Wednesday, December 2, 2009

The grocery-store sales debate, redux

A Colorado political candidate is attempting to place an initiative on the ballot to allow grocery stores to sell full-strength beer, reports my Durango Herald colleague Joe Hanel.

As most of you know, grocery stores in the state may sell only beer containing up to 3.2 percent ABV. Real beer is sold in liquor stores.

This is just the latest chapter in a long debate over whether grocery stores should be allowed to sell full-strength beer. The Legislature has taken up this issue and gotten nowhere, in part because convenience stores - a surprisingly powerful lobby - do not want to lose more business to grocery stores.

Leaving aside the politics, let's take a look at the merits and drawbacks of grocery store sales. I start from the standpoint that people and institutions should generally be allowed to do what they want unless there is a good reason to prohibit them from doing so.

That leaves us with the objections to grocery store sales. As I see it, there are two primary objections to allowing grocery stores to sell full-strength beers:

1. It would hurt other businesses, primarily small liquor stores located next to grocery stores and also convenience stores.

2. It would reduce consumer access to craft beer, as most large grocery chains would carry only beer from big producers such as Sam Adams and New Belgium.

The best articulation I've heard of objection #1 was put forth by Ska President Dave Thibodeau in a May interview with Beer at 6512:

"Most of the little independently and locally owned liquor stores that are sitting right next to these large, chain grocery stores, a lot of those guys would go out of business. ... This is what’s unfair about it: they strategically located their stores in the parking lots of grocery stores. It was their business plan. To go and change the rules now that negates the entire reason they thought they had a good idea, it isn’t fair."

The interests of business owners clearly carry some weight. But changes in laws that affect businesses are nothing new. Cigarette manufacturers are required to label their products with strong warnings. Car manufacturers are required to install seat belts. Obviously, the government can and does impose regulations when the public good outweighs private interests.

Besides which, this unusual state law is responsible for the market being as it is. Durango has a ridiculous number of liquor stores. The phone book lists 15. When I moved here, it seemed to me that one could almost jump from liquor store to liquor store without ever touching the pavement.

The current rules distort the market by creating far more liquor stores than consumers would otherwise support. Imagine if milk could only be sold at specialized milk stores. There would be a milk store every few blocks, just as is now the case with liquor stores.

My guess is a bunch of small, unattractive liquor stores would go out of business, while the biggest and best (like Star Liqours and Liquor World in Durango) would survive. That, to me, is an acceptable outcome. Obviously, liquor store owners feel differently.

Which brings us to objection #2, that grocery stores would carry only the big brands and smallish brewers like Ska, Steamworks and Durango Brewing would not be able to get their beer in front of consumers.

I can only point to Oregon's experience with grocery-store sales, which has been overwhelmingly positive. The state has a thriving craft beer industry while also allowing grocery stores to sell full-strength beer.

Certainly, not every grocery store in Oregon carries beer from small producers. But a surprising number do. And bottle shops fill in the gaps.

To give an example: In my old hometown of Corvallis, Oregon, (pop. 50,000) you can walk into a grocery store and buy beer from the big guys like Deschutes, Widmer and Rogue. If you want something more unusual, you simply go to the bottle shop downtown, Whiteside's Beer and Wine, which has a selection that puts anyplace in Durango to shame.

Oregon's breweries have not suffered as a result of grocery store sales. Just look at success stories like Ninkasi Brewing. It was founded in 2006, brewed good beer and broke into grocery stores. It's now the seventh-largest brewery in Oregon, with an output comparable to Ska's.

Grocery-store sales in Colorado seem to me inevitable, whether it takes a year or 10 or 50. And guess what: when it happens, the sky will not fall.


  1. I haven't read the initiative (if anyone has a link please post it) and the Herald article didn't mention this, but an article I read last week ( mentioned that the initiative would give the local liquor authority the ability to deny a grocery store a liquor license if there are already several liquor stores in the neighborhood. It sounds a bit arbitrary, but makes me wonder if any local grocery stores would be granted the ability to sell wine and beer based on the number of liquor stores here.

  2. Restricting totally rightful activity (such as buying alcoholic beverages from any business you wish) is always a bad idea. Not only is it morally wrong, because governments have no moral right to interfere, but it is economically destructive. It's pure, ugly protectionism at its worst.

    When I hear liquor store owners and brewers (believe it or not!) complaining about these proposals, it makes me think of extreme examples. Imagine liquor stores were staffed by slaves who lived in basement dungeons, and liquor store owners said: "But we can't let the slaves free, and have to pay them wages! We'd go out of business!"

    Meaning: liquor stores have been profiting unjustly due to these unjust laws for years, which they shouldn’t have, and they don't have a moral or economic leg to stand on. The restrictions on sales should be eliminated. I don't have a problem with phasing it in to give them time to adjust, but it needs to happen, period.

    BTW, Durango is a rocking good beer town! I could use a Conductor IPA on draft right now.

    Jeff Montgomery

  3. I have to sarcastically agree with Jeff M.....let the wal marts of the world unite and conquer!!!

  4. Nice Blog. I live in PA and we are going through the same thing. The difference here is we have state controlled stores that sell spirits and wine. I own a beer distributor and they want to put beer in grocery stores here. Obviously I am biased but here are a few thoughts to consider...
    Small business fuels the nation. Don't get me wrong, the box stores and grocery/convenience chains have there place in the world, however, small biz is the backbone. In our state for example, we lost 52,000 jobs this year in big business and added 7000 in small business. This is something to consider. In general, at least around here big chains and box stores are killing small businesses. Here, the grocery stores already have: food, dvd rental, coinstars, seasonal items, gas pumps, spring water, propane refills, tobacco, lottery, pharmacueticals and now they want beer? When does it end? It's really about Greed, bottom line. If you are the kind of person who likes paying $2.00 at the ATM to get your own money out this is right up your alley because make no mistake, you will pay a premium on beer. Or they will use it as a loss leader and grossly overcharge for fruity pebbles and mustard. People want convenience like anything in this world ie. fast food, high speed internet, cell phones and ATM's. Instant gratification! But at what expense? Oh by the way, not sure about out there but ever see the winners working at the grocery stores? I am sure that under age consumption will drop with those winners at the helm...that was sarcasm. Good luck out there! Just remember that the general assembly must change the laws and you vote for those representatives. If you want change make it happen, don't bitch about..."the government".

  5. I will concede that when they constructed the 3.2% laws in Colorado, it was a very, very stupid idea. But to go and change the law now will crush many small businesses, only to make out-of-state owned corporations such as Walmart and City Market more powerful. Owners of liquor establishments went into business based upon the current rule sets. Now you go and change rule and thousands of small business owners and employees of these businesses are looking for work. One vote for NAY!