Are distilleries de facto bars?

  • Monday, February 26, 2018 1:23pm
  • Opinion

In January the state Alcohol and Marijuana Control Office (AMCO) enacted regulations to prohibit distilleries from mixing cocktails in their tasting rooms. Distilleries will now have to provide mixers and alcohol separately to customers, and the customer will mix their own drink.

In response, the Legislature introduced bills to overturn those regulations (House Bill 269 and SB 153) and allow distilleries to continue making cocktails. The House bill was heard in House Community &Regional Affairs and is now in the House Labor &Commerce committee.

The AMCO regulations may seem petty, but I don’t think they go far enough. Distillery tasting rooms, like brewery tasting rooms, were not meant to be bars. A distillery exists to manufacture alcoholic spirits for commercial sale. In fact, it is against state law (AS 04.11.170) to have bar stools in tasting rooms, live entertainment, televisions and other forms of entertainment. The hours of operation are spelled out, from 9 a.m. until 8 p.m., and the licensee cannot sell more than three ounces a day per person for consumption on the premises.

Because most of Alaska’s new distilleries are producing vodka and gin (whiskey takes a couple years to age), patrons aren’t anxious to taste the pure product. Distilleries began selling mixed drinks, and it wasn’t until September 2017 that the state took notice.

A Google search of Alaska distilleries shows photos of tasting rooms with seating including comfortable tables and chairs and even sofas. By all appearances, the distilleries are operating as bars. A license to run a distillery sells for a biennial fee of $1,000. The biennial fee for a beverage dispensary (bar) license is $2,500. But because bar licenses are limited by population and very few are available, someone who buys an existing bar license will pay $250,000.

There are currently nine distilleries operating in the state, and like bars, the number of distillery licenses is based on population — one license for every 3,000 people in a community. We have around 30,000 people in Juneau, so we could have 10 distilleries here. In the Anchorage and Mat-Su area there could be 133 distilleries. Based on Alaska’s population of 738,432 as of 2015, there could be 246 distilleries statewide.

While legal, another issue the consuming public may not be aware of is the fact that a number of the new distilleries are not actually distilling raw alcohol on their premises. They procure raw alcohol (ethanol) from other distilleries, and then flavor it with juniper berries for gin, or rhubarb, spruce tips, etc. for vodka. The flavored ethanol is processed through their still, and is then considered distilled on site.

Regardless of how the distilled spirits are produced, a distillery tasting room has a huge advantage over bar owners who buy distilled products at retail or wholesale and pay significantly higher prices for the products, which are marked up at each stage of distribution and heavily regulated and taxed by both national and state governments. The profit margin on a $5 cocktail offered at a distillery tasting room far exceeds the margin earned by a bar on a similar drink.

To be clear, my remarks are not targeted at Juneau’s local distillery. I do not know the owners, but I think they have created a beautiful establishment. My concern is the basic fairness of distilleries acting as de facto bars and operating without a bar license.

I also question why our Legislature is encouraging the proliferation of liquor establishments in a state that has a terrible alcohol problem. Do we really want to explode the number of drinking establishments in Alaska?

A reasonable solution to level the playing field would be to adopt rules that limit the volume that may be dispensed as samples relative to total production. That percentage could be debated, but it should be a small amount when compared to the distillery’s main purpose, distilling packaged alcohol for distribution. The purpose of allowing alcohol manufacturers in Alaska to sell samples of their product should be to allow them to introduce their goods to customers, not as a means to stay in business by competing unfairly with licensees holding bar licenses.

• Kimberly Metcalfe is a Juneau resident who has no financial or ownership interest in the alcohol industry.

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