Feb 12, 2009 Ami Olson Uncategorized
As tough as times are, liquor and wine store owners across New York State have united against a proposition included in Gov. David Paterson’s budget that would allow wine to be sold in grocery, drug and convenience stores, a move that could translate into more than $100 million in revenue for the state in the first two years.
The profit would come from one-time licensing fees stores would pay for the privilege, at a cost of .46 of one percent of the store’s 2008 sales.
But as a direct result of that short-lived windfall, liquor storeowners say, thousands of jobs would be lost and businesses would close as liquor stores became unable to compete with big chain grocery stores.
A united front
Of the group of about 15 people who attended Assembyman Will Barclay’s town hall-style meeting at Camillus Town Hall last week, several were representing local liquor stores as owners or employees. None of them were in favor of Gov. Paterson’s proposal to allow grocery, convenience and drug stores to begin selling wine.
Barclay said he was not surprised to hear from storeowners at the meeting; he had been notified earlier that several business owners would be present.
“They are very organized,” Barclay said.
During the meeting, Barclay intimated he had the impression grocers had assumed the move was a done deal, but didn’t count on how united liquor storeowners would become against the proposition.
He added that he felt Paterson had probably made the proposition because of the revenue potential and had not realized, as Barclay hadn’t at first, the impact it could have on liquor store business.
Bad for business
“Most people don’t understand wine is a controlled substance,” said Chuck Pascale, a co-owner of Pascale’s Liquor Square on Erie Boulevard in Syracuse.
The percentage of alcohol in wine compared to beer is significant – making it more attractive to underage drinkers. One of the biggest arguments against the proposition is an increase in underage drinking and DWIs.
“Ninety percent of sales to minors come out of grocery stores,” Pascale added.
Putting wine in grocery stores would give youth much easier access to a controlled substance.
The underage drinking issue is one of the biggest factors, butthe inability for liquor stores – small, independent businesses by design – to compete with larger chain operations spells the end for business owners.
“The balance will be destroyed,” Ray Rudolph told Barclay last week. Rudolph owns Plaza Liquor Store in Camillus.
That fragile balance exists for liquor proprietors between wine and liquor, and the ratio of tax and profit each product presents. Grocery stores want to sell wine, but not liquor, because of the low state-imposed tax and the high markup on wine, Rudolph said. Selling hard liquor imposes a high excise tax in New York and the profit margin is negligible.
Pascale, who stocks about 4,000 varieties of wine, said 60 percent of his average sales are from wine.
“It would probably be very difficult to survive,” Pascale said. “Ironically, grocery stores would only sell the top-selling items.”
With limited space, grocers would probably carry the most popular wines; consumers lose out on the variety while liquor stores lose business.
Additionally, grocers are not going to increase their space to make room for wine, or employ more people to sell it, Rudolph pointed out. In the meantime, jobs are lost at the liquor stores who go out of business, and the property the stores once occupied stand empty. And, the service offered in liquor stores in regard to wine knowledge will also go away.
But, maybe not
On the contrary, Paul Speranza, vice chairman of the general counsel and secretary of Wegman’s Food Markets, Inc., noted in a telephone interview that selling wine in stores other than liquor stores would create jobs on the production side of the wine business.
It is unlikely liquor stores would hire more people than they already employ, Speranza added. But if the retail outlets for wine is increased, grape farmers and wineries will be able to employ more people to meet demand for product.
Speranza testified to the New York State Senate Finance Committee and Committee on Ways and Means to state his case and discredit liquor store owners’ two main arguments: that liquor stores can’t survive selling the hard stuff alone, and restrictions placed on liquor and wine sellers will not allow them to compete with grocery, convenience and drug stores.
Speranza claimed 30 to 40 percent of liquor stores’ profit comes from hard liquor, not wine.
“So they’ll still have the monopoly on that,” he said.
And as for the limited hours of business and restrictions on items sold, imposed by the state – liquor store owners need to take that fight to the state, not grocers.
But that’s not an option, said Pascale.
“We’re not looking for a concession from the state, we’re not interested in selling beer and cigarettes,” Pascale said.
He added that is the official position of the Last Store on Main Street, a coalition of store owners and business advocates opposed to the proposition.
Scratching the surface
The issue becomes more complex when specialized retailers and independent grocery stores are taken into account.
For nine years, Vinomania, a specialty wine shop downtown on Pearl Street, has provided local oenephiles with lesser known but top quality product.
Owner Gary Decker called his shop a “unique wine store,” and said because of Vinomania’s very specialized selection, attention to customer’s specific needs and tastes, and the expertise he offers, putting wine in grocery stores is not a threat to his store.
“I don’t even think twice about it,” he said. “But I feel bad for the little places that are going to get knocked off.”
Decker, like many local liquor and wine stores, is garnering names on a petition distributed by the Last Store on Main Street coalition in opposition to the proposition; a stack of informational post cards for the organization sits by the front door.
The one-time licensing fee grocers, drug and convenience stores would pay to be allowed to sell wine is only a quick fix for the state, Decker said.
Green Hills Market, a family-owned, independent grocer in Syracuse would stand to benefit financially from the switch just as much as big chains like Wegmans or Price Chopper, but were founded on local roots like small businesses such as Liquor Square and Vinomania.
Nevertheless, Green Hills owner Heather Hawkins pointed out New York would not be the first state to put wine in grocery stores – rather the 36th.
“We feel this is a natural pairing because wine complements food and we look forward to developing this opportunity should the Governor’s proposition pass in NYS,” Hawkins said via e-mail.
The bottom line
The collaborative efforts of liquor store owners throughout the state, and even in the same small towns, is a sign that competition between local stores has taken a back seat to the threat that none of them may be able to survive if the proposition passes. The last stand on Main Street is evidence to that.
But a little more competition is only fair, Speranza pointed out.
Liquor stores hold the monopoly on liquor and wine sales, and it’s only fair to consumers to break the monopoly at least on wine and pass competition-induced price savings on to shoppers.
Among the many arguments against the proposition, increased underage drinking and drinking and driving provide more statistical ammo, but facts and figures are handy for the pro-proposition side, too.
As Speranza pointed out, this is but the most recent battle in a decades-old fight.
He and Danny Wegman, who founded the chain, started working to put wine in Wegmans stores more than 30 years ago, Speranza said.
The difference this time is that the move is part of the Governor’s budget.
But that isn’t making Speranza any more optimistic about this go.
“We still need to be realistic,” he said.
In the end, the proposition is but one of many controversial issues enveloped in Paterson’s budget, and business owners and consumers alike will have to wait and see whether this proposition makes it through the legislature.