Decorated glassware, imprinted coasters and branded chalk boards are effective promotional products and staples in bars and restaurants across the country—except in Michigan, where local regulations prohibit the use of many items featuring alcohol brand logos. These service-industry staples have been banned across the state for years, but now some businesses in Michigan are lobbying to change those rules.
The Michigan Liquor Control Code Act (MLCCA) of 1998 prohibits a liquor manufacturer or vendor from providing anything with a "secondary value" to a retailer, a definition that extends to bars and restaurants. Logoed coasters, glassware, uniforms, ashtrays, napkins and more all provide another function beyond advertising, and therefore cannot be given to the local watering hole.
It isn't just the giveaways that are regulated. Tavern owners can buy these products either blank or with the name of their own establishment printed on them, but can't use pint glasses featuring a beer brand, even if they've purchased them from a store or distributor. The items that are permitted, like posters and point-of-sale displays, are limited to specific dimensions and uses. No items under any circumstances can be co-branded with the name of both a bar and a beer.
The labyrinthine laws exist for two reasons: one, to discourage the over-consumption of alcohol, and two, to support the "three-tier system," a state-mandated business model designed to control liquor sales by separating the market. Under the rules, governed by the Michigan Liquor Control Commission, a business can register only as a supplier (brewers, vintners and distillers), a retailer (bars and restaurants) or a wholesaler that acts as a middleman between the other two. The relationships flow one way: Suppliers can only sell to wholesalers, who can only sell to retailers, who can only sell to the public.
Many states have strict and often archaic laws regulating the sale and distribution of alcohol, yet Michigan is alone in its level of control over promotional products, preventing retailers not only from receiving logoed merchandise but also from buying it. The question is, why?
In an interview with MLive.com, Mike Lashbrook, president of the Michigan Beer and Wine Wholesalers Association (MBWWA), an influential trade group that has opposed any changes to Michigan's liquor laws, said, "It gets into an issue of an even playing field at both the retail and wholesale and brewer level. If you get into what essentially becomes a game of commercial bribery, as in who can give away the most and who has the deepest pockets, those particular brands would then be favored on tap or featured at given licensees."
Lashbrook's statement that promotional products serve as "commercial bribery" doesn't sit well with everyone. "Is our media that much more powerful than any other advertising medium?" asked Paul Kiewiet, the executive director of the Michigan Promotional Products Association (MiPPA) and a marketing industry expert with more than 30 years of experience. "Regulators are suggesting that a microbrewery supplying a few dozen imprinted beer mugs to a retailer is more powerful than Super Bowl ads, full-color ads in the Sports Illustrated swimsuit issue, or a full flight of ads on the radio broadcast of the World Series. It's a nice compliment, but one that they have no business trying to regulate."
The promotional products community has resisted this characterization for years and has statistics showing the effectiveness of imprinted items. In a 2010 study, the Advertising Specialty Institute found that promotional products have a better cost-per-impression than prime time television and national magazines. Research conducted by the Promotional Products Association International in 2009 found that 78 percent of businesses found promotional products to be "very effective" or "somewhat effective" in meeting their advertising needs.
According to Jim Wysopal, president of California-based supplier Openers Plus, who has worked with the country's largest beverage brands for more than 20 years, "The alcohol industry is the stereotypical reason why promotional products work and why advertising in general works."
"Promotional products are effective marketing to end-users," Wysopal explained. "Every bar owner is looking to sell more product, to make more money. Giveaways are used to sell a brand. A brand that gives bottle openers, decorated pint glasses and coasters to each bar is helping that bar sell more brand, [and] in turn, make more money."
The Michigan Licensed Beverage Association (MLBA), which represents the state's bars and restaurants, wants its members to have the same rights to use promotional products as pubs in other states. Scott Ellis, executive director of MBLA, said that the federal government's Alcohol and Tobacco Tax and Trade Bureau already has comprehensive laws regulating what promotional merchandise can be given to bars and restaurants, and his association is asking Michigan to replace the current flat ban with those policies.
In a conversation with Promo Marketing, Ellis said his association is taking baby steps. The state's laws prohibit manufacturers or wholesalers giving "aid and assistance," such as secondary use promotional products, to retailers. "We're not even asking for that," he said, referring to free items from manufacturers. "We're asking for the ability to purchase. We don't want it for free. We want to be able to use them, period."
It isn't just the bar industry that wants a more open policy. In a statewide poll conducted by the MLBA and the Michigan Restaurant Association, 75 percent of respondents said they would either strongly support or somewhat support a change in the law that would allow logoed barware at restaurants.
"These items are allowed under federal statute, but they are prohibited from use in an establishment under Michigan's archaic liquor code and rules," Ellis explained.
The retailers want to use the product and the wholesalers want to uphold the prohibition, but what about the last part of the three-tier system? Michigan has a strong brewer's culture: The state is home to more than 100 craft breweries, and in May 2013, Grand Rapids was named "Beer City USA" in a national poll. Shouldn't these proud companies want to, and be able to, promote their products in their home state?
The answer to that question, it turns out, is hard to find. When contacted for this story, no brewery would speak on the record about the MLCCA or the use of promotional products in the state's taverns. One source, speaking on the condition of anonymity, said some manufacturers are working with the state and the wholesalers to change separate MLCCA provisions that limit a brewery's ability to expand. The beer makers don't want to take on another battle, especially one that would put them at odds with their wholesaler partners.
Craft breweries and microbreweries also have another reason not to change the regulations regarding branded merchandise: they're exempt from the laws. Brewpubs owned and operated by a manufacturer are allowed to use promotions with beer-centric logos, meaning they are free to advertise product using pint glasses and napkins in ways other bars cannot.
Caught in the middle of this are Michigan's promotional products professionals, who are effectively cut out from one of the most popular markets for logoed merchandise. The state is home to hundreds of supplier and distributor companies who are contending with laws no one else in the country faces. As Kiewiet said, "If they were to try to limit advertising on other media, there would be outcries for violation of the First Amendment."
Kiewiet's not the only one who questions the MLCCA's rules. In 2012, Michigan Gov. Rick Snyder asked local business owners to review the state's liquor laws and make recommendations for changes. One of those recommendations was to "remove all prohibitions on Secondary Use items that are provided by suppliers," and the state's Office of Regulator Reinvention voted 12-6 in favor of that recommendation. That vote was not binding, but it gave hope.
Change is on the horizon, but what form it will take is uncertain. In September, Michigan state Sen. Joe Hune submitted two bills that would prohibit any changes to the state's liquor regulations, effectively turning the Michigan Liquor Control Commission's rules into laws. "We're going to bring everyone to the table and try to get complete agreement on the issues," Hune told the Michigan Information & Research Service.
The MLBA doesn't buy it. Hune's bills strongly support the MBWWA's stance and ignore the issues Ellis and his team have raised. The MLBA has pledged to continue its campaign for change, but until then, the state's bars and restaurants have to wait for the tables to tip in their favor.