Beer and Liquor in Colorado Grocery Stores: far too many unhappy consequences

Natural Grocers continues to provide data, information, and analysis on the proposals to allow grocery stores to sell full strength beer and liquor.  Below is a summary of our testimony and white paper submissions.  No, we do not think this is a good idea. 




Why the Current System Works.   Jump to Maps   Index

 

• Independent liquor stores are evenly spaced across the state and urban neighborhoods because licenses are issued based on expressed needs of communities


• Currently liquor stores are independent family-owned businesses offering access and opportunity for all comers with drive and ambition.


• Profits stay in community with local families.


• Businesses support traffic in smaller neighborhood shopping areas.


• Safety controls to prevent access, theft, or consumption by minors.


• Balanced sales between different retailer segments based different products.


• Regulatory control is highly successful – few violations and closures.


• Product selection is responsive to local desires with emphasis on local companies.


• Crime syndicates do not have access to liquor sales; money laundering curtailed.


• Fair and balanced competition among many entities of similar size.


• Community input on approval of licensees and locations during hearing process forces higher standards of compliance.



 

What happens when liquor can be sold everywhere?  Use these headings to jump to detailed pages below.

 

6. Effects on crime and underage drinking

7. Effects on free market competition

8. Effect on Jobs

9. Effect on Colorado brewers

10. Effect on local economic redevelopment efforts and viability of neighborhood shopping centers

11. Effect on traditional neighborhood retail areas

12. Effects on viability of convenience stores

13. Effects on large retailers

14. Maps showing concentration of independent liquor stores, convenience stores, and grocery stores in Denver Metro area.

 

View this document in PDF format (new window)

View the independent Summit Economic Impact Study



 

Natural Grocers will never sell alcohol, but we have a significant stake in the outcome of this debate.  Index

 

• Natural Grocers is a family-owned Colorado business, founded in 1955,  operating 30 stores in the State and employing over 1,000 Coloradoans.


• Natural Grocers never has and never will sell alcoholic beverages.


• Natural Grocers does not request or pursue special tax breaks, sales tax rebates, or other municipal incentives when opening new stores. We believe


our business model should stand on its own.


• We are experts in retail shopping areas and revitalization projects. Whenever possible, we locate stores in distressed retail areas so we can anchor other businesses in the neighborhood. However problematic for our health goals,  liquor stores are often critical for the success of these retail areas.


• We locate stores in areas that are underserved by other grocers in terms of fresh, wholesome, nutritious food.


• We provide extensive educational and counseling services to our customers and our communities via one-on-one health coaching, the Health Hotline publication, handouts, lectures, seminars, outreach and more – all for free.



Key Concerns with full strength beer and liquor in grocery and convenience stores    Index


• A recent amendment allowing ownership of up to five liquor stores has not been properly analyzed, with no public comments solicited. This is a drastic and fundamental change to Colorado liquor regulation that needs careful study and consideration before the consequences can be understood.


• Access by minors to stores selling full strength beer increases greatly under S194.


Unlike small stores, big grocery stores are open longer hours and are minimally staffed.  Theft of product by minors, and drinking alcoholic beverages inside the store itself, will be a significant new problem for Colorado. Security measures put in place at the registers do nothing to mitigate these activities.


• Retail sales and distribution in all industries continue to consolidate into the hands of a few conglomerates. For Colorado beer sales, this consolidation will eliminate many small family owned storefronts that support Colorado families and neighborhood shopping areas. In turn the State’s craft breweries will also suffer.


• The full strength “beer is beer” strategy is just one more incremental step by the big chains towards moving all liquor stores into grocery outlets. If we do not intend to let grocery stores control the bulk of liquor sales, there is no reason to approve “beer is beer”. The two tactics are part and parcel of the same long term strategy, going back over the last 30 years, targeting many jurisdictions across the nation. Once Coloradoowned liquor stores are reduced in number, the chain stores will point to “underserved areas” as justification to start selling all beer and liquor based on unmet need.

 



Summit Economics has performed an independent, in-depth study of the economic impact of similar changes in other states.  Their findings show that over 900 independent, family-owned Colorado business will close if liquor sales are handed off to grocery chains.  Read the Summit Economic Impact Study here. 



 

 

Effects on Crime and Underage Drinking:  Immediate Safety Concerns   Index


• Small liquor stores have vested interest in controlling access to beer and liquor.


• Unaccompanied minors are not allowed and all minors are scrutinized.


• Serious anti-theft measures in place, focusing on human supervision.


• Large food retailers open 24 hours with minimal staff in aisles.


• Large retailers place case-stacks of beer, liquor and wine throughout store to prompt impulse purchases, making target for theft and in-store consumption.


• Measures in place at register are irrelevant when theft and in-store consumption occurs. Teenagers are very unlikely to attempt to use register lanes when obtaining liquor.


• Chains have dis-incentive to report theft or consumption by minors to liquor control authorities.


• “Shrink” in inventory easily overlooked by large retailer; lost inventory matters a lot to independent liquor stores.




Effects on Competition:  Immediate consequences to competitive market  Index



• Larger food retailers will buy local independents with intent to close them.


