near, it is clear that there will be at least one bill that attempts to alter the “automatic conversion” to full-strength beer by creating a new license for all FMB licensees. The new license would create certain limitations on grocery stores and convenience stores that want to continue selling beer and malt liquor. CML has authority to request legislation mirroring the proposal made during the interim, as well. However, if groups pushing the other proposal can incorporate key municipal issues, then there may be no need for a competing bill. That process will continue through the end of 2017 and into the next session.

Other legislation is likely, considering the myriad issues SB 197 created that changed beer and liquor business and licensing in Colorado in ways that have still not yet been fully comprehended. (i.e. updates to the alcohol beverage tastings statutes and prohibitions on open containers) The key for CML is ensuring that all existing local control is retained and that anything new also provide for similar or broader local authority. Stay tuned and cheers!

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