Greenspoon Marder Hospitality, Alcohol & Leisure Blog: “Hooray for Hollywood (and not the one in California)”

May 3, 2022

Yes, there’s another Hollywood out there other than the entertainment capital of the world. The one referenced in the title above is in Allegan County, Michigan and if you ever make your way there you can have a fine specialty cocktail made by a craft distiller at, what the state argues is finally a reasonable price.

First a little background. Michigan is a control state when it comes to the sale, service, and the distribution of alcohol. In the parlance of the trade and the regulatory structure that frames all alcohol sales in the United States, a control state is one where the sale of beverage alcohol is controlled by state governmental agencies. Control, in this instance does not mean regulatory control, here it means that the state is an active market participant. The state actively sells alcohol into the marketplace either as the wholesale or retail actor and in some instances may be both. To be clear, government agencies in these states are the only actors – that is, they hold the monopoly on alcohol sales within the tiers and in some instances within their borders. Seventeen states in the U.S. are control states in some iteration. There are even some control counties within non-control states that have plenary authority over alcohol sales such as Montgomery County, Maryland.

Control states account for about 23% of all distilled spirits sales in the U.S. with smaller percentages for beer and wine. Control states and their advocacy associations assert that these jurisdictions “reflect the public commitment to moderation and serve as a vehicle for balance between alcohol profits and public well-being through dedicated enforcement, resources, promotion of alcohol education and awareness programs to support that commitment.”

Hooray for Lansing for almost coming in line with free market economics at least for real world pricing of spirits. Michigan is applauding itself for HB 4824 which was passed by its House in May 2021 and is on its way to the Governor for presentment and consideration. The bill would reduce the markup charged by the state on distilled spirits produced either by in state or out of state craft distillers to 32.5% at the wholesale level. Currently, standard state markup, codified in law, at the state level for all distilled spirits is a minimum of 51% to a whopping maximum of 65%. Michigan is also patting itself on the back by requiring that only 40% of Michigan agriculture product be used in the distilling of the base of the craft spirit in order to qualify for the reduced markup. The reader should take note that this reduction and requirement only applies to distilleries defined as Craft under Michigan law. Interestingly, it does appear that the state has learned from its Granholm debacle. The law does apply to both in state and out of state craft producers seemingly avoiding a commerce clause attack. The bill can be seen here.

A visit to the State of Michigan’s Liquor Commission website states this:

The mission of the Liquor Control Commission is to make alcoholic beverages available for consumption while protecting the consumer and the general public through regulation of those involved in the sale and distribution of these alcohol beverage products.

It seems to me that at the current minimum of 51% and maximum of 65% profit margin perhaps the words “while maximizing and filling state coffers beyond standard free market margins allow” should be added to the mission statement as well.

So next time you’re in Hollywood (Michigan) enjoying the aroma and taste profile of a local or foreign craft spirit, keep in mind the image of a kerchiefed and shmata wearing babushka with hammer and sickle in hand cutting enough sheaves of wheat to achieve the state mandated 40% Michigan product base mark to take advantage of the liberal 32.5% price markup.

Rest easy barfly your loyalty to the party is helping the state achieve its planned economic objectives. Nazdrovia!

Please reach out to me at [email protected] or (305) 789-2770 at any time, our team is ready to assist you 24/7.

About Greenspoon Marder

Greenspoon Marder LLP is a full-service law firm with over 240 attorneys and more than 20 office locations across the United States. With operations from Miami to New York and from Denver to Los Angeles, our firm attracts some of the nation’s top talent in key markets and innovation hubs. Our core practice areas include Real Estate, Litigation, and Transactional Services, complemented by the capabilities of a full-service firm. Greenspoon Marder has upheld a spot on The American Lawyer’s Am Law 200 as one of the top law firms in the U.S. since 2015, and our goal is to provide exceptional client service by developing a thorough understanding of each client’s business needs and objectives in order to provide strategic, cost-effective solutions.

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Greenspoon Marder Hospitality, Alcohol & Leisure Blog: “Hooray for Hollywood (and not the one in California)”

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