No new liquor store will be willing or able to re-enter market.


• Liquor stores in retailer-owned centers may be forced out by retailer.


Chains’ deep pockets will prevent store from litigating due to cost.


• Larger stores will be reduced in size and product selection decreased.


• Liquor stores in retailer-owned centers will close or down-size due to loss of


full strength beer revenue relative to their overhead and established business model.


• Lenders will pull back from loans to small liquor stores due to consolidation of market, furthering decline of independent operators.


• New competitors will enter market and diminish independent’s revenues.



Effect on Jobs     Index



• Increase in competition favoring chain retailers merely transfers


jobs from family owned independent businesses to large chains.


• Chains will only create part-time stocking jobs with low wages and few benefits.


• Buying, ordering, checkout, and receiving functions assumed by existing chain retailer staff.


• Experienced and knowledgeable customer service staff not needed by chain sellers.


• Extended hours of food and convenience retailers will mean no customer service staffing for most of each day.


• Self-service business model of food retailers will mean no customer service required.


• Smaller selection of familiar brands requires little expertise to sell.


• Net result is swapping of one full-time job at independent small business in exchange for 1/2 chain store stocking job.




Effect on Colorado brewers and supporting industries     Index



• Selection at chain stores will decrease, providing fewer revenue opportunities.


• Access to centralized buying offices restricted at chain stores.


• Increased costs to market and sell products to chains will reduce profits.


• Inventory “SKU” rationalization by large retailers eliminates slower selling boutique brands before they can become established, favors large brands.


• Retailers focus on fewer brands from fewer suppliers to promote efficiency.


• Slotting fees required to gain access to large retailers lower profit margins.


• No qualified sales people to promote unique properties of different product.


• Reduced clout with large retailers as sales volumes decrease.


• More difficult to reach critical mass in market place to justify and support sales


to export markets in other states.


• Inability to build a strong local market reduces availability of growth capital.


• Employment by breweries decreases overall.


• Purchases of agriculture inputs decreases overall.


• Some brewers relocate to other states.




Effects on Traditional Neighborhood Shopping Areas     Index



• Personal relationships with neighborhood customers.


• Access to myriad of local brands and ability to sell these brands based on


knowledge, expertise and trusted recommendation of proprietor.


• Many locations are in cherished “walkable” neighborhood centers.


• Expertise about products far exceeds that of a Big Box staff.


• Opportunity to sell unique small batch local products and provide


personalized recommendations.


• Traditional liquor stores can eliminate underage purchasing, theft, and instore consumption by controlling access and supervising minors (even those accompanied by adults).




Effects on Economic Development of Retail Centers: Immediate economic and quality-of-life results for neighborhoods      Index



• Total current retail sales of full strength beer distributed among 3+ times as many outlets


• Smaller stores in lower traffic areas may not survive


• Neighborhood shopping centers lose traffic of anchor stores and become less viable.


• Other stores in small shopping areas may close or relocate due to lower


traffic.


• Urban renewal efforts thwarted as important traffic-generating liquor stores are eliminated.


• Additional money and effort required to assist revitalization projects.




Effects on Viability of Convenience Stores: Long term consequences for convenience stores      Index



• May be underestimating the long term outcome of moving full strength beer sales into grocery stores.


• Increase in competition for beer sales by factor of three or more times.


• Creates much stronger competitive environment for beer sales.


• Food retailers have far more customer visits; beer sales in convenience stores likely to decline over time.


• Large food retailers will continue 30-year campaign to gain control of liquor sales; will not stop at full strength beer.


• Large food retailers will under-price beer and advertise sales heavily to gain convenience store traffic.


• Will invite new and stronger competitors into market.




Effects on Large Food Retailers: Long term competitive strategies of large retailers      Index



• Chain grocery industry implementing strategy nationwide to gain access to liquor sales.


• Industry has deep pockets and special teams in place to lobby for liquor sales.


• Long term strategy of reaching incremental gains to weaken, divide and conquer independent businesses selling liquor.


• Large retailers are built on strategy of centralizing purchasing, consolidating markets, reducing number of items for sale, using volume clout to pay less for products.


• Large retailers can sustain much lower margins for longer periods of time to put pressure on sales and profits of smaller competitors.


• Advertising clout of large retailers can overwhelm best efforts of independent store’s marketing efforts.


• New competitors will enter market and further dilute profitability.




Maps of Store Locations – Metro Denver      Index



MAP A: traditional liquor stores in central Denver metro area


Map B: all liquor stores, convenience, and grocery stores in central Denver metro area


Yellow squares show locations of convenience stores.


Orangesquares show locations of grocery stores.


Green squares are traditional standalone liquor store locations.


Green squares show locations of stores whose primary business is beer, wine and liquor. This is most often the independent family owned store.

Green squares do not include convenience stores, groceries or pharmacies whose liquor store business is secondary to their main business. Green squares closely match the 1600+ family owned businesses selling beer and wine.

Radius circles depict estimated marketing areas, showing the spread-out marketing areas resulting from current neighborhood- and need-based licensing framework.