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Missouri, Kansas lawmakers face furious debates over alcohol regulation

  • The Kansas City Star
  • Published Sunday, May 5, 2013, at 9:07 p.m.
  • Updated Monday, June 17, 2013, at 9 a.m.

After a spring of health care and taxes, lawmakers in Kansas and Missouri are bellying up for a final fistfight — over how liquor is sold, how much you pay for it, and how many choices you have at the bar or liquor store.

The brawls team longtime political foes, while pitting well-paid friend against well-paid friend. Special interests spend small fortunes on TV ads, lobbyists and campaign contributions. Legislators, meantime, land in a dizzying crossfire between alcohol makers, bottlers, distributors, and, in some cases, your bartender.

All because of the post-Prohibition rules regulating demon rum and its good-time relatives.

Concerns in the two states are slightly different:

• Kansas is deciding if grocery and convenience stores can sell hard liquor and full-strength beer.

• Missouri is addressing a raging dispute between the people who make alcoholic beverages and the distributors who get it to market.

The stakes are enormous. Selling booze is a multi-million-dollar business, involving dozens of firms, thousands of workers and millions in tax revenue.

Add the public’s safety, health and convenience. Mix in dozens of highly-paid lobbyists, new-media tools and shifting political alliances, and you’ve poured quite a potent legislative cocktail.

“It’s been intense,” said Sen. Jolie Justus, a Kansas City Democrat. “One issue a session comes to a head like this.”

Kansas state Rep. Marvin Kleeb, an Overland Park Republican, calls the combatants in his state “very passionate.”

The debates matter.

Ultimately, specialty beers and wines may be easier to find — or less available. Brews and spirits could be cheaper, or consumers could be so confused that tax revenue slumps. You might be able to pick up a bottle of vodka with a tank of gas and a bag of chips, but the corner liquor store might close.

Grab a cold one. Here’s what the two states are trying to figure out.

Missouri

Since the end of Prohibition, Missouri has used what’s called a three-tier system to move drinks from fermenter to glass.

Manufacturers, from Boulevard Brewing to Anheuser-Busch InBev to McCormick Distilling, don’t sell directly to the neighborhood bar or liquor store. Rather, the makers must engage a Missouri-based distributor, which then sells beverages to the retailer, which sells them to the public.

The idea: Split control of liquor sales among the makers, wholesalers, and retailers, so that no segment of the industry can control prices and products. Before Prohibition — and sometimes during Prohibition — powerful brewers and distillers could cut off uncooperative saloons and stores, leaving them without a product to sell.

State-based wholesalers, the theory went, would carry different brands from different makers, ensuring competition, lower prices, and full access to hooch.

But in 2011, a federal judge decided the state’s franchise laws did not uniquely protect the relationship between liquor makers and wholesalers. That potentially freed suppliers to alter their distribution agreements, seek other partners — or perhaps to bypass the middleman all together.

“It’s chaos,” said Susan McCollum, owner of Major Brands, one of the biggest liquor wholesalers in Missouri.

McCollum’s company and others like it are an integral part of the liquor sales system, supporters say. The firms help collect state alcohol taxes and help supervise compliance with regulations. And because wholesalers must be Missouri-owned, they contend, the state’s residents are protected against predatory pricing that could come from large, out-of-state brewers, distillers, and bottlers.

But those services aren’t cheap. In a year, McCollum says, Major Brands collects more than $400 million in revenue.

Liquor suppliers say that’s cash they could return to consumers if the middleman goes away. Additionally, they say, there are too many liquor makers today for a Prohibition-like cutoff of retail products. Indeed, they contend, more suppliers would enter the state if they could avoid onerous agreements with local distributors.

Of course, there’s no guarantee consumers would see any savings if distribution agreements are changed or ended. The money could simply go in the manufacturers’ pockets.

Micro-brewers and small vintners have different concerns. Many would prefer direct sales to retailers, saving the money paid to the middleman, but few have the marketing muscle to directly compete with huge multi-national companies. They’re watching developments nervously, and have asked the Legislature for protection.

Bar and liquor store owners find it easier to deal with the distributors they know than the suppliers they don’t, but also worry about the cost of the three-tier setup.

All of the competing interests have collided in Senate Bill 365 in Missouri, and a companion bill in the House. Supporters say the bills return the state to the three-tier system as it existed before the courts intervened while protecting smaller brewers and wine makers.

“It provides consumers with tremendous choice, it helps promote responsible distribution, and it keeps the market competitive all at the same time,” McCollum said.

