Colorado Liquor Law Working Group Releases Report on Changes to Retail Liquor Licenses

On December 29, 2017, the SB 16-197 Working Group released its report to the Senate Business, Labor, and Technology Committee and the House Business Affairs and Labor Committee making recommendations on the implementation of the sweeping changes to Colorado Liquor Law that were signed into law by Governor Hickenlooper in 2016. SB-197 addressed the regulation of retail sales of fermented malt beverages, malt liquor, wine, and spirits for off-premises consumption, and unified the definitions of fermented malt beverage and malt liquor, to be effective as of January 1, 2019.

The report is relevant to all parties impacted by SB 16-197, including current licensed retail liquor stores, current liquor-licensed drugstores, and future licensees including supermarkets and convenience stores. While ultimately the General Assembly will be tasked with translating these recommendations into law, the recommendations will be an important starting point as legislators consider how to continue the reform efforts that began in 2016. As is stated in the Working Group Report, the 2016 changes made by SB 16-197 are “the most significant changes to the Colorado Beer and Liquor Codes . . . since their codification in 1935 following the repeal of Prohibition in 1933.”

The Working Group was tasked with the following duties:

(1) Develop an implementation process for grocery and convenience stores to apply for a license to sell fermented malt beverages and malt liquor containing at least 0.5% alcohol by volume starting January 1, 2019.

(2) Analyze the impact that removing the alcohol content limit on fermented malt beverages will have on the alcohol beverage industry as a whole, as well as on current retail licensees.

(3) Consider other legislative, regulatory, or administrative changes necessary to promote the three-tiered distribution system in Colorado.

(4) Examine and make recommendations regarding laws governing tastings conducted on retail premises licensed under §12-47, C.R.S., and the ability of retail liquor stores licensed under §12- 47-407, C.R.S., to sell growlers containing malt liquors.

For each of these items, the Working Group has released one or more recommendations that were voted on by the membership of the Working Group:

(1) Implementation Process for Grocery and Convenience Stores to Apply for a License

· Recommendation 1 suggests a procedure for “grandfathering in” existing licensees but specifies additional requirements for new licenses and those transfers of ownership starting January 2019.

· Recommendation 2 suggests a process for local community members to petition for a local review to be conducted before a grocery or convenience store with a current license is allowed to sell higher-strength beer.

· Recommendation 3 suggests a more extensive application process and requirements for both existing and new licenses.

· Recommendation 4 suggests that no changes are needed for current licensees to sell higher strength beer as of January 1, 2019.

(2) Impact of Removing the Alcohol Content Limit

· Recommendation 5 suggests the simplification of the licensing process within a single tier for manufacturers, wholesalers, and importers that include both FMB and malt liquor in their product lines.

· Recommendation 6 suggests that special attention be given to the effect of any recommendation in this report on the craft brewing industry in Colorado.

· Two recommendations make suggestions regarding regulating the public consumption of FMB and malt liquor:

o Recommendation 7 suggests that both be prohibited unless a local government specifically allows it, without making any changes to the prohibition of vinous and spirituous liquors.
o Recommendation 8 suggests that all alcohol beverages, including FMB, malt liquor, vinous and spirituous liquors, be either prohibited or allowed without distinction.

(3) Changes to Promote the Three-Tiered Liquor Distribution System:

· Recommendation 9 suggests defining in the Colorado Liquor Rules when the manufacturing process for an alcohol beverage ends.

· Recommendation 10 suggests implementing a comprehensive set of reporting requirements for carriers shipping alcohol beverage products into Colorado.

· Recommendation 11 suggests an annual briefing to a legislative committee about the state of the three-tiered liquor distribution system in Colorado.

(4) Tastings and Growlers at Retail Liquor Stores:

· Recommendation 12 suggests a number of statutory and rule changes to update and streamline the laws and rules governing tastings at retail liquor stores and liquor-licensed drugstores. The Working Group decided to make no recommendation regarding expanding the sale of growlers to additional licensees than breweries, where these sales are currently allowed.

Interestingly, at first look the voting records of the Working Group may appear to show a less-than-enthusiastic level of support for each of the 12 recommendations. The members of the Working Group were not required to enter a vote for each recommendation. In many cases where a particular recommendation related to an industry sector that didn’t apply to a specific group member, that member would abstain from taking a position, which resulted in very few of the recommendations receiving the support of a majority of the full Working Group membership.

The General Assembly is free to respond to the report in any way it sees fit — adopting or rejecting any or all of the 12 recommendations as they deem appropriate.  It remains to be seen how much weight the report will carry due to the apparent lack of consensus from Working Group members.  Retailers that are currently licensed or potential future licensees will continue to monitor progress on the recommendations and how they are addressed during the legislative session.