A Jug of Wine, a Loaf of Bread – States Expand Sale of Beverage Alcohol in Food Stores

As the great poet once put it, “A Jug of Wine, a Loaf of Bread . . . O, Wilderness were Paradise enow.” Clearly, people have long deemed that wine and food go together. Despite this sentiment, there are still states with laws restricting when food and alcohol sales can occur at the same time.

However, three states have had recent developments in their rules, which have made one-stop shopping for that jug of wine and loaf of bread either already available, imminent, or at least a bit more likely. These seem to be part of a larger trend among states to modernize their laws, to attempt to improve things for customers and industry members alike. While the sale of beverage alcohol in food stores may not be as momentous as Pennsylvania’s recent modernizations, they are still a notable change.

Tennessee

In 2014, after years of debate and compromise, the state of Tennessee passed SB 837, which created a new license type, the “wine at retail food store license” permitting food and grocery stores to sell wine. Though this may seem like old news now, the bill made the effective date July 1, 2016, meaning that wine sales in food stores have only just begun.

The new law restricts sales only to wines up to 18% ABV, so Tennesseans must still go to a liquor store for their sherries and ports. However, a provision in the law also allowed Tennessee liquor stores to begin selling more beers, mixers, party supplies, and foods–in fact, these sales began occurring last year. So the opening up of sales has gone both ways.

Coming into 2016, there was a great amount of uncertainty surrounding how the July 1 selling date would work out. This is because the laws, as they were written, didn’t allow food stores to purchase or stock wines before July 1. So there would be a gap between when they could sell wine by law, and when they would in fact start selling wine.

But in April, a measure was quickly passed that allowed food stores to stock wine well in advance of July 1. (Leading, in June, to well-stocked shelves of wine, in sight of customers, but barricaded from their reach–quite a tantalizing situation, I’m sure.) This measure, along with the thorough efforts of the Tennessee Alcohol Beverage Commission to approve applications, meant that there was no delay on July 1 in the sale of wine.

Oklahoma

Oklahoma is in the middle of a major overhauling of its alcohol beverage laws. Currently, all of Oklahoma’s laws are housed in its state constitution. This means that any change requires a constitutional amendment, which is generally a harder process than merely updating its statutes.

But SJR 68, and its companion bill SB 383, will bring the question to the voters of Oklahoma in November, whether the state’s alcohol beverage laws should be modernized. These are large, omnibus bills that affect essentially every aspect of selling alcohol beverage in the state (including rules on craft production, 3.2 beer, and even a potential direct-to-consumer bill).

Included are provisions that would allow grocery and convenience stores to sell full-strength beer and wine up to 15% ABV. The new rules would also allow package liquor stores to have sales of food products up to 20% of their total revenue.

However, it’s important not to get ahead of ourselves. While SJR 68 and SB 383 have been signed by the governor, they merely authorize a vote of the people in November. It is still very possible that these measures could fail, meaning no change in Oklahoma. This lack of certainty is compounded by a recent decision by the Oklahoma Supreme Court, invalidating a proposed ballot initiative that included language very similar to SJR 68—though the Court’s opinion has not been released, so it is unclear whether that opinion would apply to the ballot vote this November on SJR 68.

And even if they do pass in November, sales of full-strength beer and wine in grocery stores wouldn’t begin until October 2018 at the earliest. So while this may be exciting news, there’s no reason right now to expect any change soon.

Colorado

Colorado has seen a contentious debate over expanding sales of beverage alcohol in food stores, with small liquor stores and craft producers vehemently clashing with big box grocers, like Kroeger and Safeway. Both sides accused the other of stifling competition and degrading consumer choice. It seemed as though the issue would come down to a voter referendum this fall. But the signing of a compromise bill by Governor Hickenlooper on June 10th headed off this potential vote.

The compromise bill, SB 197, will greatly expand the sales of beverage alcohol in grocery stores, but it does so through a complicated process, to be slowly rolled out over the next two decades. However, it does seem as though the bill has ended the era of bad feelings, as Your Choice Colorado, the group behind the proposed referendum in the fall, recently announced it would no longer seek to get its measure on the ballot, meaning that, for now, all sides have agreed to wait and let SB 197 play out before bringing up the issue again.

