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DABC AND LEGISLATIVE

Regarding the DABC, Legislature, and Utah Liquor laws……

Recently, the DABC engaged in what I like to call The Great De-Listing. In the letters they sent out, over 900 products were de-listed, meaning they would be pulled from the shelves of State Liquor Stores. De-listing is a normal part of the DABC process, and, while normal as a business matter, it is symptomatic of a larger problem in a control state environment, where all distribution and sales, as well as a good portion of manufacturing, are controlled by the State Legislature, through the DABC.

Let me explain…

The DABC is tasked with executing the relevant laws passed by the Legislature and signed into law by the Governor. While in many cases they have much interpretational latitude, the fact remains that they don’t make the law. An easy target, and often a legitimate one, they are limited by legislative constraints.

Of the legislative constraints that are troublesome, none is more troublesome than the method by which the DABC is allowed to purchase products. As it currently stands, the DABC elects to use a computerized inventory management system called Symphony, a product of the grocery store industry, which determines how many of each product is allowed in each price bracket. The quotas assigned to each price tier appear to be somewhat arbitrary, although I am sure there must be some method to the madness. For an item to be listed, there has to be space in that price bracket for that product, or it can be listed as a trial listing allowing it time to grow. The biggest problem with this is the limited time allotted for a product to remain on the shelf before being evaluated for viability, and possibly de-listed. Which brings us to the other major shortcoming, the method by which products are de-listed. As it has been explained to me, products are evaluated on overall sales, and per-store, per-day sales in terms of both revenue and units sold. This is where the system goes off the rails in terms of local products, in my opinion. As a local producer, I am held to the same standard for sales as national and international brands, even though they have a massive competitive advantage in terms of marketing and brand recognition, to say nothing of their universal placement. It is simply impossible to succeed in that environment, especially given the other constraints the Legislature places on us regarding marketing. But, perhaps most important is the fact that by the time a local product is evaluated and de-listed it is likely being used in bars and restaurants, which can account for a bulk of that products sales. If that product is de-listed, those restaurants won’t be able to simply pick it up with their other orders from their local liquor store and, since it is illegal for the producer to deliver it to them, they will certainly stop using it, putting the producer at an even greater disadvantage.

Another, more nuanced, legislative issue is this. The DABC is a taxpayer funded entity which supposedly exists to provide a service to the taxpayer. In this regard, they are no different than the DMV. However, it is run like a for-profit business, and except for their taxpayer funded nature, they are fundamentally the same as Lee’s Discount Liquor. The State wants the revenue stream from the liquor store as a business, and the control that only a control state can exercise over commerce. They are a monopoly in every regard. In this monopoly, you, the taxpayer, are funding a state run business, whoseoperational budget you pay for, all for the privilege of paying an 89% markup on the products they allow you to buy. This markup is also why you can’t have alcohol delivered to your door. You have no say in the way the store is stocked, or how the product is sold, and you have no option to take your business elsewhere. And, if you simply drive across state lines to buy your alcohol, you are probably breaking the law. In this monopoly, I, the producer, can only sell to the State, in the manner in which the allows, and the State controls most of my marketing and advertising, and all of my distribution, through legislative fiat. In this monopoly, the State has its expenses paid for by the taxpayer, they keep all the profits from sales, and they control distribution, resulting in little motivation on their part to provide the public or the producer with the service for which they are paying. In any other setting, this would be grounds for an anti-trust/racketeering case.

The legislative issues concerning alcohol sales in Utah aren’t all bad, however. Small producers get a discount allowing them to keep more of the profit to help them in achieve success, assuming they can do so under the other constraints placed upon them by the State. And, this system keeps prices low for products that have huge profit potential such as premium whiskey’s and wines. Also, from a marketing and distribution standpoint, I like having the DABC be the only entity I have to deal with. I would also add that the DABC has a lot of great people working for it, and we have had overwhelmingly positive interactions with them overall. Done correctly, the potential for the Utah control system to give Utah taxpayers the best system in the nation is hard to overstate. But it will take a sea change in the prevailing philosophy at the Legislature concerning alcohol sales to realize that potential.

Until we can achieve such a philosophical shift in the halls of power, the Legislative restrictions placed on local producers, and the competitive advantages given to large producers who don’t spend a dime in Utah, and don’t hire a soul in our state, will make success in Utah almost impossible for local, small, distilleries to achieve. It is for this reason that these distilleries will be forced to concentrate their sales efforts out of state, or go out of business. The biggest loser in that situation will be the Utahns who want to purchase products made locally, by their neighbors, using local ingredients.

What can you do? A number of things really help. Reach out to your State Senators and Representatives, often. Voice your opinion in the media when given the opportunity. Write or call the DABC. And, purchase your favorite spirits from the State Liquor Stores if possible. It is the best part of our business to interact with all of you here at our distillery, and I know other distillers feel the same, but sales numbers from state liquor stores will help keep these products on the shelves. And, on that note, ask the manager at your local DABC Store for products that are missing from the shelves. Keep asking. Tell us what you want and we will push from this end. Together, I hope we can keep Utah products on our shelves.