Colorado craft’s grocery conundrum

By Bart Taylor | Mar 31, 2015

Consumer & Lifestyle Food & Beverage

Colorado craft beer makers are a collegial bunch. As heady and competitive the market has become, the cooperative vibe that its first-movers established has endured and been a catalyst for growth.

And so has Colorado liquor law, making it no surprise the sector is unified against a development many view as an existential threat to the industry: the prospect that grocery stores will be able to sell full-strength beer and wine. Many crafters believe grocery (and convenience store) sales will devastate local liquor stores and in turn do irreparable harm to the sector.

There's reason to worry. The current system has been equal parts sales channel and industry incubator. Assured of a protected network of specialized retailers, craft entrepreneurs have been free to take risks, innovate, and experiment. The results have been breathtaking. Colorado now boasts more craft breweries per capita than any state in the nation, alongside a thriving specialized retail channel that serves local interests by preserving choice and promoting local industry.

Others argue that grocery sales would not hurt the industry but help build it by improving availability and convenience. The pesky reality is that today, consumers might agree. As a result advocates for expanded sales stand a better chance than ever of landing the issue on a statewide ballot and winning.

How good a chance? Numbers give the "convenience" vote a boost. Craft products comprise about 20 percent of total beer and wine purchases here, meaning that for most Colorado consumers, buying any full-strength beer at the same location where groceries and other consumer goods are purchased is a plus. Voters may also look to California and Oregon, thriving craft markets where full-strength beer and wine are sold alongside groceries, and assume Colorado's robust industry would evolve and adjust.

That's certainly the case. But at what cost?

For John Carlson, executive director of the Colorado Brewers Guild, access to market, for one. "Should the current regulatory structure change, smaller brewers will have a more difficult time getting their packaged beer on the shelf," Carlson says. "Larger packaging brewers will likely see less of their portfolio make it to the shelf of a large out-of-state corporate grocer due to limited space."

Kevin DeLange, co-owner of Dry Dock Brewing, agrees. "Smaller breweries who are just now starting to distribute will be significantly hindered growing their business because they won't have access to market. Many of them are already curtailing capital investment and growth due to the uncertainty." For a sector that's grown up ensuring the next entrepreneur in line enjoys the freedom to innovate, with assurance that consumers can buy, it's a big deal.

Not all small craft brewers agree. "I'm 100 percent in support of full strength beer sales in grocery stores across Colorado," says Trinity Brewing's creative founder Jason Yester. "Although some brewers oppose it, as a boutique brewer I see a huge opportunity with the continually increasing number of natural grocers opening and operating in our state."

Dry Dock's DeLange sees breweries like Trinity suffering most, with grocers tilting to volume beers from larger craft brands. "Larger breweries who are already in multiple states know how the system will change and already have relationships with the chain stores and will have less damage control to do," he says.

For their part the Guild isn't convinced a ballot measure is inevitable and seem only to have begun the fight. They're part of a relatively new coalition called Keep Colorado Local, business leaders intent on winning the argument before an election, in part as a means to dissuade the opposition from spending big.

As a practical matter though, what steps could be taken to mitigate impact on small craft makers and the retail outlets that have long supported them, if advocates for expanded sales succeed?

Trinity's Yester hints at one direction. "States like Oregon are selling full strength craft beer at all grocery and convenience stores and doing so with great success. Portland is the only city in America where over 50 percent of total pours are craft beer. It's structures like this that prove availability drives both education and sales. This is something we all want."

Using wider distribution as a springboard to educate consumers could drive overall market share for a sector that believes it has an unlimited ceiling.

Much also depends on what an actual election decides. A constitutional amendment, as we've seen, leaves much to be decided. Can industry and the voices who support them in this fight, like the Colorado Licensed Beverage Association, preempt an electoral battle and work with the "grocery lobby" to agree on a framework that's also favored by lawmakers? Consensus seems a long way off.

What's certain is that whoever decides to take on Colorado's craft industry should be fully prepared. Collaboration Fest, a new Guild event inviting craft brewers to work together to conceive and pour new varieties, drew over 2,500 attendees last week at Sports Authority Field at Mile High.

Tugging on superman's cape can be risky business.