Currently in Colorado, a person can hold only one off-site retail license at a time. For large grocers with multiple storefronts, this means that only one of their stores can get a retail license for full liquor sales. All of their other stores are limited to selling only 3.2 beer. Grocers sought to change this rule, to allow a party to hold an unlimited number of licenses with the right to sell full-strength beer and wine. However, small liquor stores saw the extra competition as life-threatening, and craft producers feared that they would be unable to gain purchase in the chains. And so this effort was vigorously opposed.

SB 197 reached a compromise between these parties, creating a new scheme for retail sales in Colorado, the details of which will need to be worked out in the coming months.

SB 197 allows stores that primarily sell food to sell full-strength beer, wine, and also spirits. However, SB 197 retains a limit on the number of licenses any one entity can hold, which will slowly expand over the years. To begin with, starting in 2017, someone can hold up to five licenses. This will expand in 2022 to seven licenses, increasing in amount every five years, until 2037 when grocers could hold an unlimited number of liquor licenses.

However, before a grocer can get an additional license, it is required to buy at least two existing retail licenses and merge them into a single new license. Along with these two licenses, an applicant for a new license will also need to buy up all other licenses in their vicinity. For a town of more than 10,000 people, this means buying out all the retail licenses within 1,500 feet of their location; for a town of fewer than 10,000 people, it is within 3,000 feet. This situation seems poised for holdouts, but we’ll have to wait and see how the expansion of licenses actually plays out.

The new law will also allow liquor retail stores (with a different license type than the one available to groceries) to get up to 20% of their revenue from the sale of food, and allow the sale of foodstuffs other than items traditionally associated with the consumption of beverage alcohol, such as olives and limes.

In all, this is one of the largest revisions of Colorado’s beverage alcohol rules and is expected to greatly restructure how beverage alcohol is sold in the state. The Colorado Liquor Enforcement Division is currently working through how to carry out SB 197, and plans to hold a series of industry meetings to discuss its impact and implementation.

On one hand, an increased amount of shopping locations seems like good news for beverage alcohol producers. After all, more shops should mean more customers. But these changes shouldn’t be shrugged off as merely a few more retailers out there. According to reports on the Tennessee rule change, this kind of disruption in sales is almost unprecedented–since Prohibition only Iowa has amended its rules to expand the availability of off-site wine sales (in 1986, in an effort to lessen its grip on the control market).

There are many industry members that oppose these changes. The most obvious opposers are the small liquor stores ubiquitous (at least in Colorado) alongside grocery stores, who fear being squeezed out by the new competition. (The buy-out mandated by SB 197 hopefully allays some of these fears.)

The effects of these bills on the craft market remain to be seen. Hopefully these states will seek to minimize any deleterious effects, and ensure that all products receive an equal opportunity to reach the consumers.

We would like to hear your thoughts and concerns on this issue. We’ve set up a new feed on our Beverage Alcohol Community to track the conversation.

In recent years, states have taken a number of steps to modernize their alcohol laws. Currently, we are seeing this in the expansion of sales of beverage alcohol in food stores. This is now a reality in Tennessee, and we are eagerly waiting to see what the impact there will be. Colorado will begin lumbering towards that scenario shortly. And we’ll have to hold our breath for Oklahoma. Whether or not this all will truly bring Omar Khayyam to paradise (after all, he’d still need to get his “Thou” to properly fill out the poem), at least he’ll have fewer stops when running errands.

Update 11/10/2016: On Election Night, Oklahoma residents voted to approve State Question 792. This means the proposed rules–moving the ABC laws out of the state constitution, expanding grocery sales, eliminating 3.2 beer, and a DtC provision, among others–will soon become law in Oklahoma. However, there is a very long-lead in time before these rules actually become effective, and it is widely expected that a legal challenge is coming. So do not expect to see big change in Oklahoma for quite some time. Further, groups like Free the Grapes! have called the DtC provision fatally flawed, as it contains, among other rules, a cap on the total amount a resident can receive from any winery in a year–a restriction that is near impossible to follow. As Oklahoma carries out the long implementation process, you can expect to hear more from us at ShipCompliant.

 

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