Keep Colorado Local (KCL) is opposing the push to expand Colorado liquor laws that will allow full strength
beer and wine sales in grocery and convenience stores. KCL has stiff competition from large
corporations, and has done a good job emphasizing a negative consequences upon
local businesses. Selection and variety would decrease, privately owned stores
would close, and thousands of jobs would be lost.
However, it has not explained how these consequences would come about. Let's take closer look at
how an expanded liquor law will most likely play out (taking lessons from local
florists, bakeries, delis, book stores, butchers and corner markets):
1.
It's all
about the wine: Wine has the highest profit margin and is the financial
foundation of most liquor stores. Grocery stores want it. But, if grocery stores sold ONLY the best
selling 30-50 SKUs of wine, which is equivalent to one small shelf at many
liquor stores, then it takes those sales away from liquor stores (see #2). This would be enough of a blow to the liquor
stores that they must close their doors or adjust their prices on other
products (i.e. raise prices on beer, liquor and mixers)…and this would just
hurt them more
2.
It won't
take much: The sheer number of
liquor stores helps keep the price of beer/wine/liquor down, while promising
small margins. When grocery chains slash prices (see #3) by $10 per bottle of
wine, or $4 per six pack of beer, even on only 30 products, liquor stores
cannot compete and the margins evaporate.
Liquor stores losing just 30 products means customers losing hundreds or
even thousands of choices
3.
Cheap
prices now, gouging later: Grocery
stores have "loss leaders". This means that they buy a product from
the manufacturer, say milk, at X cost, but sell it for less than X, thus losing
money. To make up this loss, other
products are marked up way above their X cost.
Since grocery stores have tens of thousands of products, they can afford
more "loss leaders".
Initially, wine prices at grocery stores will be "loss
leaders" in order to undercut the competition (liquor stores). This sounds great: Cheaper wine and beer. But
when the competition closes its doors, grocery stores will have free rein to
raise wine and beer prices to whatever they want (not to mention the number of
competitors goes from hundreds to 10 or lower)
4.
Convenience
is inconvenient: If you just want a 6 pack of beer, or a bottle of wine for
a dinner party, do you really want to wade through the grocery store? While in
Boston, I had to hunt for beer. Boston! I hated going to a grocery store just
to pick up a 6 pack of Sam Adams or Harpoon. Does the grocery-store-system work
in other states? A bit, but from my experience in Boston, San Diego, Portland
OR, and Seattle, not as well as Colorado's system
5.
Nothing
Personal: Not all liquor stores offer personal customer service, but many
do. What's a good wine to pair with duck confit? Which beer would counter the
stickiness of brie? The wine and beer worlds are complex, and to match your
needs with a product requires knowledge of both. It is doubtful that grocery
stores, much less convenience stores, will populate their stores with
knowledgeable staff
6.
Integrity
of product: Grocery stores wield awesome financial power and they can buy
products en masse. Selling in bulk, distributors can decrease the number of
stops their trucks make, which saves them time and money. But wine and beer are
fragile products. An IPA has a shelf life of about 3 months if stored in a
cooler. If stored warm, cut that time in half…at least. Warm wine fairs a little better, but it still
has a shelf life not comforted by backroom storage. Once products start to
suffer to age, as we all do, their quality diminishes. Brewers and vintners
know what their products should taste like and customers expect it
7.
Distribution
crunch: The loss of multiple outlets might sound intriguing to the big
distributors—fewer number of stops while selling the same amount of product to
the bigger stores. The trickle-down effect,
however, is that the bigger stores buy in bulk (see #6) at cheaper rates, thus
affecting the margin the distributor makes. Of course, by then they will have
released several drivers and warehouse workers to cut the loss. They would also
run into stiffer clients: Kroger, Wal Mart, Target and Safeway can battle them
with their own distribution networks, political/financial capital and “other”
influences.
Prediction: If this law passes, the beer scene in Colorado
might suffer, or it might not. Given my experiences in Portland, Boston, San
Diego and Eugene, I think chances of the former coming true is greater, but of
course not certain. California and Oregon beer scenes are good, but not great—or
at least not to their potential.
The important aspect is this: If this proposal becomes law,
and if smaller stores close, then there
is no going back. For better or worse, we would be stuck with the new
system. No one in their right mind would open smaller stores after seeing small
stores close, and grocery conglomerates would fight to keep it that way. The
old saying comes into play here, “If it ain’t broke, don’t fix it”. Is Colorado’s system really broken?
Personal story:
I did some snooping around Portland, OR the other week to
check out the scene there. I went to
several Whole Foods, Belmont Station and a place called BEER.
 |
| Warm IPAs at Whole Foods |
·
The Whole Foods selection was good, but not
great. The storage was horrible: warm IPAs stacked everywhere and some bottles
expose to heat, not to mention fluorescent lighting. The wine selection was equivalent
to a small to medium sized store in Colorado. Traffic (car and human) was a
headache
·
Belmont Station had better selection, but still
had many beers warm. It was also a trek to get to
·
BEER was better with cold storage, but smaller
selection than Belmont. Closer to downtown
·
Places like Belmont Station, BEER and
BeerMongers also serve on-premise beer/cider. That is, they are part pub. I
think without this feature, these places would fold. Not sure if Whole Foods
allows on-premise sales…who would go there to have a beer anyway?
·
Plaid Pantry is a convenience store chain
(private) with some beer selection. Was not a beer destination spot for me. It
seems like these are default spots to find some craft beer when other places are too
far away
·
Could not find MillerCoors and AB-InBev products
at these locations. I was told that the distribution laws in Oregon are “quirky”
and there’s a battle between AB-InBev and a smaller distributor over
territories. This could affect sales of both AB-InBev and local beers. Didn’t find a Fred Meyer (Kroger). I suppose
living there I’d know more about where things are
·
Only saw one wine shop, and it was closed
·
Most selections of Oregon beer is in the bomber
packaging. Few six pack offerings and I was told this is because the packaging
options for breweries are limited
My conclusion from my trip (2nd time in Portland)
is that the Oregon…or Portland at least…beer scene is good, but not great. It “works”, but I think is restricted. Bottle shops are the preferred outlet, but
even they are not as good as many Colorado stores in terms of selection and
storage. It was certainly easier just to hit the breweries/tap rooms instead of
bottle shops and Whole Foods.
Cheers and Beers
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