Iowans, on average, are consuming beer, liquor and wine in mass quantities and at an accelerating rate.

For the fiscal year that ended last June 30, the average consumption levels for Iowans aged 21 years or older were a record 35.6 gallons of beer, 2.23 gallons of spirits and 1.9 gallons of wine, according to data issued by the state Alcoholic Beverages Division.

The 6.4 percent increase in hard liquor consumption was aided by a state law change that removed restrictions on gas stations selling spirits and by a spike in consumer demand – especially among women and young people – for flavored drinks such as vodka, whiskey and tequila, ABD officials noted. (Story continues below report)

2012 Annual Report

“There has been an uptick in consumption,” said division administrator Stephen Larson. “The sales number reflects that trend and that trend will continue.”

ABD official Tonya Dusold said there has been “an explosion” of new brands and new flavors of spirits that are “selling really well” in Iowa, especially among female consumers.

“We saw almost a 24 percent increase in those in a single year,” Dusold said. “We’ve been seeing flavored vodkas for several years. Now we’re seeing those flavors seep into other categories and we’re seeing more flavored tequilas and flavored whiskies and things along those lines, and that’s primarily females driving that. I think we’ll continue to see those seep into other categories as well.”

Total spirits sales in fiscal 2012 were more than $242 million, a $21 million increase over the previous year, Larson noted. Liquor sales in Iowa were the highest since fiscal year 1988 when the state became the exclusive wholesaler of spirits, he said. In addition to revenue from spirits profits, the increased funds generated by state taxes on wine and beer, license fees and civil penalties contributed to a record $115 million in state revenue collected and generated in fiscal 2012.

Larson attributed about $10 million of the increase in spirit sales to a 313 spike in the number of class E liquor licenses issued to convenience stores that after July 1, 2011, no longer had to segregate liquor products in a separate area and process them on a separate cash register thanks to a change in state law. The sales levels however did not equate to consumption because the state figures reflected new inventories for convenience stores that initially stocked liquor products under the law change.

“I think the intent of changing the outdated law that was on Iowa’s books was to make it easier for convenience stores to offer those products without having to build a separate wall and maintain a separate cash register and a separate door way if they sold gasoline,” said Dawn Carlson of Petroleum Marketers and Convenience Stores of Iowa. “It seems like a very minor change. Consequently, convenience stores have found it easier to offer this product and apparently consumer demand has been pretty good.”

Carlson said the initial demand for the change primarily came from rural communities that wanted an alternative option for accessing spirits instead of having to drive to urban centers to make purchase liquor purchases. An unintended consequence pointed out by some city officials, she noted, has been a proliferation of businesses that sell alcoholic and tobacco products but no gasoline that have used the new law to seek state permits.

Sen. Jack Hatch, D-Des Moines, said there was concern that might happen but he doubted the split-control Legislature would revisit the issue and local officials that encounter problem areas likely would have to address them via zoning restrictions or ordinances.

State ABD officials said the trend of increased sales of alcoholic beverages has continued into the current fiscal year that began on July 1 with gross sales up 13 percent for the first four months.

Larson said most of the revenue generated by alcohol sales is transferred to the state general fund to be appropriated by the Legislature for a variety of state programs. In fiscal 2012, nearly $18 million was generated for substance abuse programs, while cities and counties received more than $3.6 million to support local programs and the remaining funds will be used for Iowa native wine and beer promotion.

Also during the past fiscal year, Larson said his division’s Regulatory Affairs Bureau initiated a comprehensive program to increase compliance with state liquor laws through education, voluntary adherence and punitive regulation.

“During the inaugural year of the compliance program, more than two-thirds of routine checks found licensees to be in compliance,” he said. “However, 54 percent of complaint-initiated investigations found violations.”

The top three offenses were bootlegging, infusing and retailers purchasing product from businesses not licensed for wholesale.