More lenient state laws could chill low-alcohol beer market

OKLAHOMA CITY -- Beer snobs are raising their mugs to a stronger brew in three states that once forbade grocers from selling anything but low-alcohol brands, and the changes could indirectly chill the industry in two others where such regulations remain.

Until October, Oklahoma grocery and convenience stores could stock beer with only up to 3.2 percent alcohol content -- considerably lower than even leading light beer brands. Liquor stores were able to sell stronger 8.99 percent beer but were prohibited from selling cold beer of any strength.

Voter-approved changes now allow stronger ales to be sold in Oklahoma grocery and convenience stores. And many of the changes are being adopted this year in the adjoining states of Colorado and Kansas.

The beer revolution will leave just two states -- Utah and Minnesota -- where only 3.2 percent beer may be sold in grocery and convenience stores. Beer industry observers say how lawmakers in those states react to the changes could determine whether the future of low-point beer in the U.S. is as flat as a week-old lager. Half of the nation's 3.2 beer market was in Oklahoma and an additional 20 percent was in Colorado.

"It is a dramatic drop," said Brett Robinson, president of Beer Distributors of Oklahoma, which represents some beer distributors in the state. "In Oklahoma now, beer is just beer. There is no more definition or classification."

Cans of spring seasonal Alpha Hive Double IPA are ready to be filled with beer Friday at COOP Ale Works in Oklahoma City. COOP Ale Works, which distributes in six states including Oklahoma and Kansas, has discontinued two of its three 3.2 percent brews.Sue Ogrocki ~ Associated Press

Oklahoma was the first of the nation's five 3.2-beer states to make the switch. That's ironic considering alcohol was illegal until voters repealed statewide prohibition in 1959 -- 26 years after Prohibition was repealed nationally.

"It was a long time coming," said Lisette Barnes, president of the Oklahoma Beer Alliance, a beer industry trade association. "It's refreshing. I think overwhelmingly people are excited about it. It's been a good thing for both industry and consumers."

As the market for "baby beer" continues to shrink, brewers must decide whether it's profitable to continue to make it -- a decision that could cause low-point beer supplies to dry up in Utah and Minnesota.

Anheuser-Busch, the world's largest beer producer, said it will work to meet the needs of consumers in 3.2 percent beer states even amid declining demand.

"While we will continue to produce 3.2 percent beer, regulatory and legislative changes in Oklahoma, Colorado and Kansas that affect demand for 3.2 percent beer will impact our national production," the company said in a statement in December.

Josh Yager transfers cans of F5, one of their most popular brews, from the production line Friday at COOP Ale Works in Oklahoma City.Sue Ogrocki ~ Associated Press

But some brewers are already cutting back on their 3.2 percent beer production. Oklahoma City-based craft brewer COOP Ale Works, which distributes in six states, including Oklahoma and Kansas, has discontinued two of its three 3.2 percent brews.

"The only reason we produced those other two beers was to have beer in grocery and convenience stores," said Sean Mossman, director of sales and marketing for COOP. "Now that we can sell our more popular styles in the grocery stores, we just don't see any need to continue manufacturing those beers."

And selling COOP's flagship beers in grocery stores "has been a boon for us," Mossman said. He said the brewer's business has increased 50 percent in the months since Oklahoma grocers began stocking its stronger beers. New regulations go into effect in Kansas in April, when grocery and convenience stores can start selling beer with an alcoholic content of 6 percent.

"Overall, we're very happy about the death of 3.2 beer," he said. "The death of 3.2 beer is good for us."

Dwindling supplies of low-point brew is something state regulators have considered.

Darby Rose works on the packaging line Friday at COOP Ale Works in Oklahoma City.Sue Ogrocki ~ Associated Press

"That's the question we've been facing for a couple of years." said Terry Wood, director of communications for Utah's Department of Alcoholic Beverage Control. "Business decisions may be made that make it just a financial choice for the breweries to stop producing 3.2 beer."

Former Minnesota state Rep. Jenifer Loon, who authored legislation repealing a longstanding ban on Sunday liquor sales in 2017, said regulatory changes in other states will likely force Minnesota lawmakers to consider allowing full-strength beer in grocery and convenience stores.

"The market's probably going to control this. Within the foreseeable future, there probably will have to be a change," Loon said.

Grocers have expressed support for selling strong beer in the past, but any effort to expand beer sales will probably be met with stiff opposition, she said.

"It's been very difficult to kind of drag our liquor laws into the 21st century," Loon said.

Josh Yager transfers cans of F5, one of their most popular brews, from the production line Friday at COOP Ale Works in Oklahoma City.Sue Ogrocki ~ Associated Press

For now, low-point beer will continue to be produced by the New Belgium Brewing Co., a craft brewery based in Fort Collins, Colorado, spokesman Bryan Simpson said. Production of 3.2 percent comprises just one-half of 1 percent of the brewery's overall production, and the company will shop it exclusively to Utah, Simpson said.

"It makes sense for us to do it because we want to have a presence there," Simpson said. He said the company's breweries are already set up to produce low-point beer and "there's really no sense to hit the brakes."