Proposed alcohol law changes would ‘level playing field’ among manufacturers

Requests to create a more level playing field for all alcohol manufacturers and to allow brewpubs to sell growlers without selling or sending beer to wholesalers first were among five recommendations for changing Iowa’s alcohol laws submitted to Governor Terry Branstad and Lt. Governor Kim Reynolds on Feb. 1. — changes that brewing and distilling representatives have been requesting for years.

Stephen Larson, administrator of the Iowa Alcoholic Beverages Division, and Debi Durham, the director of the Iowa Economic Development Authority, wrote in a co-signed letter accompanying the recommendations:

“We feel that these recommendations will create greater economic opportunities for our local entrepreneurs, make it easier and more efficient for Iowans to conduct business with state government, make Iowa’s alcohol laws easier to understand and enforce, and result in public policy that continues to protect the health and safety of Iowans.”

Current Iowa Code Chapter 123 makes it harder to run a micro-distillery in Iowa than to run a brewery or winery.

Suntory Yamazaki Distillery in Osaka, Japan. Iowa micro-distilleries might soon share the rights of the state's larger operations -- Photo by Toukou Sousul
Suntory Yamazaki Distillery in Osaka, Japan. Iowa micro-distilleries might soon share the rights of the state’s larger operations — Photo by Toukou Sousul

While breweries and wineries can serve beer and wine by the glass without limitation, Garrett Burchett, the owner and manager of the Mississippi River Distilling Company in LeClaire, said state law limits the free samples at his distillery to just two ounces — a little more than one full shot glass — per customer per day.

Though there is no limit to the number of six-packs, bottles and cases that can be sold at Iowa’s breweries and wineries, the state’s micro-distilleries are limited to selling the equivalent of two 750 ml bottles per person per day. While breweries and wineries have no production limit, the state imposes an annual production cap on micro-distilleries, which Burchett said limits growth in the industry.

Burchett said he wants Iowa to treat micro-distilleries the same way it treats breweries and wineries, which is why he is thrilled that Larson and Durham are recommending that state law be amended to do just that.

The recommendations were developed after a months-long, comprehensive review of the state’s alcohol laws requested by Branstad and Reynolds in August. The review included a working group of those who make and sell alcohol in the state, including Burchett.

At the top of Larson and Durham’s list of recommendations is a request to create greater parity among beer, wine and spirit makers by changing the way the state licenses the manufacturing of spirits.

Photo via Iowa Brewers Guild
Photo via Iowa Brewers Guild

Iowa currently offers two licenses for those wanting to make spirits — a manufacturer’s license and a micro-distillery license. The manufacturer’s license does not permit on-site sales or tastings but has no production limit and allows the manufacturer to sell its products in other states.

A micro-distillery license allows limited on-site sales (1.5 liters per person per day) and sampling (no more than two half-ounce samples per brand per person), but caps production at 50,000 proof gallons and prohibits out-of-state sales. Micro-distillers who want to sell their spirits outside of Iowa need to obtain a manufacturer’s license, too.

To give those making spirits similar privileges enjoyed by brewers and vintners, Larson and Durham propose that the micro-distillery license be eliminated and the manufacturer’s license be amended to permit complimentary tastings in conjunction with a tour and include the ability, perhaps with a supplemental permit, for a manufacturer to sell its spirits for consumption as long as they are made on-site.

The recommendations reflect changes Burchett has been promoting for years. He said that while brewers and vintners want “x, y and z,” distillers still want “a, b and c” because they are so far behind. “We want to get where [breweries and wineries] are,” he said. Many of the laws regulating alcohol in the state were written soon after Prohibition, he said, and those governing distilleries were written with large distilleries, like those in Kentucky and Tennessee, in mind — not micro-distilleries like his.

The state has made tweaks to accommodate the growing micro-distillery industry recently, Burchett said, and “you kind of want to dip your toe in the water” first when adjusting laws. “We’ve done that,” he said, “but now it’s time for some changes.”

Burchett said distillers are thrilled about the recommendation and said it is a validation of what distillers have been saying for a long time. “We couldn’t be happier,” he said.

Photo via Iowa Brewers Guild
Photo via Iowa Brewers Guild

Another recommendation made by Larson and Durham echoes a change long sought by J. Wilson of the Iowa Brewers’ Guild, which would give brewpubs limited self-distribution privileges.

Currently, Iowa’s native brewery permit allows brewers to self-distribute to a degree, including the ability to fill growlers without having to first sell their beer to a distributor. However, unlike the rules for breweries, Iowa’s brewpub permit does not allow for any self-distribution.

In order to fill growlers, Wilson said a brewpub must first sell pre-filled growlers, or a keg used to fill growlers, to a distributor. After a stop at the distributor’s warehouse, Wilson said the beer is then bought back by the brewpub and returned.

Noting that both brewpub owners and wholesalers are frustrated by the inefficiency and added cost of selling and shipping beer only to be sold back and returned, Larson and Durham recommend that brewpubs be allowed to sell beer for growlers without selling or sending it to a distributor first.

Both Burchett and Wilson have high hopes that the legislature will follow the recommendations and approve changes to the state’s alcohol laws. “Beer is bipartisan,” Wilson said. Though Burchett admitted that nothing is guaranteed, Larson and Durham’s recommendations provide a loud and clear message that change needs to happen and puts pressure on the legislature to get it done.

Larson and Durham’s list of recommendations also includes calls to streamline the licensing options for brewers and beer wholesalers, increase collaboration between the Iowa Alcoholic Beverages Division and the Iowa Wine and Beer Promotion Board and perform an “in-depth review of laws pertaining to alcohol licensing, administrative actions and administrative appeals” that govern establishments selling alcohol.

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