HB 1192 and the battle over full strength beer

by Beer

What’s at stake in the 3.2 beer battle?

If you live in Kansas or Colorado, you know about the looming battle over beer in grocery stores.  Currently grocery stores in Colorado, Kansas, Minnesota, Oklahoma, and Utah are allowed to sell only 3.2 beer.  3.2 beer, or near beer, is beer which is 3.2 % alcohol by weight (ABW) or about 4% alcohol by volume (ABV).  Since the original law was expressed as ABW, the beer is referred to as 3.2 beer.  Full strength beer is only 1% ABV more alcohol than the 3.2 version on average, however people perceive a difference and this difference drives beer sales.

Grocery stores want to sell full strength beer, while liquor stores are lobbying heavily against it.  In Colorado, state lawmakers Rep. Buffie McFadyen (D-Pueblo) and Sen. Jennifer Veiga (D-Denver) introduced bill HB 1192 which will allow grocery stores in Colorado to sell full strength beer.  The bill does not address the sale of wine or spirits.  A similar bill (HB 2062) is up for debate in Kansas.

  • Colorado is an”elite” group of states which include Utah and Kansas that still have 3.2 laws
  • HB 1192 is a bill aimed at allowing grocery and convenience stores to sell full strength beer

The history of 3.2 beer

3.2 beer is an artifact from prohibition.  March 22, 1933, before prohibition ended, Congress amended the Volstead Act (the enforcement of prohibition) with the Cullen-Harrison Act to allow 3.2% ABW beer.  Prohibition was seen as a failure which led to organized crime, and the Cullen-Harrison Act was an attempt to stem the tide of people demanding the repeal of the Volstead Act.

grocery store beer

The concern is making regular strength beer available in grocery stores means we won't have access to good beer anymore?! That makes no sense.

December 5, 1933, Congress amended the Constitution again with the Blaine Act, or the 21st Amendment as it is commonly known.  This amendment not only legalized alcohol, it restored control of alcohol to the states.  Once this amendment was put into law, the Cullen-Harrison Act became an asterisk in history (at least it should have).

Few states kept the 3.2 beer and at the time of writing only six states use the designation for beer in their laws.  Missouri has a 3.2 designation, but it is rarely seen since everyone can sell full strength beer.  Minnesota has permits for full strength alcohol, but the 3.2 licenses are much easier for retailers to obtain.

If you want a full strength beer in Colorado, Utah, Kansas, and Oklahoma, you have to buy it from a liquor store.  HB 1192 hopes to rid Coloradoans of this prohibition era law.

  • The Cullen-Harrison Act (3.2 law) became irrelavent after the 21st Amendment

The debate over full strength beer

Will liquor stores go bankrupt?

The main argument against HB 1192 is by allowing grocery stores to sell full strength beer; they will put liquor stores out of business.  The thought is if liquor stores lose their beer business, they will no longer be able to keep their employees and will possibly fail.  Liquor stores claim beer sales account for as much as 70% of their business.  If they can’t sell beer, the store will be forced to close.

This hasn’t happened in the other states which allow grocers and convenience stores to sell full strength alcohol.  California and Oregon allow grocers to sell full strength alcohol and liquor stores still exist.  According to getRealBeer.com, a survey in Southern California showed “of 292 Vons supermarkets indicates that fully 70 percent of them have at least 2 retail liquor stores within one-half mile – many of them in the same shopping center”.

When you point out other states have liquor stores and do just fine, the common argument against this point is “we are not California”.  Well this is true.  We are also not Oregon, Arkansas, Idaho, Iowa, Maine, or any of the other 38 states which allow grocery stores to sell full strength beer.  Somehow small brewers and liquor stores survive just fine in these states when grocery stores sell beer.  In fact, of the 5 major cities with the most liquor stores per capita, four allow the sale of full strength beer in grocery and convenience stores.  Denver is the lone exception.

  • Liquor stores have no problems coexiting in 38 other states
  • In the top five cities with the most liquor stores per capita, four allow full strength beer in grocery and convenience stores

Where is the money going?

Another (strange) argument is the money will go to large corporations outside of Colorado.  The main supermarkets in Colorado: Safeway and King Soopers, have their corporate headquarters outside of Colorado (even though King Soopers originated in Colorado and was purchased later).  The fear is the hard earned cash you spend on beer will go to other states.

