Why is alcohol more expensive in Iowa?

Expensive alcohol being purchased from store. Cash register shows a $103.92 total.

Why is Alcohol more expensive in Iowa?! Megan McKay, the founder, and CEO of Peace Tree Brewing Company explains Iowa’s nutty laws, why she started the company in Knoxville and announces their newest Iowa beer, 99 Pils.

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Why is alcohol more expensive in Iowa?

Alcohol in Iowa is more expensive because of Iowa laws that force brewers and distillers to use state required distribution partners, and state-run warehouses. Some of these laws are left over from prohibition while others are meant to protect local distributors from abuse from large brewers.

“Some of it is for our protection, some of it is stuff that has been around since prohibition. As the brewers got more power, the wholesale distributors needed to make some rules to stave off their power.” said McKay. “Now all of a sudden, you’ve got little people like us who are on the same side of the plating field as Budweiser and Miller-Coors.”

Iowa alcohol laws are really quite insane when you dig in. For one, brewers can’t sell liquor—one entity can’t be a brewery and distillery. But in Iowa someone can own a winery and distillery. But it gets much worse.

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Why beer is more expensive in Iowa.

In Iowa there are two licenses that impact brewers. A company can choose to be a Native brewery, or Brew Pub. Natives brewers can self distribute, meaning they can run their beer directly to grocery stores.

A different license is however if you want to operate at multiple locations and/or sell liquor. If you have a brew pub license though, you can no longer self distribute.

When Peace Tree switched to brew pub, that means they could no longer simply run their beer to stores. Instead, they are now required by law to send their beer from Knoxville to Ankeny to a local beer distributor.

That distributor then distributes the beer for them, charging them for the service. This means they pay to deliver the beer to the distributor, then pay again when they distribute it. All these costs of course, are passed on to you. Why is Alcohol more expensive in Iowa? Because Iowa forces this middle-man relationship.

The idea is to protect wholesalers and distributors. If Budweiser for example were to leave a distributor their business would be over. Obviously a smaller brewer like Peace Tree doesn’t have as much local impact as Budweiser, but the same rules are applied to them.

If it sounds nuts, it actually used to be worse. In 2022, if Peace Tree wanted to sell beer for drinking at their Knoxville location, they had to ship their beer to their lawfully required Ankeny distribution partner, then the distribution partner would truck it back for drinking. Thankfully, they can sell direct from their taproom if they document it for the state.

Liquor laws are similarly convoluted.

Why liquor is more expensive in Iowa.

Buying a bottle of Woodford Reserve in Minnesota is around $24-26.99 at a store like Total Wine. In Iowa it can cost you $32-$40. Why?

Instead of state mandated distribution, liquor prices in Iowa are impacted by state-run warehouses. In Peace Tree’s case, their is a Blonde Fatale Whiskey, named after their famous Blonde Fatale beer, but it’s not their product. Instead, it’s a marketing agreement with Foundry Distillery in Des Moines. Peace Tree will give the non-alcoholic “mash” to Foundry, and Foundry produces the product.

Screen capture showing alcohol is more expensive in Iowa. Woodford reserve is pictured as $26.99 in Minnesota, and $45.99 in Iowa.
Woodford Reserve prices in Minnesota (left) and Iowa (right.)

Once that liquor is produced however, a company like Foundry or Templeton Rye has no say on where it goes because they are required by law to sell it to the state of Iowa, which has its own warehouse and trucks to distribute alcohol.

If you’ve wondered why is alcohol more expensive in Iowa, and selection is limited, this the reason. Your favorite liquor store or grocery store can’t order what their customers want. Instead, they have to request the State of Iowa carry it, so they can but it for customers. Of course, the state of Iowa charges their own markup and has no competition.

McKay had nothing but good things to say about her distribution partners, the alcohol law part of the interview is from 14:43 – 23:50. The reason why alcohol is more expensive in Iowa is because Iowa laws add unnecessary cost to the process. That cost is passed on to Iowans.

Megan KcKay, CEO of Peace Tree Brewing Co. in Knoxville, Iowa
Megan McKay, CEO of Peace Tree Brewing Company

Megan McKay, CEO of Peace Tree Brewing Company

Megan McKay is the founder and CEO of Peace Tree Brewing Company. She founded the company out of the 2008 recession to help her home town of Knoxville.

McKay says Peace Tree makes 3500 Barrels of beer per year, which amounts to 48,000 cases of beer. It may sound like a lot, but she says that makes them a very small craft brewery.

She discusses why “craft” is a term reserved for low-volume brewery, and how bigger brewery’s are intentionally trying to confuse the market.

Peace Tree Brewing Co. announces 99 Pils

99 Pils from Peace Tree Brewing Co. in Knoxville, Iowa
99 Pils from Peace Tree Brewing Co.

McKay also announced a new beer on The Iowa Podcast: 99 Pils. “We’ve never done a Pilsner and put it in a can. It will be called 99 Pils, which is super fun—it harkens back to the 99 Counties in Iowa.” McKay told the Iowa Podcast. “It’s a really nice crisp light beer..that will make it’s debut at BrrrFest over in Coralville on the 28th.”

This new beer comes with Peace Tree Brewing Company’s switch to aluminum cans, dropping the famous stubby bottles or “bombers” they’ve been known for.

Check out the official website at PeaceTreeBrewing.com and learn more about 99 Pils here.