But several alcohol manufacturers and suppliers, led by the Distilled Spirits Council of the United States, have bitterly fought the measures. They have no problem with the three-tier system, but claim the bill unfairly preserves antiquated and unique protections for liquor wholesalers, hurting competition and costing consumers.

“The three-tier system is our life and blood,” said Donn Lux of Luxco, a bottler and blender near St. Louis. But “we believe the (franchise) standard should be the same for everybody.”

Both sides have dipped into the modern toolkit of political persuasion — YouTube videos, statehouse rallies, news releases, anonymous fliers. A group associated with liquor suppliers recently posted a video comparing the liquor system with the Berlin Wall.

And both sides have lobbied up. State records show Major Brands has hired 19 lobbyists, while the liquor suppliers have countered with more than two dozen of their own.

By comparison, Kansas City Power and Light has two Jefferson City-based lobbyists.

“Everybody’s represented well on this issue,” said Missouri GOP Rep. Mike Cierpiot, chuckling. “They’re working the halls pretty hard right now.”

Those lobbyists cross traditional party lines, illustrating the tangled nature of the discussion — and the role of money.

One-time Democratic operative Jack Cardetti is working alongside conservative strategist James Harris against the bills, for example. Democrat Steve Glorioso is teamed with GOP consultants Jeff Roe, former GOP House Speaker Steve Tilley and über-GOP lobbyist Jewell Patek to push the bills through.

Not everyone is pleased by the hard-sell tactics. “Political consultants know only one way — that’s to throw mud,” said Sen. Jason Holsman, a Kansas City Democrat.

Even the tea party is conflicted. Grover Norquist’s Americans for Tax Reform supports the suppliers, while Missouri’s conservative Eagle Forum supports the wholesalers.

And companies directly involved in the issue have taken seemingly contradictory stands.

Glazer’s, a Texas-based wholesaler, is on the manufacturers’ side, while Kansas City-based Boulevard Brewing Co., a supplier, decided last week to support the restrictions “in solidarity with our wholesalers,” according to Jeff Krum of the company.

For reasons that aren’t completely clear, Anheuser-Busch InBev, maker of Budweiser and dozens of other popular beers, hasn’t taken a public position on the bills. A year ago, the international brewer with major facilities in St. Louis, said it wanted to cut its distribution costs, but apparently hasn’t yet brought its lobbying muscle to the Missouri debate.

A full accounting of the special interest spending on the liquor bill may never be available, but all sides believe it may have already reached seven figures.

With just a few weeks until adjournment, the fate of the bills remains uncertain. Several lawmakers said they’re waiting for a signal from Gov. Jay Nixon, who vetoed a similar bill last year because he said it didn’t do enough to protect small brewers and vintners in the state.

Legislators don’t want to engage in a major floor fight on liquor issues, they said, without some insurance Nixon will endorse the final result.

Kansas

The liquor issue in Kansas is simpler, and, for now, quieter.

For several years, grocers and convenience store operators have pushed for expanded liquor sales in their Kansas stores. They want to sell spirits, wine, and full-strength beer in their stores.

Those businesses tried again this year, much to the consternation of the state’s liquor store owners, most of them are smaller firms who want the business to themselves.

“It would put at least half the liquor stores in the state of Kansas out of business,” said Marshall Rimann, who owns two liquor stores in Johnson County. “It’s a business killer and a job killer.”

But big-box retailers and convenience store owners — through a non-profit company called Uncork Kansas — say wider liquor sales would be more convenient, competitive, and would save consumers money.

“We’re still mystified why we have to operate under Prohibition rules in Kansas,” said Mike Thornbrugh of QuikTrip, one of the members of the Uncork Kansas group. “Name me any other business that has that kind of protection.”

Both sides have spent time and money discussing the issue with lawmakers. Uncork Kansas, for example, reported spending almost $15,000 for lobbying expenses in the first three months of the year.

As a non-profit, the group is also required to file a federal tax return. But a database of those returns has no record of the filing, and a spokeswoman for the group could not immediately provide a copy.

“They’re spending a lot of money,” said Kansas Rep. Stan Frownfelter, a Kansas City, Kan., Democrat who opposes expanding liquor sales to bigger stores.

The Kansas Association of Beverage Retailers, which represents the smaller stores, shows spending of $1,100 in its January lobbying report.

The bill expanding liquor sales in Kansas remains stalled in a House committee, but could emerge in the veto session later this month. And all sides expect it to come back next year if it isn’t settled this May.

“Obviously, there’s a lot of business and money at stake,” state Rep. Kleeb said.

To reach Dave Helling, call 816-234-4656 or send email to dhelling@kcstar.com.

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