Beer and liquor wholesalers face off over mixed drinks legislation
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A House committee on Tuesday advanced a bill letting beer wholesalers sell liquor-based ready-to-drink (RTD) cocktails, over the protests of liquor industry representatives.
One lawmaker withdrew an amendment nixing regulatory differences between beer and liquor wholesaler permits altogether even as fellow committee members — frustrated with the discussion — called for broader solutions or study.
“It’s a very small tweak to the system,” said Tyler Starkey, executive director of the Indiana Beverage Alliance said of the bill.
He and other proponents said House Bill 1025 would allow beer wholesalers to sell from their suppliers’ entire portfolios of products. Manufacturers are increasingly crossing beer-liquor lines as they cash in on a mixed cocktail boom.
Anheuser-Busch figured prominently in the discussion. The major beer brewer acquired liquor-based ready-to-drink maker Cutwater Spirits in 2019.
Tom Morgan, executive vice president for liquor distributor Republic National Distribution Co. of Indiana, called the bill “remarkably predatory and one-sided.”
He and other opponents feared traditional beer manufacturers would return to their familiar beer wholesale partners, stripping liquor wholesalers of those liquor-based RTD beverage brands.
Similar legislation died in Senate committee last session when it didn’t get a hearing.
Unique approach
Indiana law provides for combined wholesale licenses — beer and wine, or liquor and wine — but generally doesn’t allow crossover. Multiple witnesses said the beer-liquor separation makes Indiana an outlier among states without government-run alcohol sales systems.
The bill would put liquor-based mixed beverages under a wine license, allowing all wholesaler types to sell them.
Beer wholesalers emphasized their long relationships with manufacturers.
“This year marks our 75th anniversary with our largest supplier, Anheuser-Busch,” said Justin Winingar, vice president of his family’s Orange County Beverage Company. “… This bill would allow us to continue that relationship that we have, … of servicing all the products that they make, if they saw fit.”
Liquor wholesalers argued that they were at risk of losing brands.
John Baker, chief operating officer for National Wine and Spirits, said the company recently lost the Sazerac brand with just 30 days notice and no compensation. He feared the exodus could grow.
“I think we can understand the writing on the wall when the Anheuser-Busch representative is testifying for the other side,” Baker said. “… Spirits wholesalers won’t keep these brands. They will go to the beer network. And we have no recourse.”
Multiple witnesses said the bill would change little for consumers, and is mostly about competition between industries.
Amendment withdrawn
Beer and wine wholesalers operate under different regulations.
Indiana law grants beer wholesalers franchise protections and allows them small, exclusive territories. Liquor wholesalers said Tuesday that they either wanted in on similar protections, or wanted broader changes.
“If you’re going to open up (the law), open it up so that all alcoholic beverage wholesalers are treated the same,” one said.
“It’s only an issue here in Indiana because it is unique to Indiana to have that horizontal separation within the (wholesaler) tier,” acknowledged Starkey, although he said the liquor industry was using such discussions to “distract and deflect” from the bill.
Rep. Jake Teshka, R-North Liberty, introduced an amendment that would have allowed one entity to hold all three license types — thereby authorizing any wholesaler to sell any type of alcoholic product. The amendment also eliminated other discrepancies between the license types.
He said the industry fight was beyond government’s interest in regulating alcohol, like preventing underage drinking and intoxicated driving.
“I think that this committee should be … less concerned with who’s making money on which portion of this type of business,” Teshka said. “I don’t believe that it’s the government’s role to block and tackle for private industry.”
His proposal earned oral backing from Indianapolis Democrat Blake Johnson, who quipped, “I think I’m physically uncomfortable saying these words, but I agree with Jake Teshka.”
Rep. Jim Lucas, R-Seymour, said the more testimony he heard, the more he viewed the amendment as a solution — despite Republican leadership’s distaste for it.
Majority Floor Leader Rep. Matt Lehman, R-Berne, suggested the amendment could threaten the three-tier supplier-wholesaler-retailer system. And he encouraged more study of the topic, despite his prior participation in an unsuccessful study committee.
“We went into the 7.1 rewrite with parameters already set. We were told, ‘Don’t touch this. Don’t touch this. Don’t touch this,’” Lehman said. “So I think we were doomed to fail, to be honest. I think we need to have an open, honest discussion on discussion about … the role of the government”
Teshka withdrew the amendment in an agreed-upon move.
Manning told reporters that he’d welcomed more discussion or even new proposals after last session’s bill but hadn’t gotten it.
“I am always open to conversations. But me personally, I would like to see action,” he said. “If we’re not going to actually get to a place where we have a wholesale reform … I would rather deal with … particular issues as they come up.”
Asked if the bill would further complicate a framework some on Tuesday called “convoluted,” Manning replied, “Sure. Yeah. The whole thing is convoluted. It always has been — it probably always will be, if we’re being totally realistic.”
The committee approved the legislation 8-3, with Johnson, Lucas and Republican Rep. Cory Criswell voting against; Teshka voted in favor. The bill will next be heard on the House floor.
The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.