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Craft beer faces challenges as chain retailers start to sell full-strength beer

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This morning, Chris Wright reached out to clarify that Pikes Peak Brewery is hoping for equal, fair access to both liquor stores and grocery stores.

“We’re just trying to position Pikes Peak to take advantage of the changes that are coming to the beer market in Colorado,” he says. “I’m not favoring one outlet over another.”

——ORIGINAL POST 1:00 A.M. WED., FEB 14, 2018——

On June 10, 2016, the Colorado State Legislature signed SB16-197 into law, a bill that, primarily, creates a “liquor-licensed drugstore” license, allowing grocery stores, drug stores and convenience stores to sell alcoholic beverages of any strength. To keep locally owned stores from getting steamrolled by competition, those licenses are limited in number until 2037 — an owner can only license five locations for now.

There’s another piece of the law that’s coming into play on Jan. 1, 2019, and according to Pikes Peak Brewery owner/Colorado Brewers Guild chair Chris Wright, the implications for the craft beer industry are significant.

“A piece of this bill was [changing] the definition of what is called ‘fermented malt beverage,’ [previously defined as] anything that is 3.2 ABV or less,” he says. Before SB16-197, grocery and convenience stores were allowed to sell 3.2 beer and only that. Need brought small, often locally owned liquor stores into high-traffic shopping centers. It’s a setup Wright calls “absolutely fundamental” to Colorado’s craft boom.

“It allowed us to expand our market one liquor store at a time instead of flying to California and trying to get it on grocery store shelves,” he says.

But due to that language change, any store that could sell 3.2 beer will be able to sell full-strength beer as of January 2019. For brew pubs that only pour on-site, business shouldn’t change much. To support retail craft breweries, Wright and the CBG will partner with other industry groups to lobby on behalf of local producers.

“We are going to fight to make sure anything introduced this session will preserve our access to markets,” he says. When asked if CBG would push for legislation to support craft breweries beyond open-market competition with companies like AB InBev (which held $258.38 billion in assets in 2016), he said, “I don’t see us having the stomach to [ask for] preferential treatment.”

From his view, consumer demand for craft brews should push retail chains to engage with the state’s largest breweries. Smaller breweries will have to partner with local retailers, who Wright feels will have to double down on craft to stay competitive. Whether that will be enough, Wright says, is “the four million dollar question.”

In 2016, Indy Executive Editor Emeritus Ralph Routon traveled to Seattle, Washington, five years after ballot issue 1183 allowed privately owned competition with existing state-owned liquor stores, a sea change similar to SB16-197.

“In a section with at least 50,000 inhabitants, (Seattle’s metro area has 3.6 million people), there only appeared to be a couple of specialty wine stores of any size, nowhere near us,” he wrote. Supermarkets, the most common booze retailers, stocked few if any local beers, a grim portent.

Wright’s been expanding PPB since 2016, hoping for grocery store sales. But he thinks it’s too late for other breweries to start expanding now. His advice: “Figure out how to protect, rather than how to grow.”

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