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.