Committee hears testimony on HB 4403 to allow alternating proprietorships for Michigan distillers

Representative Wenzel introduced House Bill 4403 on Oct. 26, telling the House Regulatory Reform Committee the measure would amend the Michigan Liquor Control Code to expressly permit distillers and mixed spirit manufacturers to enter into alternating proprietorships, an arrangement that allows two or more producers to share space and equipment.

“An alternating proprietorship is when 2 or more alcohol producers share space and equipment to manufacture their products,” Representative Wenzel said. She described the bill as a “simple, yet significant” fix to a technical gap in state law that has created confusion for small distillers even though there is no explicit statutory prohibition.

John O’Connor, president of the Michigan Craft Distillers Association and owner of Long Road Distillers in Grand Rapids, testified in support. “The federal law around alternating proprietorships is legal at the federal level for brewers, winemakers, and distillers,” O’Connor said. He told the committee that Michigan’s liquor code dates largely from 1998, when the state had virtually no distilleries, and that the newer industry needs the same flexibility currently available to breweries and wineries.

O’Connor and other witnesses described business and technical reasons for the change: alternating proprietorships let small producers launch and scale without making large upfront investments in capital-intensive equipment, such as canning lines; they allow producers to lease idle capacity to test products before investing in equipment; and they can help get products to market faster. O’Connor said equipment lead times are long — he cited a 24-month wait for a piece of distillation equipment he ordered — and described the marketing importance of tasting rooms to small operations.

Witnesses gave specific cost examples: a single-head canning filler can cost about $20,000; a new, higher-capacity canning line can cost about $500,000 and, with associated chillers and tanks, a mid-scale canning operation could approach $1 million. O’Connor and other industry witnesses said the ready-to-drink canned cocktail sector is a fast-growing market and that mixed spirit manufacturers face additional capital hurdles to enter it.

Small distillers from throughout Michigan described downtown footprints and space constraints that limit on-site expansion and said the legislation would allow them to contract with other Michigan distillers with excess capacity rather than outsourcing production to out-of-state facilities. Jason Smith of Michigan Moonshine LLC and Tom Smolinski of Copper Kettle Distilling spoke in support, describing their operations and the economic and tourism benefits of the craft distilling sector.

No committee vote on HB 4403 is recorded in the transcript for this meeting; the committee took testimony and questions and then moved to other agenda items.

The measure amends state liquor law language to add parity for distilled spirits with existing provisions for breweries and wineries, according to sponsors and witnesses.