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UW Election Eye 2012

Campaign 2012 through the eyes of UW faculty and students

May 30, 2012 at 6:27 PM

Lessons for Washington on the politics of alcohol from Wisconsin

Washington’s new liquor law is bringing big changes to the state’s alcohol industry. What can we learn from a state known for its alcohol about the future of booze?

Whether it is bars, restaurants, or distilleries, all will be affected by the new Washington law, and everything that comes with it. (Lucas Anderson / UW Election Eye)

MILWAUKEE — The politics and economics of alcohol in Washington change tomorrow, when sales of liquor move from a state enterprise to a private one. The state of Wisconsin is rich with lessons for what might come next for Washington.

Wisconsin is the birthplace of Miller Brewing and contains the city with the most liquor licenses per capita, some of the lowest taxes on beer, and one of the highest percentages of adults who binge drink. In short, it’s a state that knows alcohol.

What the history of Wisconsin makes clear is that alcohol is political.

The Tavern League of Wisconsin is the largest of its kind in the country, and one of the most successful lobbying groups in the­­­­ state. Over the years, the group has successfully lobbied the state officials and the legislature for its constituents: bars, pubs, restaurants, hotels; basically anybody who sells alcohol in the state. In a place known for its alcohol, you can imagine they mean business.

“If I needed 100 phone calls on an issue today I promise I could get them,” says Pete Madland, Executive Director of TLW, which has nearly 5,000 members across every county of Wisconsin.

Recently, TLW’s biggest fight was the smoking ban now in effect across Wisconsin similar to what happened in Washington seven years ago. While Madland and the rest of the League ultimately lost, their influence kept the language vague, and the power in the business owner’s court.

The small business owner is the League’s bread and butter.

Madland contends that of the TLW’s members, “most” are independent, small business owners, without big money behind them. Indeed, in 2008, the Milwaukee Journal-Sentinel found that the Tavern League had spent the least money of the larger more successful lobbying organizations in the state. According to the Sentinel’s research, TLW had spent $385,000 and was successful 60% of the time, compared to millions of dollars spent by local labor and teacher’s unions, with less success.

Wisconsin has one of the lowest taxes for beer in the nation at $.065 per gallon. (Lucas Anderson/UW Election Eye)

Alcohol has a long legacy in Wisconsin. Across downtown Milwaukee one finds neighborhoods like “Brewers Hill” and “Schiltz Park,” as well as a smattering of brewpubs and of course, lots of taverns. Madland attributes the culture to a substantial German heritage in the state, and beer giants Miller and Anheuser-Busch have both been a part of the state’s local economies.

But, as with anything, it could be due to money. Wisconsin has one of the lowest taxes for beer in the nation at $.065 per gallon, and also has low yearly fees for retaining a liquor license, both of which TLW has fought to keep low. The most recent attempt at a tax increase was in 2009, when lawmakers tried to increase taxes on spirits by 58% and beer five fold. Those were defeated, proudly with the help of TLW.

Despite overwhelming support for the sellers of alcohol in the state, TLW has mixed feelings when it comes to the producers of it.

TLW receives some money from the largest beer companies in America, MillerCoors and Anheuser-Busch as corporate sponsors, as well as from the Wisconsin Wine and Spirit Institute, a lobby group for wine and spirit wholesalers. But locally TLW often clashes with craft distillers and breweries in the area.

Up until three years ago, Guy Rehorst, founder and owner of Great Lakes Distillery in Milwaukee, could not sell his own product. A state law, safeguarded by TLW, only allowed distillers to sell through distributors, not directly to customers. With the help of the Chamber of Commerce, it was changed, but the groundwork was laid for the awkward relationship between producers and TLW.

Great Lakes is the first distillery in Wisconsin since the Prohibition Era and one of nine craft distilleries in the state, all trying to fit in a culture grounded in beer. They pay more in taxes than the local craft breweries, whose taxes are scaled with production size, which makes it more difficult to compete with larger national brands.

Recently, TLW defeated a measure to allow distillers to have tasting events inside liquor stores — a privilege allowed for beer makers as a marketing strategy, but not for spirits. Madland saw the effort as a fight against large, corporate distillers bringing money in and hurting local tavern business. But as a smaller craft distillery, Rehorst says it limits his market reach.

Washington craft distilleries will have to decide whether or not to distribute their own product to local bars and restaurants, or have a company do it, for added cost. (Lucas Anderson / UW Election Eye)

“Yeah, you are going to find a bottle of Absolute everywhere you go … our products are not in every bar in the state,” said Rehorst.

One bar that carries Great Lakes products is Benno’s, a long-time tavern outside of Milwaukee. Marty Weigel, the owner of Benno’s and a Common Council member in West Allis, has been supporting the craft industry in Wisconsin since he opened. While they have been in and out of the organization, Benno’s is currently not a member of TLW.

“I’m not a member of the Tavern League, because, honestly, I don’t think the Tavern League is doing what’s best for the tavern business,” said Weigel.

Weigel argues that TLW’s efforts in keeping tavern operating costs low has made the “most liquor licenses per capita” title possible, and, he says, that’s a bad thing. Because of the amount of bars, many of them don’t do a very good job at enforcing state intoxication laws. The consequences of which also plague the state.

When it comes to the craft brewing and distilling business, Weigel says they might be a little out of touch.

“I imagine most of the Tavern League guys wouldn’t know a difference between an ale and a lager,” said Weigel.

In Washington, craft distilleries are preparing for the June 1 switch from a publicly to privately owned system of alcohol sales. Washington is booming with microdistilleries, with more than 40 licenses and 20 more pending. Steven Stone from Sound Spirits, the first distillery in Seattle, said many distillers were satisfied with the simplicity of the state-run system, but look forward to the switch.

However there are some drawbacks. Stone predicts his spirits will rise 20% or more in price, due to the added fees included in the new law. Similarly, craft distilleries will now have to become more than just a producer. In the past, the State Liquor Control Board was their retailer and distributor — essentially their only customer. Diversifying business plans will require big decisions, but with some positive impacts, says Stone.

“Now, I’ll know who my customers are,” Stone said.

Comments | More in National | Topics: Alcohol, Bars, Beer

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