Source: http://irishliquorlawyer.com/
Sean O’Leary
April 8, 2019
There is a theory out there, that is actually backed up by statistics, that the presence of craft brewers is hurting bars and taverns. An article on this subject cites Bureau of Labor statistics that the number of “on-premise drinking establishments have decreased by 6.3% since 2010.[1]
Bar/tavern owners are starting to take notice and protest!
In New Jersey, proposed laws that would allow craft brewers to serve customers without taking them on a tour first, met with fervent protest from some bar owners. [2]
Ironically, as the number of bars/taverns shrinks, the amount of craft brewers keeps increasing.
It seems that the bar/tavern owners are affected by the presence of craft beer and not necessarily craft spirits. However, if recent legislation in Illinois passes, craft distillers will become a major player in this space.
Present law on crafts
Craft distillers and craft brewers can sell to customers in their tasting rooms. However, they can not have any other alcohol sold on their premises. (A law change from last session allows craft brewers to serve another craft brewers beer on tap but does not allow wine or spirits or canned or bottle beer). One small difference between the two is the craft brewer can self-distribute a certain amount as long as they make under a certain threshold, while a craft distiller can not self-distribute it product.
A brew pub, similar to a craft brewer makes its own beer, however, unlike the craft brewer they have full retail privileges and can serve other brands of alcohol on its premises. So, unlike the craft brewer or craft distiller, along with their beer, the brew pub can offer selections such as Jack Daniels or a bottle of Kendall Jackson. Also, unlike the craft brewer, the brew pub has no rights to self-distribute.
Making craft distillers a threat
Present law does not make the craft distillers a threat to the bar/tavern scene. Craft distillers are limited to serving their own product in their tasting rooms. And although the consumption of spirits is on the rise, it does not match the groundswell of customers that flock to craft breweries. However, favorable law changes could become a game changer and make a craft distillery a favored destination.
There are several bills proposed that would greatly increase the power of craft distillers. Senate Bill (SB) 1190 would allow craft distillers to self-distribute up to 2,500 gallons of product. SB 1672 would allow along with self-distribution privileges, full retail privileges and increase the amount of the craft spirit sold at retail from 2,500 to 10,000. Further, the bill proposes to create a warehouse permit to allow the storage of 500,000 gallons.
Under House Bill (HB) 2675 a new craft distiller pub license would be created. The license would allow a craft distiller to produce 5,000 gallons of product and would allow full retail privileges. The craft distiller could have up to 3 licenses. Further, the bill would allow it to sell for off-premise consumption no more than 5,000 gallons.
What these pieces of legislation shows is that the purpose is to move craft distillers from a bit player to a major influencer on the retail scene.
Under the proposed legislations, craft distillers would have the brew pub’s power of full retail privileges with the craft brewer’s benefits of self-distribution. Additionally, the amounts they could sell in their tasting rooms could quadruple under one of the bills.
What does this do to bars and taverns
Enjoying full retail privileges would make the craft distillers a more attractive place to visit. Like a bar, they could offer any type or brand of liquor, however, unlike the bar, they could offer a unique product made on-site. This is also a product that the customer could take home.
Further, proposed legislation would allow craft distillers to promote and deliver their product in the marketplace at a cheap cost. The bar/tavern would lack this favorable trait.
Whether these legislative proposals are right or wrong is subject to debate. Some believe it’s beneficial to provide craft distillers more opportunity to grow, while some believe that it provides them an unfair advantage in the marketplace.
What is clear is that for bars/taverns, if these legislative proposals are successful, bars/taverns are put at a competitive disadvantage to the craft distillers and will probably lose market share.
And of course, that leads to another debate whether this should or should not be a major concern?
But of course, it is not debatable whether this is a major concern for bars/taverns!
No matter what way you look at it, bars/taverns have been losing market share for sometime and it is hard to stop the bleeding. But one must ask, will future legislation not only not stop the bleeding, but will future legislation create a bigger wound that becomes an insurmountable gaping hole?
[1] https://www.chicagobusiness.com/article/20180209/ISSUE01/180209890/craft-brew-taprooms-stealing-business-from-bars
[2] https://njmonthly.com/articles/just-for-the-web/bars-lash-vs-craft-beers/