Contentious Grocery Store Wine Bill Fails In House

Contentious Grocery Store Wine Bill Fails In House

Update, Tuesday, Feb. 28, 2017: Action on the bill was delayed until Monday, and it was defeated. It came back to the House on Monday, and fell three votes shy of passage. Legislators plan to bring the bill up again.

Original story:

A proposal in the Arkansas Legislature to allow grocery stores to sell more wines is scheduled to come up in the House on Friday, and opponents warn that it would damage local liquor stores.

Senate Bill 284's lead sponsor is Sen. Bart Hester, R-Cave Springs, who did not immediately return a call on Thursday. Other sponsors are Sens. Gary Stubblefield, R-Branch, and Linda Chesterfield, D-Little Rock; and Rep. Jon Eubanks, R-Paris. The Arkansas State Chamber of Commerce also supports the bill.

"It's a free market issue, just like when big box stores showed up and affected some Main Street stores and not others," Hester previously told Arkansas Business. "Now the free market is online and big box stores are trying to figure out how to play in the new retail world.

"You can fight change and die or you can make it work with a new business model," he said. "The free market will always cure itself when the customer does the talking with their dollar."

The Senate approved the bill in an 18-11 vote on Feb. 8. An amended version cleared the House Rules Committee on Wednesday. 

The debate over the bill has put local liquor store operators against bigger retailers like Wal-Mart Stores Inc. of Bentonville and Kroger Co. of Cincinnati. 

Bill Paschall, a spokesman for the United Beverage Retailers of Arkansas (UBRA), said Wednesday's committee vote was close. He said the only "crumb" in the amendment for liquor store owners was that, if the bill passes, they'd be able to sell consumables, which are currently prohibited.

Thin Margins 

Opponents paint a dire picture for small stores should the bill become law. They contend the bill will create an imbalance between small businesses, like liquor stores, and large retailers, like Wal-Mart and Kroger, that have more resources and purchasing power.

According to a study released Wednesday by UBRA and prepared by Histecon Associates of Little Rock, the wine bill could cause a 25 percent drop in sales for small stores, an annual loss of about $31 million and the loss of 110 jobs.

Francois Guilloux, managing partner of There Performance Group of Little Rock, said the bill would be "extremely detrimental" to an industry worth $600 million, and lead to the loss of 1,000 jobs. He said his firm's research has shown that, "the best case scenario is, in the next 12 months, you will see around 20 percent of liquor store owners shut down" — or about 100 stores out of the 459 in Arkansas. 

And over two years, he said, the state could see the number of liquor stores here cut by half. 

Guilloux said liquor stores operate on a "very thin line, arguably today, of 20 percent gross profit margin." If the bill becomes law and wine sales at liquor stores drop as expected, he said, the stores would lose 3 to 5 percentage points of that 20 percent. Liquor store owners would have to make up the difference by cutting employees, employee training and advertising expenses.

Guilloux also sees the bill as an effort by big retailers to eventually take over the industry by selling spirits, as well. He doesn't believe Wal-Mart and other retailers will stop at selling more wines, although Wal-Mart has said it wouldn't pursue selling spirits.

Senate Bill 284 also sets fees for "grocery store wine permits" at $1,000-$5,000. The fees will go to the Arkansas Wine Grants Fund, which provides $500 grants and up to $100,000 annually for each winery in the state.

If the bill becomes law, half the fees would be transferred to the Tourism Development Trust Fund to operate and staff a wine tourism facility in Franklin County and provide office space there for the Arkansas Wine Producers Council.

Guilloux doesn't see the grants as terribly valuable — he said they wouldn't turn any part of Arkansas into a Napa Valley-like tourist magnet. He argued that the bill would hurt Arkansas wineries, who could lose shelf space as grocery stores gravitate toward other, bigger-selling brands.