Opponents say mixed beverage bill could raise prices for consumers

(stock image courtesy: PIxabay/Bridgesward)

A bill letting beer wholesalers cash in on lucrative liquor-based drinks would “expand their monopolistic advantage” and raise prices for consumers, argues a leading wine and liquor organization.

But beer wholesalers say it shouldn’t affect pricing, and that they should be able to sell products from brands they’ve spent millions promoting.

Indiana has three types of alcohol permits and no entity can hold all three.

Permit holders can deal in wine and either beer or liquor. That means categorizing a beverage as beer or liquor locks the opposing group out from business in that drink. Classifying something as wine extends access to all.

As brands like White Claw and Truly—both name-dropped during legislative proceedings—expand into spirits-based versions, their products go to liquor wholesalers by default.

House Bill 1544 would change that by defining liquor-based mixed beverages and putting them under wine licenses. Beer wholesalers already have control over malt-based hard seltzers.

Price fight

Could the measure raise prices for consumers?

Wine and Spirits Distributors of Indiana Executive Director Jim Purucker feared it could. He told the Capital Chronicle that Indiana’s lower number of liquor wholesalers each have many more stores, so they can negotiate lower bulk rates and pass savings onto buyers.

“When retailers are forced to purchase a product from wholesalers in relatively small exclusive geographic territories, it reduces the retailer’s ability to negotiate for a lower price to virtually zero and Hoosiers pay more,” he said in a news release last week.

But if prices did go up, he said, the market would self-correct: suppliers would go back to liquor wholesalers to get their products to retailers.

“All this does is provide an additional option—no one has to use us [beer wholesalers]. And no one has to stay with us,” Starkey told the Capital Chronicle.

System dissatisfaction?

For wine and liquor wholesalers, the bill is another slight in a system they see as overly protective of “beer guys.” But beer wholesalers say the bill has little to do with those “trade practice issues.”

Indiana gives beer wholesalers franchise, geography and credit protections, which Purucker described as privileges not extended to wine and liquor wholesalers.

“These monopolistic advantages are granted by the government to only politically powerful beer wholesalers, giving them a near-permanent state-sponsored stranglehold on the marketplace,” he said in the news release.

He said the legislation as written puts an estimated “$100 million of business in our warehouses at risk a year.” His organization plans to “aggressively” combat those protections to “level” the playing field.

Beer wholesalers say the bill is narrowly focused.

“A lot of these trade practice issues and buzzwords you hear in the alcohol space have nothing to do with our legislation,” Starkey said. “What our legislation does is just provide an additional opportunity for our suppliers to control the route to market. We get to carry the products that they supply. We’ve helped wholesale for them for decades.”

Beer wholesalers also want their investments in merchandise, free samples and more to keep paying off.

Stanley Ziherl, president of Five Star Distributing, told the Capital Chronicle that wholesalers are hurt if they’ve built up equity in a brand but are blocked from dealing in some popular new products.

Innovation blurs boundaries

Alcohol brands are continuing to diversify their offerings, producing more products that either don’t fall cleanly into one category under law, or involve starkly different wholesaler types. Wine and spirits wholesalers fear the implications, but beer wholesalers say they’re zeroed-in only on this year’s bill.

Many traditional beer brands, for example, now include wines and spirits: think Natural Light vodkas or malt- and wine-based Fireball Cinnamon.

“This whole discussion is not about these flavored beverages or these mixed cocktails. This is a much larger discussion,” Purucker said. “To suggest that somehow it’s going to end here and not be extended to White Claw vodka or Cutwater vodka …”

“We know where this is headed,” he added.

Beer wholesalers denied that suggestion.

“The only plans that I have go through the end of April of 2023,” Starkey said, referring to the end of the legislative session. “And our effort is on these mixed beverage products.”

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.