Legislature

Iowa distillers frustrated with state regulations

State law rooted in era of Prohibition repeal

Winery and distillery barrels are stacked in the manufacturing area at Cedar Ridge Vineyards in Swisher. (The Gazette)
Winery and distillery barrels are stacked in the manufacturing area at Cedar Ridge Vineyards in Swisher. (The Gazette)
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DES MOINES — When Bettendorf brothers Mike and Matt Blaumdecided in 2013 to open a whiskey distillery, they chose Galena, Ill., in part because they found Illinois state regulations more favorable than Iowa’s.

Three years later, small Iowa distilleries continue to fight for what they say would be more equitable state laws.

“Really it’s a fairness issue,” said Garrett Burchett, owner of Mississippi River Distilling Co. in LeClaire, Iowa.

Iowa’s alcohol laws are grounded in a so-called three-tier system in which an independent distributor must operate between the manufacture and sale of alcohol. The system goes back to the 1930s and the repeal of Prohibition.

The state has carved out some exceptions along the way, allowing small wineries and craft breweries to sell their product on-site.

Distilleries that produce hard liquor seek a similar exception but have failed over the past four years to convince state lawmakers.

“We’ve seen tremendous growth in the Iowa wine and beer industry, and what we’re asking for is the same thing, the same privileges you’ve extended to the beer and wine producers in the state, extend those to the distillers,” Burchett said.

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The Blauns, who grew up in Bettendorf, decided to open their distillery in Illinois instead of Iowa in part because of that disparity in Iowa’s regulations. Illinois, like all six states that border Iowa and 36 total, allows distilleries to sell spirits by the glass, according to the Iowa Alcoholic Beverages Division.

“Yeah, it was definitely a consideration,” Matt Blaunsaid. “We were looking at Iowa and Illinois at the time, and the Illinois laws seemed to be a bit better. That was one of the reasons we ended up in Galena.”

There is legislation in the Iowa House that would allow distilleries to sell spirits in glasses — they currently can provide only free samples — and raise to nine liters the amount of spirits a distillery may sell to visitors.

The bill passed a subcommittee in early March but has not received any legislative action since.

Distillery owners say the legislation has been thwarted by big beer companies and wholesalers, and they point to political donations made by the groups.

The only groups registered in opposition to the current legislation are the Iowa Wholesale Beer Distributors Association and Anheuser-Busch.

The wholesale distributors association donated $181,000 to state legislators from both political parties between 2013 and 2015, according to state campaign finance records.

“It’s real straightforward: It’s big beer,” said Jeff Quint, owner of Cedar Ridge Winery and Distillery in Swisher. “It’s just big beer that’s fighting it, and this bill doesn’t have the word beer in it once.”

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Distillers said they think large beer companies and wholesale distributors view the legislation as an avenue to increased competition.

“It’s my opinion, of course, that distributors and the major (companies) are looking at what happened to the microbrewery industry and how it blossomed and became around (12 percent) of total beer sales, and how they just ignored it too long,” said Gregory Brunelle, owner of Werner Distilling in Holstein. “I think they saw that, and they don’t want that to happen (again).”

When asked whether his group is responsible for legislative leaders not moving the bill, Iowa Wholesale Beer Distributors Association executive director Nathan Cooper said state lawmakers always have supported the three-tier system and the proposed legislation would weaken that system.

Cooper said beer distributors support current state regulations.

“This bill weakens the legitimacy of the system that Iowa has chosen to regulate alcohol,” Cooper said. “The three-tier system has helped provide a safe environment for consumers, and many Iowans are successfully employed because of it. It works for Iowa.”

Iowa House Speaker Linda Upmeyer, R-Clear Lake, said the bill has not moved because support among lawmakers is divided.

“There are people all over the map. It’s one of those things where there are many different opinions about how this should be done,” Upmeyer said. “We’re trying to work across the rotunda as well (with Senate Democrats) to make sure we’re all moving forward together. If we’re going to be able to get something done, we need to work on it together.”

But Rep. Guy Vander Linden, R-Oskaloosa, who chairs the House’s state government committee that introduced the bill, thinks there is enough support to pass it.

“I’m convinced it would pass the House if it came to the floor,” Vander Linden said.

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Vander Linden said he supports the bill and thinks it would provide an economic boon to the state.

Burchett agreed, saying he could double his workforce, and he and Quint said the growth of distilleries would benefit Iowa’s agricultural economy.

“This is an industry we think, in terms of Iowa and agriculture, that really lends itself to the industry,” Burchett said. “Whiskey is made primarily from corn, and certainly we have a lot of that sitting around.”

It all comes down to fairness, distillers said, which is why Quint said he is frustrated and saddened that it appears once again lawmakers will not act on the issue.

“Every state around us has figured out how to do this. Wineries and breweries have figured out how to do this. Yet here in Iowa, we can’t figure out a way to do this,” Quint said.

“I think that’s an excuse for inaction, and that’s looking like what we’re going to get.”

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