Michigan made a major move this week to boost the burgeoning craft distillery industry with the adoption of bipartisan legislation that makes distribution of some products simpler and taxes lower. Now it should tackle the remaining barriers keeping the promising new segment from reaching its full potential.
The key piece of the four-bill package signed by Gov. Gretchen Whitmer deals with canned cocktails, the hot new segment of the liquor business that packages mixed drinks in an aluminum can.
Michigan distillers can now raise the alcohol content of the ready-to-drink cocktails to 13.5% from 10% in cans less than 24 ounces.
In addition, taxes on mixed spirits were cut to $0.30 per liter from $0.48 per liter.
Small distillers can also distribute up to 3,000 gallons of their product to retailers themselves, bypassing the Michigan Liquor Control Commission’s rigid distribution system. Liquor makers can now move their bottles through wine wholesalers, a cheaper option that will give them access to more outlets.
The cost savings and additional revenue the legislation should generate will be a boon to an industry that has grown to roughly 40 local distillers statewide from fewer than five over the past five years, says J.P. Jerome of Detroit City Distillery, and vice president of the Michigan Craft Distillers Association.
“Where it’s really important is for those making spirits in Michigan on a small scale,” he says. “It should allow more people to get a foot in door. It will allow local brands to build themselves up.”
To really push it ahead, the state should take additional steps.
Chief among them is lowering the oppressive excise tax on distilled spirits. For a bottle of booze that sells for $30, the state claims about $10 in taxes. After distribution and other costs, the distiller is left with just $7.
That reduces profit margins on a low volume business, and makes prices less competitive.
Lowering the tax on small distillers who use Michigan agricultural products and employ Michigan workers might actually generate more revenue for the state.
Craft distillers in Michigan should also be allowed to sell their products online and ship direct to consumers, as wineries do.
The potential for this industry could equal that of craft breweries, which have sprung up in towns across Michigan, creating jobs and boosting tourism.
“We could have the same presence,” says Jerome.
Another push by the state could get them there.
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