Allowing Grocery Stores to Carry Wine is Bad for Small Business and Ultimately Customers

The state of Arkansas has this strange fascination with catering toward large chain businesses while building regulations that continue to keep independent businesses from ever succeeding and growing. It was something that was abundantly clear in my three years in economic development for the state, where the effort to bringing in large operations from out of state easily dwarfed the underfunded and under appreciated efforts to help existing businesses succeed, grow, and ultimately become big business themselves. It is also reflected largely in the latest effort to allow grocery stores to carry wine, something spearheaded (ironically) by one of the few small Arkansas businesses to ever grow into a large business, Walmart.

Senate Bill 284 was secretly introduced and passed by committee yesterday, added at the last second to the agenda to keep opposition from having a voice. Somehow supporters of the bill were still on hand to show their support. Among other things, what it would do is allow grocery stores throughout the state to apply for a license to sell wine with no limits on how many stores across the state an individual grocery store chain can permits.

The law puts small locally owned liquor stores at a sizeable  disadvantage for a number of reasons. To start the law has always prohibited individuals from owning more than one liquor store, meaning all liquor stores are essentially stuck at the small business level forever. Secondly liquor stores are (with rare exception) barred from selling any grocery goods. So if you wanted to go pick up some local artisan cheese to go with your wine or Arkansas brewed beer at your favorite liquor store, forget it.

By allowing grocery stores to hold unlimited permits and offer other items it creates an unlevel playing field for grocery to compete over small businesses. One liquor store we talked to off the record about the issue says it would impact them at minimum 20% of their total revenue, maybe more in time as consumer spending habits increased.

Proponents of the bill claim that it will increase convenience to consumers while increasing total tax revenues for the state. The additional tax revenue will, in part, go to fund an increased budget for tourism efforts at state wineries.

The overall result however will come at a great cost to consumers. Many liquor stores that have focused heavily on wine will be forced to shut their doors, unable to withstand the decline in revenue. Grocery stores will focus heavily on the low to midrange wines, leaving many high end wines unavailable or at such a high markup from the remaining liquor stores to account for the decline in revenue. New, more artisan level products will be slow to enter the market because of lower levels of demand. It will be the same effect as having to pick Kraft cheese up at Walmart because the demand for artisan cheeses like Kent Walker is not enough to justify the sell.

One idea circulating around, if the bill passes, is to level the playing field for independent liquor store owners. Allow liquor stores to sell select grocery goods to allow consumers more choice, allow liquor stores to bring in brands not currently distributed in the state until the brand is acquired by an in-state distributor to increase consumer choice, and allow liquor stores to ship both in state and out of state.

It is a proposal we can quickly get behind. The obvious part here is allowing the two consumer choice issues. If you are not familiar with the state’s distribution laws, essentially liquor stores cannot carry wine (or any other alcoholic product) unless it is distributed by a registered distributor. This means there are a lot of unique wines, beers, and other products out there that liquor stores could sell, but distributors are slow to sign agreements or it is not in their interests. This proposal allows liquor stores to form their own partnerships, still remitting the required taxes, until the product is carried by a distributor.

The final portion of it is a little deeper. They suggest keeping the one liquor store per person law, but allowing wine to be sold and shipped across the country. This is something allowed by a number of other states and allows liquor stores to increase total sales while still allowing consumers to have a better choice in where they shop. It will allow local independent businesses to grow on a competitive level, and have all the opportunities they need to succeed, and by allowing out of state sells, it will increase the total tax revenue beyond what is currently achievable under both the current and proposed wine sales system.

Ultimately Arkansas has to do a better job as a state building up home grown talent rather than trying to suppress opportunity with a quick hit. It is better for the long term economy of the state by building loyalty and attracting talent, not just bringing in businesses that will leave as soon as they get a better offer.

The Bill was voted on and passed this afternoon by the Senate. It now moves to the House of Representatives. I urge you to find your representative and give them a call to prevent this bill from passing, at the very least until a counter measurement can be voted on to balance the impact to small businesses. Also encourage them to stop secretly passing things through committee without hearing all sides of the argument, because that is sort of bull shit and a clear sign that a bill is bad for the state of Arkansas.

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5 Comments

  1. John Smykla
    February 9, 2017 at 9:21 am — Reply

    Theses stores also don’t have to abide by the 1000′ property line to property line setback that a liquor store must be from a church or a school. They can share a property line. It’s completely unfair.
    Thanks for shedding light on how Bart Hester (NW Arkansas Senator, where is Walmart located?) worked to shut out opposition to this bill and sneak it through without hearing both sides of the argument. He says it’s about free markets. Laughable. It’s about doing what Walmart tells him to do so they will support him in the future.

  2. Doug McDowall
    February 10, 2017 at 5:46 am — Reply

    Another regulation was changed around 1982 to allow gas stations to sell beer, but there was no limit placed on the number of beer permits that could be issued into each county based on population. Another regulation prohibits minors from ‘handling’ alcoholic beverages at their place of employment, so most small employers will no longer hire anyone under 21. Thousands of these beer permits have been issued, with a dozen or more still being issued each month into our wet counties, Dollar General is now by far the largest holder of beer permits in Arkansas. What is the difference in youth unemployment between the ‘wet’ and ‘dry’ counties (statewide the latest rate is 37%) and are job opportunities for teens a higher priority than increasing the number of alcohol outlets in our communities, and where is juvenile crime the greatest in Arkansas?

  3. Linda
    February 10, 2017 at 9:40 am — Reply

    I agree , not fair. I enjoy going into a nice liqour store and talking with a knowledged employee about wine. Not happening at Wally World ! Email sent to my representative.

  4. February 11, 2017 at 8:31 pm — Reply

    Thank you so much for this article – this bill is amazingly flawed – we as owners definitely have had no representation in this! Most owners do not know to this moment that this bill is even in the works. I am appalled that those of us that have been so willing to function within the rules and regs of our business are now being told that it is alright to give the big guy everything that we are unable to have!

  5. Nick
    February 14, 2017 at 12:54 pm — Reply

    In year 1, 60% of total wine sales will shift to grocery. Many independent stores will close, and grocery will not hire any new employees to replace the loss of labor. Tax revenue will go down (same volume of cheaper products sold) and enforcement cost will increase.

    This just happened in TN, nothing good will happen out of this measure…Call your representatives and tell them NO.

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Allowing Grocery Stores to Carry Wine is Bad for Small Business and Ultimately Customers