From Politics in Minnesota
Regular readers of the Politics in Minnesota (PIM) Morning Report know that we try to flag stories about issues in other states that mirror matters before the Minnesota Legislature. One of the phenomena we've noted in recent months is that groups pushing policy changes are trying to reconfigure those issues into fiscal ones. In other words, groups are trying to frame what would normally be termed policy changes as fiscal remedies for ailing state coffers.
Perhaps the most striking example of this phenomenon is what's going on in New York concerning the sale of wine in grocery stores. Last year, New York grocers introduced a simple bill to allow them to sell wine, and it was soundly defeated by the state's liquor stores. But the grocers of New York got busy, coming up with a comprehensive package that gives something to the liquor industry. This year's proposed "Wine Industry and Liquor Store Revitalization Act" would eliminate Prohibition-era restrictions by allowing liquor store owners to expand their product offerings to such items as wine accessories and snack foods, which they're currently prohibited from doing. (Minnesota, of course, has a similar law.) It would also allow wine to be sold in outlets that are currently licensed to sell beer.
Perhaps the biggest coup for the New York grocers was getting the buy-in from Democratic Gov. David Paterson, whose administration estimates the package would add $147 million annually to the state of New York. The bill is now part of Paterson's proposed $1 billion package of new taxes and fees.
Certainly there are differences between how New York and Minnesota currently regulate liquor distribution and sales, but the key point they have in common is that Minnesota also has a liquor law framework predicated on a post-Prohibition market order. Proponents of the revision to New York law now include the New York Farm Bureau, the New York State Grape Growers Association, the New York Wine Industry Association, and the faction of liquor stores that stand to benefit. What percentage of the New York liquor store industry supports the bill is unclear. But the liquor stores that oppose it have taken to calling Wegman's, a major regional grocery store chain, "greedy grocers."
We'll keep you posted on what happens in New York. Meanwhile, we checked with the Minnesota Grocers Association. The group does not plan to pursue wine in grocery stores this year, according to Jamie Pfuhl, the group's executive director.
The New York WIG Story
Source: Legislative Gazette
by Stephanie I. Witkin
January 25, 2010
For the second year in a row, Gov. David A. Paterson included in his Executive Budget a proposal that would allow the sale of wine in grocery stores across the state.
The legislation would allow almost 19,000 retailers to sell wine alongside beer. The bill was first introduced in 1984 as part of a plan for New York state wineries to increase their marketing opportunities.
The bill, (S.5787/A.8632-a), sponsored by Sen. Liz Krueger, D-Manhattan, and Assemblyman Joseph Morelle, D-Irondequoit, was re-introduced in 2009 as part of the solution to alleviate the deficit. Paterson has added it again to his 2010-2011 Executive Budget in an effort to reduce a portion of the mounting $7.4 billion deficit in New York. If the bill passes then an estimated $147 million in new revenue would be generated over the next two years.
The most significant source of revenue would come from grocery stores and drug stores applying for licenses that would allow them to sell wine. Since 1998 all licensing fees have been deposited into the General Fund.
This year's bill has added new provisions to try to level the playing field between large supermarket chains and small mom-and-pop liquor stores. Some of the new provisions added to the bill are - liquor stores would be allowed to sell items complimentary to their business, they would be allowed to sell directly to restaurants and retailers, they would be able to form buying pools that would allow them to buy in bulk and lower costs. The new law would allow liquor store owners to obtain more than one liquor license which currently isn't allowed. The bill would also create a "medallion" system, through which existing store owners will be able to auction of their existing licenses to the highest bidder, and sell the one additional license this section allows them to obtain from the state Liquor Authority.
This bill would also bring about changes to liquor stores as well. Certain "antiquated" alcohol laws will be amended in order for liquor stores to compete fairly with grocery stores. "They are referred to as antiquated because most laws have not changed since 1933," said Jennifer Carlson, of the New York Wine Industry Association. "The fact is that New York wines have less than 3 percent of shelf space in liquor stores. . Any increase in exposure helps with their sales," she said.
Last year's bill was defeated after liquor store owners and sympathetic lawmakers expressed concern over unfair competition with grocery stores and large chain stores.
In a Cornell University study conducted by Bradley Rickard, assistant professor of applied economics and management at Cornell, a model was created that assessed the likely impact of introducing wine into grocery stores. Twenty-one simulation experiments were conducted and found that liquor stores stand to lose 17-32 percent of their business. Also, out-of state wineries would benefit from the bill and in most cases in-state wineries would gain revenue as well.
"Most of the arguments I make . support this bill," said Rickard. But, "I can't throw all my support behind it," because of the issue that liquor stores are going to lose revenue from wine sales. Rickard also said he would like to do more research about what the new provisions would do to help liquor stores. "I'm interested in trying to quantify the benefits of the provisions in the current bill," Rickard said. "I'm also curious about other provisions that aren't in the current bill."
But the issue is sure to be as contentious as it was last spring before the bill died.
"Sales are down dramatically. People are not buying wine and liquor. On top of that asking [liquor stores] to take a 30 percent pay cut is going to have a devastating impact," said Michal McKeon, a spokesman for the Last Store on Main Street, a coalition of small business owners.
Another concern for some is that 90 percent of alcohol sales to underage drinkers occur in grocery stores and convenience stores, according to those who oppose the legislation. "I don't know any teenager who would go to the shelf and pick wine over beer," said Carlson. The stores that are going to be selling wine already have alcohol such as beer; therefore Carlson says that underage drinking would not increase.
However, McKeon argues that this is not true. "Every gas station and deli is going to have wine. That is 19,000 new outlets. It is going to have an impact," on underage drinking, he said. McKeon also refers to a Columbia University study that found just as many teens would buy wine as beer. The Columbia University study found that 5 percent of the teens surveyed bought alcohol from a store and 34 percent got alcohol from a friend.
The Last Store on Main Street coalition is worried that letting grocery stores sell wine would drive them out of business. "It's a phony compromise that allows big box stores to crush our business. Being able to sell potato chips adds little to the devastating impact," said McKeon. "There is nothing more phony than big box lobbyists saying 'we're here to help you small businesses.' It's almost insulting."