Liquor Stores: Grocery Wine Bill a Death Knell

Liquor Stores: Grocery Wine Bill a Death Knell

Liquor store owners and others in Arkansas say a bill to let Wal-Mart and grocery stores sell a larger assortment of wine fundamentally changes their business model, will lead to the closure of hundreds of package stores in the state and will result in less choice for consumers.

“What I believe is unfair about what we’re doing is we have prevented the liquor stores from setting up a business model that can compete in a free market, so we have essentially set them up to fail,” said state Rep. Jana Della Rosa, R-Rogers, who opposed Senate Bill 284. “And they have done nothing wrong.”

“It’s going to be really tough for Arkansas small businesses to survive if this thing gets through,” said John Akins, owner of Legacy Wine & Spirits of Little Rock and president of the United Beverage Retailers of Arkansas, referring to independent package stores.

The measure, filed by state Sen. Bart Hester, R-Cave Springs, allows grocery stores to sell wines from any winery. Currently, grocery stores can sell wine only from “small-farm wineries,” those that don’t produce more than 250,000 gallons of wine per year. SB284 would greatly expand the wine selection that grocery stores, including Wal-Mart and Kroger, can offer.

That makes it convenient for consumers, but it changes the business landscape for package stores in Arkansas, which are heavily regulated by the state and are subject to a number of laws that grocery stores are not. Those laws include limiting liquor store permits to only one person or business and forbidding franchising, effectively preventing many package stores from being able to buy in bulk and so offer discounts. They also include requiring liquor stores to be at least 1,000 feet from a church or school.

Hester, who said Wal-Mart brought the legislation to him to sponsor, disagreed with the bill’s opponents.

“If this were an issue about allowing Wal-Mart to sell wine for the first time, I would have had a very different position on it,” Hester told Arkansas Business. “But since they’re allowed to sell wine — we’re just talking about allowing them to sell the brands that they want — I think that’s kind of a no-brainer, free-market position for me.”

As for the argument that the bill changes the rules of the liquor-selling game, Hester said: “If we were 50 years later, they would say we’re changing the rules in the middle of it. And they’re absolutely right. We are changing the rules. That’s what we do. We’re elected representatives of the people, and we come down and we change the rules to try to be more fitting of the day and the time and what’s best for the state of Arkansas.”

Akins knows that the market is changing and that big retailers like Wal-Mart have an advantage. “There’s nothing we can do to stop Wal-Mart,” he said. “But Wal-Mart also needs to be a little more compassionate toward small business and let us come up with some sort of way to adjust our business model before this happens.”

John Smykla owns the Little Brown Jug in Pine Bluff. “It’s not about fair competition,” he said of the measure. “It’s not David vs. Goliath. It’s David vs. a dozen Goliaths.”

The bill will immediately devalue his liquor store business by half, Smykla said. “We only have two protected classes of products we can sell. That’s hard liquor and wine over 6 percent [alcohol]. Everything else is available for sale at Wal-Mart and Kroger and everywhere else. You’re taking half of our products right there, half of the protected items that we sell and allowing anybody to get in that business without any of the same restrictions. And that’s what kills you.

“I’m totally for fair competition,” he said. “There’s nothing fair about this when they won’t play by the same rules we play by. They won’t play by the setback rule. They won’t play by the one-permit rule.

“The only concession they were willing to give us was allow us to sell food items that go with alcohol, so we can sell cheese and crackers. Nobody bought a cheese-and-cracker permit.”

(See Arkansas’ Arcane Liquor Laws Slowly Loosen.)

Roger Gildehaus is owner of the Macadoodles chain of liquor stores. Macadoodles is headquartered in Missouri, but has a store in Springdale, and Gildehaus worked 26 years at Wal-Mart. Speaking on Thursday, before final disposition of the bill, Gildehaus said that if it passed, in two years Wal-Mart would be seeking to change “the core of the liquor laws, which is one-package liquor license per person, company or entity.”

“If they win this time on wine, then they’re going to want spirits,” he told Arkansas Business. “And when they want spirits, they overturn the core of the liquor laws in the state.”

Gildehaus predicted the grocery wine bill, if enacted, would put 200 to 300 liquor store owners in the state out of business, which would have a ripple effect of lost jobs and bankruptcies, particularly troubling for smaller towns.

In addition, he and others said, the eventual outcome of allowing big-box retailers to dominate the wine market is less choice for consumers.

“When there’s competition, Wal-Mart will carry the broader assortment because they have to to compete,” Gildehaus said. “But as soon as they put that little guy out of business, that assortment dwindles real quick like. That’s when the consumer loses … the consumer always loses when competition gets put out of business.”

Anne Hatfield, a Wal-Mart spokesman, said in an emailed response to questions that, for its part, the Bentonville retailer just wants to serve its customers: “Our customers want to select from a full range of wine when they shop for groceries.”

“The liquor stores have a controlled market on liquor and spirits,” Hester said. “They had already given up or lost the argument on wine in the past, so that’s not a huge concern of mine. I like to go back to what Sam Walton said in his book I remember reading many years ago. He said, ‘We at Wal-Mart cannot compete with the little guy that does his job right.’”