Hearing offers snapshot of next battle over Minnesota’s liquor laws: selling booze in grocery stores

The Legislature took another run Tuesday at answering one of the state’s fundamental questions: Is Minnesota exceptional — or just weird?

At issue was whether residents should be able to buy wine, regular-strength beer and Minnesota-produced liquor in supermarkets and convenience stores. A bill to do just that was being considered in a Senate hearing room, even though it won’t come up for a vote this session. Should it pass next year, or the year after that, or … someday, Minnesota would join the 44 states that allow regular “strong” beer to be sold in grocery stores, as well as the 39 states that allow wine and 22 that allow liquor sales in such outlets. 

On one side of a Capitol building hearing room sat those who consider the state to be “weird,” an outlier in polite-speak. They were grocery store owners, craft distillers and the bill’s prime sponsor, Sen. Karin Housley, a Republican from Stillwater.

On the other side — and they really did sit on opposite sides — were those who think the state is exceptional. That is, that Minnesota’s system for regulating alcohol sales that’s been in place since the end of Prohibition is just, well, better than systems in other places. They included liquor store owners, the national Distilled Spirits Guild of the United States, and the state Licensed Beverage Association.

‘They don’t understand’

First up was Team Minnesota-is-Weird. “We as a state are lagging in changes in the marketplace,” Housley said of her bill, SF 3600. “It’s important that we acknowledge that consumer buying habits are changing.”

She said previous changes in alcohol laws, especially the so-called Surly Bill, which allowed craft brewers to sell their products on site, have created a new industry in the state. Sunday liquor sales, passed a year ago, have brought consumers more convenience.

Her bill would direct cities to issue licenses to sell what the state calls “strong beer” — or what most people just call “beer” — to any grocery that currently has a license to sell 3.2 percent alcohol beer. Those stores could also sell wine and distilled spirits, as long as the latter is produced within the state’s boundaries.

The bill also provides for local consent for changes, which Housley says is intended to permit cities like Edina — which have only city-owned liquor stores — to maintain that exclusivity.

Under current law, grocery stores that have affiliated liquor stores must have the liquor operation separated from the grocery store, with separate doors and separate checkout. Each company is also limited to having one liquor store per municipality.

Kris Kowalski-Christiansen, part of the family that owns 12 Kowalski’s grocery stores around the metro, including eight that have affiliated liquor stores, said the family meets regularly with customers to ask about what they like and what they want. “One thing we hear is they don’t understand,” she said. “They’ve been to other states and they’ve seen it work and they’d really like that experience, that convenience factor.”

It’s only antiquated ‘if it doesn’t work anymore’

But there were others in attendance —from the Minnesota-is-exceptional contigent— who think current law is just fine. Tom Hanson, a lobbyist representing the distilled spirits guild, known as DISCUS, said he thinks limiting groceries to state-produced spirits only would be unconstitutional. Edina Mayor Jim Hovland said his city’s municipal-owned stores produce revenue, about $1 million a year, that would otherwise have to come from higher property taxes.

“Something is only antiquated if it doesn’t make any sense anymore,” Hovland said. “Don’t let a love of market competitiveness or the red herring of convenience increase the tax burden on people who live in communities with municipal liquor operations.”

But the committee witness with the most at stake might have been Jennifer Schonzeit. She co-owns Zipps Liquor Store in Minneapolis, and said the change would “devastate” small, independent liquor stores.

“There are very few food retailers that are small businesses anymore.” Food retailing, she said, is dominated by large businesses and many gas stations are controlled by companies like Super America, Holiday and BP.

The bill, she said, “is solely designed to enrich big business and hurt the small. It is picking winners and losers and expanding access to alcohol.”

At the end of the hearing, Sen. Roger Chamberlain, R-Blaine, said he isn’t a fan of the state’s 80-year-old liquor regulations, which emerged from Prohibition. But he also admitted to being beaten back when he has tried to change it in the past. That system, dubbed the three-tier system, requires that manufacturing, distribution and retail sales be in separate hands. Exceptions such as the Surly Bill require specific action by the Legislature.

Chamberlain said it has created expectations by those in the business that it will always remain in place because change will harm them. He summarized it like this: “Yeah, it’s wrong. It’s goofy. It doesn’t make any sense. But it’s been around so long that to undo it would cause unnecessary harm to existing mom-and-pop places, for example.”

The House will have a similar hearing on the same question Wednesday, this one for its version of the bill, HF 4152, authored by Rep. Jim Nash, R-Waconia.