I’ve never heard this concern from any Coloradoan purchasing a Samuel Adams (Massachusetts), Stone Ruination IPA (California), Chimay (Belgium), or any other out-of-state beer.  The money for these beers isn’t staying in Colorado.  If you make this claim, you are applying one standard for the grocers and a different one for the brewers.  And to what level do you want to apply this standard?  The liquor stores (not all are mom and pop operations) are not held to this standard. Maybe I should I shun Fat Tire because the beer is from Fort Collins, and the profits will not go to Denver.

I think you should drink locally, but I’m not willing to give up beers from other states or countries.  I love variety too much, and the truth is some of the money is staying in Colorado.  These major grocers are not flying people from India to work in their stores.  The workers are Coloradoans, and the major grocers employ many.  King Soopers and Safeway are also active in the community, and both give back to the community through school programs.

It’s easy to target the huge corporations as evil, especially in today’s economic climate, but what about all the small convenience stores in Colorado.  When the liquor stores extended their 6-day monopoly on full strength sales to 7 days, 3.2 beer sales plummeted by more than two-thirds at grocery stores and small convenience stores.  Since you now can purchase full strength beer on any day, why would you buy 3.2 beer from a convenience store?  These small convenience stores are owned by Coloradoans too.  It is not fair to level the playing field?

There is a study by Summit Economics, LLC, in Colorado Springs, which was presented to lawmakers demonstrating the dire consequences if grocery stores were allowed to sell beer.  While the report is technically assembled by a third party, it was commissioned by the Colorado Coalition of Liquor Store Associations.  The report is not peer-reviewed and it is hardly neutral.  If the liquor stores want to maintain their monopoly, is it really surprising the study they funded supports their position?  I would not expect a study commissioned by grocers to be impartial either.

  • 3.2 beer sales plummeted by two-thirds after Sunday beer sales were allowed
  • Taxes will go to Colorado regardless who makes the sale

Will it affect the small brewers?

Small brewers claim they will have troubles selling their beer to the large supermarkets.  Their argument goes like this.  Supermarkets typically stock items which have a slight profit margin but have a quick turnover.  The grocers can sell items much cheaper because they can purchase products in larger quantities at lower prices. The small brewers say they will have troubles matching the lower prices of larger breweries, and thus will have less access to the grocery stores demanding lower priced beer.  This will result in limited choice and struggling small breweries.

This assumption probably comes from viewing the current selection of beer in grocery stores.  Only the mass market beers, like Budweiser and Coors (ironically both are produced in Colorado) can afford to offer a 3.2 beer.  By leveling the playing field, more opportunity will exist for smaller craft brewers to sell their beer.  Grocery stores will carry the smaller local brands (as well as other national and international craft brands), and this will expose more grocery shoppers to different types of beer.  This can only help the small brewers and craft industry.  Again if you need examples, look to Oregon and California.  The craft brew industry thrives in both of these states.

craft beer

Grocers will stock the beer that sells. There is no reason a grocery store would choose to not sell craft beer unless it isn't selling.

I lived in Arizona for many years, and had no problem finding special beers in grocery stores or liquor stores.  The variety in an Arizona grocery store like A.J.’s is actually impressive.  If there is some wine or beer I couldn’t find at the grocery store, it was always available at a liquor store.  This is how liquor stores thrive in markets where they must compete.  Forcing the liquor stores to compete against grocery stores gives the consumer more choices.  It also helps smaller brewers, because liquor stores look to carry variety which grocers cannot.  Competition is good.

  • Liquor stores fill niches grocery stores cannot.  This means more variety.
  • Oregon and California allow grocers to sell full strength beer, and both have thriving craft beer industries
  • More competition means better prices and better selection for the consumer

Beer is not a utility, so why allow the monopoly?

The reason liquor stores fear the new law is because they will lose a monopoly they have enjoyed since prohibition.  Monopolies rarely benefit the consumer or business.  If liquor stores have no reason to compete, it is actually more difficult for small craft brewers to get shelf space.  Monopolies mean less variety, not more.  This hurts the craft brewing industry.  Opening the beer market will result in more competition, better selection, and better beer prices.

So tell me what you think in the comments below!  Should Colorado protect the liquor stores’ monopoly and keep the prohibition-era law, or should they open the beer market and allow everyone to sell full strength beer?

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DJ Spiess

DJ Spiess

Beer buddy

I live in Denver, Colorado. This blog is everything about beer, wine, cider, mead and other spirits.
I am a avid homebrewer and winemaker. I’ve been making my own beer and wine for many years. I started making beer when I was in college (mostly because the drinking age in the United States is 21). My first few beers were horrible. The beers are much better now, and I often supply my neighborhood with free beer! It is a great hobby!