Alex and Ani’s Rafaelian takes aim at liquor law

TRENDSETTER? Alex and Ani founder Carolyn Rafaelian is looking for a focused change in the state’s liquor laws that would allow her to sell wine from her recently acquired Sakonnet Vineyard at her expanding Teas and Javas chain. / PBN FILE PHOTO/RUPERT WHITELEY
TRENDSETTER? Alex and Ani founder Carolyn Rafaelian is looking for a focused change in the state’s liquor laws that would allow her to sell wine from her recently acquired Sakonnet Vineyard at her expanding Teas and Javas chain. / PBN FILE PHOTO/RUPERT WHITELEY

Add Carolyn Rafaelian, president of Alex and Ani Inc. and new winery owner, to the list of businesspeople taking aim at Rhode Island’s strict and often arcane liquor laws.
Rafaelian, who added wine-making to her growing lifestyle-brand empire with the purchase of Sakonnet Vineyard in Little Compton last July, this year has pushed legislation that would allow her to sell wine at her Teas and Javas café chain.
It’s one of a number of bills this session that have attempted to loosen controls on the Ocean State alcohol industry to allow things like direct out-of-state sales, hard-liquor tastings, wine tastings outside liquor stores and retail sales of product at wineries and breweries.
“Part of the problem is too much of the current law having to do with alcoholic beverages is antiquated,” said Rep. Brian Patrick Kennedy, D-Hopkinton, chairman of the House Corporations Committee and longtime advocate for liquor-law liberalization. “While other states, including our neighbors, have moved on, we seem to be stuck in the 1930s on alcoholic-beverage issues.”
As with other bids to loosen the laws, the Alex and Ani bill has faced strong opposition from established liquor-store owners accustomed to the system and unhappy about potential special treatment for an industry newcomer.
After it drew fire at a Corporations Committee hearing in April, Alex and Ani revised the bill to relieve concerns.
“My committee was extremely sympathetic to Alex and Ani and the problems they are dealing with,” Kennedy said. Terms of the bill were still being negotiated in the flurry of end-of-session legislating last week and Kennedy said he didn’t know if a compromise was likely.
When Rafaelian purchased Sakonnet Vineyards for $8.45 million, part of the allure was the opportunity to sell the winery’s product at Teas and Javas, which she hopes to expand across the state in the coming years.
But after closing on Sakonnet, Rafaelian realized Rhode Island’s three-tiered alcohol-sales system – which requires separation between the producers, distributors and retail sellers of alcoholic drinks – would not allow her to sell Sakonnet wines in Teas and Javas as long as she owned it. Even though Rafaelian promised Teas and Javas would buy Sakonnet wine through a distributor, at a significant markup, instead of directly from the winery, her joint ownership of both businesses would still be illegal.
To get around the rule, Rafaelian placed ownership of Teas and Javas in a relative’s name, an arrangement she found clumsy and detrimental to her plans for marketing the café chain as part of the Alex and Ani brand.
Then she set about getting the law changed.
Alex and Ani crafted a bill, sponsored by state Rep. Linda Finn, D-Middletown, that would have negated the prohibition on alcohol manufacturers becoming alcohol retailers. The only exception was that the combined business would not sell only the drinks it manufactured at its retail establishments.
The bill met predictable opposition from distributors and liquor-store owners who described it as an assault on the three-tier system.
So Alex and Ani agreed to rework the bill from a sweeping liberalization for beverage makers into a special carve-out just for Sakonnet Vineyards.
The amended bill exempts only the manufacturer located at 162 West Main Rd., Little Compton, Sakonnet Vineyards’ address, from the ban on co-ownership of a retail license.
And it restricts Teas and Javas to only a “Class B,” or restaurant-tavern liquor license, which would not allow the company to sell wine by the bottle and branch out into traditional package-store activities.
The changes appear to have satisfied liquor distributors, who proposed the amendments and would not be affected by Teas and Javas’ ability to expand under unified ownership with Sakonnet. In fact, Teas and Javas would become a larger customer for distributors under Rafaelian’s plan for the café chain.
R. Kelly Sheridan, a lawyer representing McLaughlin & Moran Inc. distributors in Cranston who had testified against the bill at an earlier hearing, last week expected any lingering issues to be resolved.
But liquor stores remain opposed.
“My people have been in the business their whole working lives, opportunities have come and gone, and now they want to change the law for one company,” said Robert Goldberg, a lawyer lobbying on behalf of the United Independent Liquor Retailers of Rhode Island. “Why does owning a vineyard allow you to get around all of the laws?” Along with the fairness issue, Goldberg suggested that the exception could raise additional questions, such as what happens if the vineyard starts importing grapes, or wine.
Rhode Island’s three-tiered liquor system emerged out of Prohibition and concerns in the early 20th century about monopolies and the exclusion of competing brands in the liquor business.
Approximately 30 states also have three-tiered systems, including Massachusetts and Connecticut, although in recent years they have loosened their rules more than Rhode Island has.
In addition to inefficiency and restrictiveness, critics of the current liquor laws point to a lack of clarity and inability to deal with modern commerce.
They point to the battle between Providence and the state about the legality of VIP bottle service in clubs as an example.
The argument that meets many liberalization proposals is that it would allow large corporations to move into the market with big-box liquor chains, making alcohol harder to control and putting small, local independent operators out of business.
Goldberg argues that if those changes are going to be made, they should be done comprehensively, not at the behest of individual businesses that want an advantage.
There are currently two Teas and Javas locations, in Cranston and Providence, and Rainville at Alex and Ani said Rafaelian hopes to open up to four more in Rhode Island this year.
After that, she hopes to take the chain national, he said, but wants to do it under her name.
“It is important because she plans to expand Teas and Javas throughout the state and country,” Rainville said. “It’s about trying to be a slightly more business-friendly state. Someone is coming in and saying, ‘I am going to invest so much and hire all these people, can I at least own it myself?’ ” •

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