GRAND RAPIDS — Gov. Gretchen Whitmer has signed legislation that eases restrictions on the self distribution of spirits while also giving local distillers an easier path to bring canned cocktails to market.
Whitmer signed the bills at Long Road Distillers LLC in Grand Rapids this afternoon. The bill package, Senate Bills 141-144, passed the state Senate with bipartisan support in March.
S.B. 141 — sponsored by Sen. Wayne Schmidt, R-Traverse City — allows qualified small distillers to self-distribute products directly to retailers and consumers. The bill specifies that distillers can self-distribute up to 3,000 gallons of product, but it does not include spirits currently listed in the Authorized Distribution Agent (ADA) price book. These are spirits that state-approved distributors already handle.
For distillers that currently distribute, the new law gives them an opportunity to distribute special one-off and limited release products directly to retailers and consumers. Distillers that only sell products from their tasting rooms now have an avenue for small-scale distribution.
“Overall, we’re certainly really excited, especially with the ability to self-distribute,” Josh Cook, founder of Kalamazoo-based Green Door Distilling Co., told MiBiz. “We’re gearing ourselves up to investigate that and try to make the best business decision we can to see the difference between self-distribution and working with our distribution partner,” Republic National Distributing Company.
The concept of mixed spirit drinks, or canned cocktails, was a key aspect to the bill package. Schmidt’s bill also expands the definition of mixed spirit drinks, which were formerly capped at 10 percent alcohol by volume. S.B. 141 expands it to 13.5 percent if it is packaged in a metal can of fewer than 24 ounces.
The legislation also reduces the tax on mixed spirit drinks from 48 cents per liter to 30 cents per liter. Under the previous law, a 12 ounce canned cocktail was taxed at the same rate as a fifth of hard liquor.
Currently, national brands like Truly and White Claw only pay 5 cents in tax per liter because the alcohol in hard seltzers comes from fermented malt. Because mixed drinks — such as canned vodka and soda — is a distilled product, it is taxed at the higher rate.
“End users don’t necessarily care where the alcohol comes from,” said Long Road Distillers co-owner Jon O’Connor, who’s also president of the Michigan Craft Distillers Association. “We didn’t get to parity, but the reduction from 48 cents to 30 cents is a huge step in the right direction in terms of giving distillers the opportunity to get their products to market at a more competitive price.”
S.B. 142 — sponsored by state Sen. Winnie Brinks, D-Grand Rapids — gives mixed spirit drink manufacturers the ability to self-distribute up to 31,000 gallons of mixed spirit drinks directly to retailers.
The new laws could spark an influx in distillers experimenting with the production and distribution of canned cocktails, O’Connor said.
“Being able to get to market at a small scale and retain some of the margin helps you get proof of concept, establish a base, establish a draw — people want to know the product is good,” O’Connor said. “It lets you kind of prove the market and make a few extra bucks along the way so you can see if these products are viable before you make those investments.”
In a statement, Whitmer called the craft beverage legislation a “great example of bipartisan legislation that will create jobs and help our small businesses grow, and shows what we can do when we work together. Distillers are a growing industry in Michigan, and these bill(s) make it easier for distillers to distribute their products. These bills will make canned mixed spirits more affordable and accessible, creating jobs and helping Michigan small businesses.”
While at a separate stop at Steelcase Inc. today in Grand Rapids, Whitmer also announced “slimmed down” COVID-19 emergency safety rules that begin to ease workplace restrictions and guidelines for employers.