Deregulation Jenga: What selling wine at grocery stores could mean for a thriving sector of the Connecticut economy
Without over analyzing the idea, most people would probably think it a no-brainer to allow grocery stores to sell wine and spirits: more choice; convenience; one-stop shopping. Besides, many other states allow it. So why not Connecticut?
Well, for good reasons, reasons that make our lives better, and more interesting.
Once you pull back from the initial euphoria of ‘the more the better.’ Our kids would react pretty much the same way if we started breakfast with the idea: “Hey, just thinking out loud here, but what do you think if we changed school to just three days a week?” When you don’t have context, it’s easy to think what sounds best, is best. And so I’m hoping once I lay out some context, you will think a little harder about what you are really being sold here.
It’s worth noting that to date, after looking at our laws, and the arguments for and against, the legislature has voted consistently to leave our liquor laws largely intact, understanding that a strong sector built on small business is ultimately the strongest option for the economy and the tax-payer. Nevertheless, here we go again, so let’s be clear-eyed about it.
Background: The 21st Amendment to the U.S. Constitution ended prohibition, leaving it to each state to develop and administer an effective three-tier system (manufacturer, wholesaler/distributor, and retailer) for alcohol distribution. The overriding goal was to foster a diversity of enterprises and prevent monopolies, simplify tax collection, and protect public health by ensuring that alcohol is not too inexpensive, not overly available, and safe.
The National Alcohol Beverage Control Association, the group that connects all the individual state three tier systems, lays out the endgame of deregulation in a white paper viewable on their website: “This [three tier structure] prevents marketplace domination by large companies that would seek to greatly increase alcohol sales through aggressive market practices, or by controlling the entire alcohol distribution chain, from manufacturer to consumer.” That’s exactly the behavior that fostered the societal problems that prompted prohibition. Cause and effect here is a constant.
As things currently are in Connecticut: In the wake of the 21st Amendment our state has built an especially successful alcohol gatekeeper system that stakeholders have invested in over the decades, and which has prompted exactly zero complaints about accessibility.
Package store licenses are available on a town-by-town basis, at a ratio of one license per 2,500 residents. There are roughly 1,250 existing retail outlets spread out in every corner of the state, most of them Connecticut-based independent owners who live and invest right here. By virtue of the limit of five licenses per owner, and because of the minimum bottle pricing law, competition among this wide array of owners and stores manifests not in a pricing war between a few big brands in a few big stores, but rather by lots of local stores offering a huge diversity of selection, better customer service, and being fully invested in their communities, and accountable to them, in regard to how seriously they treat their main product being the controlled substance it is, and being that alcohol is the only line item of consequence to their bottom line.
The sheer diversity of selection among Connecticut wine and spirit stores has spurred the growth of numerous local and regional artisan importers and wholesalers, like Missing Link Wine Company, which have a broad base of customers seeking small production wines, new curiosities, innovation, etc, that just would not fit the scale of big box stores and grocery chains. Connecticut is the market they all want to be in. This dynamic simply does not exist in most states near the level it does here.
What the passage of HB 6101 would mean to Connecticut: Had the post-prohibition period began with grocers and big box stores being licensed to sell wine and spirits when Connecticut first designed its new three tier system, then the system and investment would have grown around that structure, and it would not be an issue – it would be what it would be.
But a choice was made, and a healthy marketplace of small and medium sized retailers has grown around this system to where it is now – robust and healthy, and frankly better than most states, offering true consumer choice, not just the illusion of choice. So the proposal to now make a drastic change to our permitting laws in Sections 55 & 56 regarding grocery and big box stores becomes existential, not beneficial, not even neutral.
The real effect of HB 6101 will be to reallocate who gets to make a living selling wine in Connecticut, given that net alcoholic beverage sales are relatively flat. Sections 55 and 56 of this bill tilts the table of an already weak small business economy even further toward big box business, as the inevitable inertia of one-stop shopping peels away enough dedicated customers and impulse purchasers to do great harm to current stakeholders (in which I include the buying public).
Once in motion, wholesale offerings start to dwindle to primarily just large manufacturer brands, brand registrations requests (and accompany fees) dwindle, as do the number of suppliers and wholesalers, until our marketplace becomes as generic as Arizona or Florida, where the illusion of selection exists, but in reality the majority of what lines the shelves are just multiple, mass produced wines from a handful of the largest manufacturers, and that expert you looked to help you make a good selection has been eliminated. More empty real estate and fewer employees and quality jobs, just as it has played out in all the markets that ‘modernized’ their liquor permitting laws.
The choice for one-stop shopping is not a good choice in this market. Let’s learn from those who did it before us. Instead, let’s jealously guard and promote a part of the Connecticut economy we can truly brag about. It works.
Doug Rankin is Co-Owner of the Missing Link Wine Co. in West Hartford.
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