Robert Gehrke: Cheers to new beers, but Utah’s liquor laws are far from reflecting free-market values

Robert Gehrke

Things got a little choppy last week, with empty shelves in the beer aisle pretty much everywhere you went. But as of Friday, Utah beer-drinkers were able to raise a glass in celebration.

The new law raising the allowed alcohol content on beer sold in grocery stores isn’t really about alcohol, despite what some might lead you to believe. People who drink to get blasted did that before and still will.

It’s about choice — maintaining the selection that consumers had before, allowing an array of new brands into the market and giving local brewers a little more latitude to brew beer the way it is intended to be brewed.

Perhaps most importantly, it (slightly) loosens an arbitrary restriction and gives consumers the ability to choose what they actually want, not just what the state has determined they can have.

“The basic economic principles of free-market capitalism that have made America great,” Gov. Gary Herbert said in his State of the State address earlier this year.

It’s doctrine so sacred that it might as well be etched in giant letters on the front of the state Capitol... until it comes to alcohol.

Once Demon Liquor enters the discussion, all that free-market mumbo jumbo goes out the window. It’s the one area where Utah lawmakers love central planning, price-fixing and state control. Utah has operated a state-run monopoly since Prohibition was repealed with less-than-stellar results.

That doesn’t mean the state hasn’t seen some considerable progress in the past 15 years.

Private clubs are gone, stronger pours have made it possible to make a halfway decent cocktail, wine tastings are allowed, local distilleries have been permitted to crop up and, as of last week, the beer options have been opened up considerably.

(Francisco Kjolseth | The Salt Lake Tribune) Andy Shafer picks out a fresh pack of Wasatch beer as he visits the beer aisle at Smith's Marketplace in Bountiful filled with the new beer that is 5% alcohol by volume on Friday, Nov. 1, 2019, for the first time in 86 years.

It’s been a boon, not just to residents, but to the tourism industry and Utah’s reputation nationally. But it’s also been trench warfare to get to this point — and there is more to be done.

As of last week’s Department of Alcoholic Beverage Control meeting, the state is once again completely out of bar licenses, according to reporting by my colleague Kathy Stephenson. The last two were awarded and five applicants were left on the waiting list, where they may languish for six months.

[Hear more about it on “Utah Booze News” podcast.]

One of those waiting, a new addition to Trolley Wing Co., was forced to take a fallback option and buy a liquor license from another operator, which is legal. It will open as scheduled, but the cost of a license generally runs between $50,000 and $100,000 — and that could go higher given the scarcity.

Not much about that scenario is either business friendly or reflective of free-market values.

“The Legislature probably ought to take a look at this again. … I hate to go back to the situation we had a few years ago, where we had 20 or 30 people waiting for bar licenses,” said DABC Chairman John T. Nielsen. “The state also should not be preventing businesses from operating and serving the public.”

Dave Morris, president of the Utah Hospitality Association, which represents bar owners, said there are a couple ways to look at the issue. From purely self-interest, he’s already got four licenses, and is fine without more competition, thank you.

His own interest aside, though, there are broader issues.

“Does the state want to promote small business formation and encourage more economic growth and development?” Morris asked. “If that’s the case, let loose some more licenses. If they want to stifle growth and keep it, they would not be the only state that does.”

There have been some preliminary discussions with lawmakers about increasing the number of licenses, but I’m told the reception has been chilly.

Speaking of chilly … what kind of system would require products that are supposed to be refrigerated to be stored in an unrefrigerated warehouse? Wouldn’t fly with ice cream. It does with beer.

It’s even more senseless than that. The way it works now, distributors with refrigerated trucks can deliver the grocery-store strength beer to bars or restaurants, then have to deliver higher point beer to the unrefrigerated state warehouse. Then the bar or restaurant owner has to go to the warehouse to pick up the order.

The same is true if, for example, a restaurant wants to place a special order — because it takes months to convince the DABC to carry some products.

If DABC was run like a business and not a bureaucracy, the truck carrying the beer would just be able to deliver all of the beer to the restaurant that ordered it.

Those are just a few of the changes I’d make if I was Utah’s Liquor King — which I hope to be someday. A couple others:

• Privatize liquor stores: There’s no reason not to. The state could still control distribution and collect most of the taxes, without the expense of trying to run the retail operation (and doing it badly).

• Wine by mail: Most states already have this. Controls are in place — like required ID checks and signatures upon delivery — to keep minors from making purchases, and the state could still collect its cut.

• Charge the market price: Here’s where I lose the drinkers reading this column. Currently, Utah law imposes an 87% markup on liquor, no more, no less. It means people pay too much for cheap booze, but you also end up with Pappy Van Winkle selling for $150 here when it sells for hundreds more everywhere else. It’s simply bad business.

None of this is likely to happen any time soon, which means for the foreseeable future we’ll all be stuck with a system that Morris, with the hospitality association, probably described better than I could: “It’s like a bunch of vegans deciding how to run a meat packing plant,” said Morris, who is vegan. “They don’t know what they’re doing.”