In Kansas, is home liquor delivery and online sales the next steps?
The take-out cocktails and longer liquor store hours adopted in Kansas during the pandemic survived after the virus threat passed.
But some lawmakers worry that additional changes sought by grocery chains and liquor companies could hurt small businesses and overwhelm state regulators.
Changes approved in the 2021 legislative session included expanding liquor store hours on Sundays and holidays and allowing the sale of take-out cocktails and drive-thru drinks.
A special legislative committee is being pushed to make it even easier for consumers to buy beer, wine and hard liquor – changes that would require legislative approval in the spring.
Home delivery and online sales
Several large grocery store chains want to include beer in the groceries they deliver to homes. And liquor companies — both small Kansas-based distilleries and international conglomerates — want the lifting of restrictions that prohibit them from selling directly to Kansas consumers online.
Dillons, Hy-Vee, Whole Foods and Walmart are among the grocers urging lawmakers to allow them to make home beer deliveries.
Rob Budd, Vice President of Hy-Vee, said beer delivery “represents a significant opportunity…to tap into this emerging and growing market.”
Any increase in sales would increase state and local government tax revenue and create additional delivery jobs, Budd said.
Kansas liquor store owners are not strongly opposed to allowing door-to-door beer delivery. They are far more concerned about competing with larger distilleries if lawmakers allow online sales from out of state.
“Please step back and take a few years before you enact further changes and disrupt Kansas’ liquor system,” said Aaron Rosenow, owner of Vern’s Retail Liquor in Topeka.
RE “Tuck” Duncan, a longtime lobbyist for the Kansas Wine & Spirits Wholesalers Association, told lawmakers that the state’s current “three-tier system” is working well. He said the system, in which wholesalers buy products from liquor companies and then market them to retailers, provides consumers with convenient access while protecting them from “counterfeit” liquor and ensuring that all actors pay the required taxes.
“The alcohol market has innovated to meet the convenience demands of modern consumers without undermining a well-rounded state regulatory system,” Duncan said.
David Ozgo, senior vice president of the Distilled Spirits Council of the United States, argued that changes were needed to level the playing field. He said wineries had an unfair advantage because they could sell online and ship their products directly to Kansas consumers.
He said Kansans want the same convenience when it comes to buying alcohol or spirits.
“Spirits have taken market share from beer and wine over the past 20 years,” he said. “It’s only natural that they (consumers) want to buy their favorite drink as easily as possible.”
Kansas Distilleries in the Mix
Anticipating lawmakers might worry about giving big liquor companies direct access to consumers, Ozgo said Kansas-based craft distilleries would also benefit from a change in the law. Marketing their products online would free them from dealing exclusively with distributors who often do not sell their products.
More than 40% of craft distillers surveyed by the American Distilling Institute reported difficulty “finding a wholesaler willing to take their products,” Ozgo said.
Of those who could, he said, almost 70% said the wholesaler was not doing enough to market their products.
“Smaller craft brands just don’t have the volume to garner much interest from the heavily consolidated wholesale industry,” Ozgo said.
The Boot Hill Distillery in Dodge City is one of many Kansas distilleries that could benefit from direct marketing. Its founder, Hayes Kelman, a Haskell County grain producer, said the only way the distillery can sell its vodka, whiskey, gin and other products outside of its tasting room is to sign with a distributor.
But even that, Kelman said, doesn’t guarantee placement on liquor store shelves or cocktail menus in bars and restaurants.
“There are more brands than distributors,” Kelman said in written testimony to the committee.
Rep. Sean Tarwater, a Stillwell Republican and committee member, told the Topeka Capital-Journal that he would like to allow people who visit microbreweries and distilleries in Kansas to buy “another bottle of whatever they like” when they go home.
Whitney Damron, lobbyist for liquor store owners, reminded lawmakers that any accommodations they make for small Kansas producers would also apply to “out-of-state distillers big and small.”
Lots of illegal shipments
Beyond the harm direct-to-consumer sales could cause local liquor stores, opponents say it would overwhelm state regulators who already struggle to collect taxes from wineries.
Debbi Beavers, director of the Kansas Department of Revenue’s division that enforces the state’s liquor laws, told lawmakers that a limited survey showed that 50% of businesses shipping wine to the state in 2020 did not have the required federal or state licenses.
Legalizing direct alcohol shipments, Beavers said, would lead to an increase in underage drinking and the importation of alcohol whose purity has not been regulated. And she said the state would suffer a “significant loss of revenue” from alcohol taxes that would not be collected.
Duncan, the wholesaler lobbyist, urged lawmakers to wait before making any further changes to the state’s liquor laws.
“Don’t go too fast,” he said. “Let’s see how (wine) shipments clean up and how taxes are paid.”
Rep. John Barker, a Republican from Abilene and chairman of the committee, said the group would finalize the recommendations to the full legislature when it last meets Nov. 10.
Jim McLean is the Kansas News Service’s senior correspondent. You can follow him on Twitter @jmcleanks.
This story was originally published October 15, 2021 5:00 a.m.