The Thirsty Beagle: Budweiser takes nuclear option on Oklahoma alcohol legislation

Thursday, February 18, 2016

Budweiser takes nuclear option on Oklahoma alcohol legislation

Well that escalated quickly.

Many of you went to sleep Tuesday night suspecting nothing. You woke up Wednesday to this:

And don't forget this:

This was Anheuser-Busch's reaction to Senate Joint Resolution 68, which lays out possible amendments to the Oklahoma constitution when it comes to our alcohol laws. The resolution was approved Wednesday by the Senate Rules Committee, and if it proceeds further and all the way through the legislative process, it could end up on the ballot come election time in November.

AB launched an impressive multi-media campaign in response, featuring the newspaper and website takeovers above, plus television commercials, social media presence and a super-slick website.

Clearly, AB had all this stuff ready to go. Once they saw the writing on the wall and it became clear they were not going to get their way on the language in SJR 68, they hit the nuclear reaction button.

I want to talk about that some more, but first, let's take a look at SJR 68, for those who maybe didn't keep up with the news on Wednesday.

The full measure is quite technical, and while I don't claim to be a political scientist, parts of it seem easy enough to understand. (Other parts of it are not easy to understand at all.) The key takeaways -- at least when it comes to beer -- from my perspective:

-Cold beer and wine could be sold at liquor stores.
-Full-strength beer and wine could be sold in grocery and convenience stores.
-Brewers could sell their beer out of the brewery for on- or off-premise consumption.
-Liquor stores could sell any item sold at a grocery store, provided those sales don't exceed 20 percent of the store's total sales.
-It would be left up to the Legislature to decide a number of issues, including days and hours for alcohol sales, what constitutes a small brewer, and taxes levied on alcoholic beverages (the taxes especially are not an insignificant item, considering sales tax on strong beer right now is nearly three times that of low-point beer. The question is, where will the tax rate land in a single-strength system?).
-Changes would go into effect on Oct. 1, 2018.
-Oklahoma would move to a three-tier distribution system with a prohibition on ownership interests in more than one tier at a time.

And there's the rub for AB, which right now owns the distribution channels for its low-point beer in Oklahoma. SJR 68 allows five years from date of adoption for companies to divest (read: sell off) their brewery-owned distribution branches.

AB claims in its ads this will lead to severe negative consequences in Oklahoma, including the loss of hundreds of jobs, rising beer prices and Budweiser actually withdrawing from the Oklahoma market altogether.

Not everyone shares these opinions. Zach Prichard, president of Choc Beer Co. in Krebs and of the Craft Brewers Association of Oklahoma, issued this response:

"The CBAO has been anticipating the announcement of SJR 68 for some time now. As small brewers we are focused on advocating for tap room sales and other changes which help reduce the large financial risk small brewers must undertake. Oklahoma is already fortunate to be home to many great breweries. Simple, reasonable changes such as tap room sales will allow brewers to continue to grow their business. They will also provide a great showplace for Oklahoma-made beer and establish Oklahoma as a beer tourism destination.

"We expect there will be considerable discussion concerning the specific language of SJR 68 as the resolution moves through the legislature. We look forward to being part of that conversation as we all work to grow our business in a responsible manner that all Oklahomans can be proud of."

And Brett Robinson, president of the Beer Distributors of Oklahoma, issued this statement:

"The independent members of the Beer Distributors of Oklahoma fully support SJR 68 and commend Senator Clark Jolley, Senator Brian Bingman and Senator Stephanie Bice for their leadership on this complex issue. Because of their efforts Oklahomans could have the opportunity to vote this November to modernize Oklahoma’s adult beverage laws in a fair, safe and responsible manner. Doing so will protect the independent three-tier system, provide more consumer choice, allow Oklahoma craft brewers to expand their markets and safeguard against foreign-owned brewery monopolies. Modernizing Oklahoma’s alcohol laws is a complicated process, and many stakeholders, including BDO, have participated in the process. SJR 68 is the result of that process and is a quality piece of legislation.”

It's worth noting that until recently, Anheuser-Busch was a member of the BDO. They ended their membership, no doubt anticipating the two entities would end up on opposite ends of the distribution argument.

I also have some concerns with AB's claims. I've forwarded some hard -- but I think fair -- questions to them, and am awaiting their response. (One big question: Will they now file their own initiative petition?)

Eric James, senior director of sales and marketing for Anheuser-Busch Sales of Oklahoma, told The Oklahoman on Wednesday that SJR 68 "would impact hundreds of jobs and cause significant market disruption."

"We don't feel that this is a related or necessary part of modernization for consumers," James said.

To be blunt, a lot of what they are saying comes off as pure scare tactics. AB has been forced to divest in other states, and the world did not come to an end in those states. And they clearly did not stop selling Budweiser in those states. Obviously, SJR 68 would change the AB business model in Oklahoma, and clearly they are not interested in that.

They are interested in fighting this thing out, and certainly started by throwing some money around on Wednesday. 

1 comment:

  1. Would it be so bad if Budweiser stopped selling beer in Oklahoma? I say no.