St. Augustine Distillery claims current laws discriminate against distilleries

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The CEO of the St. Augustine Distillery says a bill recently passed by the Florida legislature allowing craft distilleries to sell more bottles directly to consumers still requires them to abide by regulations more stringent and antiquated than those mandated for breweries and wineries.

“We are required to operate under a different set of laws,” said Philip McDaniel, whose distillery on Riberia Street in downtown St. Augustine makes whiskey, rum, gin and vodka. “In essence, (we) are being discriminated against because we sell spirits instead of beer or wine.”

Expected to be signed by Gov. Rick Scott within the next 30 days, the bill (HB-141) increases the number of bottles a craft distillery can sell to a consumer from two to six per year, which McDaniel said is a sign of progress. He explained that the original version of the bill, however, included privileges that would have provided for parity with breweries and wineries, including the elimination of all limits on bottle sales from a distillery’s tasting room, as well as the ability for distilleries to sell drinks by the glass. Both privileges are currently afforded to Florida breweries and wineries, and distilleries in several other states, which McDaniel said makes it difficult for Florida distilleries to compete. Also included in the bill: Florida distilleries are prohibited from shipping their spirits to consumers; all transactions must be completed in person.

McDaniel said that there wasn’t enough support in the legislature to pass the initial version of the bill, which was filed by Rep. Cyndi Stevenson in December 2016. Stevenson called the current situation for distilleries “a shame,” saying that she doesn’t think parity will be achieved any time this year. As a result, distilleries will have to continue selling most of their product through distributors, which McDaniel said isn’t as profitable as selling directly to consumers. He noted that he must sell three or four bottles to a distributor to reach the same profit earned by selling one bottle from his gift shop to a consumer.

Although McDaniel values the relationships with his distributors, he said they benefit from this current system and don’t want to change it. The businessman explained that the three-tier system of alcohol distribution, which includes manufacturers, suppliers/distributors and retailers, provides distributors with the most power. The only way for a manufacturer to currently ship product to a retailer and ultimately a consumer, he said, is through a licensed wholesaler or distributor.

“This dates all the way back to Prohibition,” remarked McDaniel. “It’s that middle tier that has had complete control over the distribution of alcohol that has been opposing any changes to the three-tier system. They see it as a threat to their livelihood. Slowly, over the past 30 years, it’s been changing.”

McDaniel explained that the restrictions currently holding back distilleries were lifted for wineries about 20 years ago and for breweries over the last five to 10 years. He emphasized that he doesn’t have any interest in changing the three-tier system, but he does believe that when guests visit his business, they shouldn’t be limited to a certain number of bottles per year or refused a glass of the distillery’s spirits. Not only does he think that’s unfair for distilleries and its customers, he believes it’s not good for the distributors’ business. If craft distilleries were more profitable out of their gift shops or tasting rooms, he said, they could contribute that revenue toward marketing to help distributors sell it at retail locations and compete with big brands.

McDaniel hopes that the legislature will soon recognize it’s hanging onto something that needs to change for the best interest of the consumer. He plans to wait another year before lobbying the legislature again, with hopes it will be more favorable to small businesses like his own.

“We firmly believe in our core as business people we should be able to operate under the same rights that are currently granted to other alcohol producers,” said McDaniel. “We’re a little bit frustrated with it, but we understand that things take time, and big changes come in small, hard fought steps.”

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