I think it would be reasonable for the workplace to put limits on the type of gifts in a work exchange - saying no alcohol/cigarettes/gambling/'adult' items, for example. But the reaction given in the OP is over the top - set up a policy for next year, don't cancel two years worth of parties and throw a fit.
Next year, I'd be tempted to get together with your coworkers at lunch (or after office hours), off site, without the supervisor, and do your party then.
As an aside - universities can have some weird rules regarding alcohol, that don't match other workplace practices. In my grad school, it was perfectly legal to serve alcohol at departmental parties, but you had to hire a campus approved bartender, purchase all alcohol through the university, and offer at least one light beer.