Arkansas Liquor Stores See Sales Fall 5.5 Percent Since Grocery Wine Expansion

Arkansas Liquor Stores See Sales Fall 5.5 Percent Since Grocery Wine Expansion

Liquor stores throughout Arkansas have seen total sales fall an average of 5.5 percent since expanded sales of wine in grocery stores went into effect Oct. 1, according to a report released Monday.

"The introduction of wine in grocery stores has impacted every liquor store in Arkansas," said the report, by THEREinsights, a data analytics company based in Little Rock. "Overall, the average liquor store saw a total sales decrease of 5.5%."

The report, available here, examined a 12-month rolling period.

The effect on liquor stores depended on their product mix, the report said. Liquor stores, which it defined as those whose wine sales represent less than 10 percent of total sales, were the least affected, with an average sales decline of 1 percent. However, stores whose wine sales represent more than 40 percent of total sales saw an average decrease of 15 percent to 28 percent, according to the report.

Grocery stores in "wet" counties in the state previously had been limited to wine from "small-farm wineries," those that don’t produce more than 250,000 gallons of wine per year. Act 508 of 2017 allowed grocery stores to sell wine from any brand, greatly expanding their selections of wine.

Many liquor stores in the state fiercely opposed the measure, which Walmart Inc. of Bentonville brought to Sen. Bart Hester, R-Cave Springs to sponsor. Some liquor store owners argued the law would devastate their industry.

United Beverage Retailers of Arkansas, which represents independent wine and spirits stores, commissioned the THEREinsights report on the impact of the law.

As of July 3, the Arkansas Alcoholic Beverage Control Division had awarded 334 permits for "grocery store wine." In addition to Walmart, stores taking advantage of the act include traditional grocers like Kroger and Harps, convenience stores like Kum & Go and drugstores like Walgreens and CVS.

More: Grocery Sales of Win Hit Liquor Stores

The new law does allow liquor stores to have "consumables and edible products that complement alcoholic beverages," but the report said that sales of such items "did not provide any compensation for the wine sales drop."

There was some good news for package liquor stores in Arkansas, however. The report noted that liquor sales "were up across the state and compensated on average for a third of the loss produced in [the] wine category."

"The greatest decline in wine sales happened in December with a drop of 20 points in one month," the report said.

With the decline in wine sales, the sale of spirits has become a bigger part of the average liquor store's gross profit margin, the report said.

"Overall, liquor stores saw their gross profit on average drop by over 10%," the report said. "That's $2,000 to $3,000 profits less per month."

As expected, wines priced at between $10 and $15 took the greatest hit in liquor stores. "Box wines in general were down by 30% and [were] probably the wine category that took the impact consistently across all stores in the state. This was the obvious result of new shopping convenience for customers."

However, THEREinsights said that recently, after the period covered in the report, it had started seeing consumers coming back to liquor stores.

Nevertheless, about 10 percent of the liquor stores in the state are up for sale, the report said. "It is our estimate that 25%-30% of the industry will close doors or shift hands in the next 12-18 months."

The report predicted increasing consolidation in the industry, adding, "The current stress on the market is only accelerating this shift and is probably shortening the transition by 10 years."

THEREinsights was founded by Francois Guilloux, an expert in finance, data analytics and sales.

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