Brewing, Cideries & Spirits  October 3, 2018

Brewers, sellers brace for new rules in 2019

In three months, grocery and convenience stores in Colorado will be able to join most of the rest of the nation by being allowed to sell full-strength beer. Who will be toasting the change, and who will be drowning their sorrows, is yet to be seen.

Finally free of a Prohibition-era law that let most grocers and quick-stop outlets sell only beer with 3.2 percent alcohol content or less, Colorado’s grocery chains, liquor stores and craft brewers are bracing for the impact.

Under Senate Bill 197, passed in 2016, and redefined by Senate Bill 243, signed by Gov. John Hickenlooper in June, full-strength beer sales will be permitted in existing grocery and convenience stores — as long as they’re at least 500 feet from an existing liquor store. Pressure has mounted for the change, especially from Colorado’s continued influx of new residents from the 41 other states where beer and wine already is sold in supermarkets and gas stations.

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Colorado’s prohibition has led to a proliferation of small liquor stores located near the major grocery stores, and they’ll be facing an uncertain fate. But larger, more comprehensive liquor stores may feel the pinch as well.

“It means we’ll have 1,600 new competitors in the state — double our number of competitors now,” said Jim Dean, store manager at the sprawling Hazel’s Beverage World in Boulder. “I’m pretty sure you’re not going to double the population, so yes, I think it’s going to have an impact.

“I know lots of people who don’t drink, but I don’t know anybody who doesn’t eat,” Dean said. “When they’re there in that grocery store, and if they’re a beer-centric family and see that Coors Light or Budweiser in front of them, they’re going to buy it there.”

Dean said Hazel’s carries “nearly every craft beer that’s available in Colorado, so I think they’ll get those people. Some of the smaller craft beers, yeah, people will come and buy here. We’ll try and focus on the items the grocery stores and convenience stores don’t carry — but there’s only so many people who want to drink an oatmeal stout.

“The big brands are a huge percentage of our business. The economics are pretty easy to figure out,” Dean said. “If you’re in the grocery store and there’s a 12-pack right in front of you, you’re not going to have much incentive to drive to my store or any store.”

Colorado’s hundreds of craft brewers are most worried that those economics will squeeze their brands off grocers’ shelves. Some grocers have pledged to carry some craft brews, but Chris Staff, director of public affairs for the region’s Safeway stores, said how much they’ll display might be different for every store.

“The location and size of the store would determine what product we put in there and how much,” Staff said. “It’ll be based on the size of the store and the amount of traffic. We do want to highlight local brewers and give them shelf space and visibility, but we might not carry as much Longmont craft beer in Colorado Springs. Local is very important to customers, so we’ll be as local as we can make it.

“But the bottom line is that one size does not fit all. We have some smaller footprints, so it’s really going to depend on what makes sense at each store.”

Wynne Odell, chief executive at Fort Collins-based Odell Brewing, said she isn’t too concerned about the shelf-space issue because “the Colorado Brewers Guild has done a good job of connecting those buyers with the statewide brewers’ community.”

She said she’s more exasperated by regulations that require two different licenses for producing beer for liquor stores versus grocers. “That’s the biggest deal,” she said, “this regulatory environment that’s so wonky. We have to produce the same beer in separate tanks and we can’t commingle. We have to segregate it in our warehouses despite the fact that it’s an identical process.”

Odell gave credit to the state Liquor Enforcement Division, however, for changing a rule that prohibited brewers from packaging their beer to distribute before the Jan. 1 start date. “They came out with a ruling two weeks ago that said we could package it starting Nov. 1. That’s a huge help.”

While some craft brewers may find it harder to gain shelf space, others plan to stick with their current strategies.

Neil Fisher
Neil Fisher – WeldWerks, Greeley, Colo.

“It’s not anything that’s going to affect us at all,” said Neil Fisher, co-owner and head brewer at Greeley-based WeldWerks. “We won’t be selling to grocery stores to start. We have more than enough accounts on our waiting list, between our drafts and our cans. We have over 120 accounts waiting for our beer.

“We’re in a very unique position because our demand outpaces our supply by at least 50 percent. We can’t produce more beer than we can currently sellique position.

Demand outpaces supply by at least 50 percent. We can’t produce more beer than we can currently sell. Every time we add a tank and capacity, that beer’s already sold out, so we’re always playing catch-up.

“We’re probably the least relevant to speak on the changes that are happening,” Fisher said.

Some of those clients — especially the smaller liquor stores located near supermarkets — might not survive, said Dean at Hazel’s. “But that’s all water under the bridge. The Legislature decided. We’ll all live with it.”

In three months, grocery and convenience stores in Colorado will be able to join most of the rest of the nation by being allowed to sell full-strength beer. Who will be toasting the change, and who will be drowning their sorrows, is yet to be seen.

Finally free of a Prohibition-era law that let most grocers and quick-stop outlets sell only beer with 3.2 percent alcohol content or less, Colorado’s grocery chains, liquor stores and craft brewers are bracing for the impact.

Under Senate Bill 197, passed in 2016, and redefined by Senate Bill 243, signed…

Dallas Heltzell
With BizWest since 2012 and in Colorado since 1979, Dallas worked at the Longmont Times-Call, Colorado Springs Gazette, Denver Post and Public News Service. A Missouri native and Mizzou School of Journalism grad, Dallas started as a sports writer and outdoor columnist at the St. Charles (Mo.) Banner-News, then went to the St. Louis Post-Dispatch before fleeing the heat and humidity for the Rockies. He especially loves covering our mountain communities.
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