Colorado Liquor Wars (Or At Least, Protracted Negotiations)

The Denver Business Journal reports that supermarkets, convenience stores, and liquor stores are having trouble reaching consensus on reforms to Colorado’s alcohol-sales laws.

Since the end of Prohibition, Colorado law has allowed only independently owned liquor stores to sell a full array of alcoholic products, limiting grocery and convenience stores to peddling reduced-strength beer. A fight between the groups erupted after state law was changed in 2008 to allow liquor stores to open on Sundays, an event that grocery- and convenience-store owners say has decimated their sales on what was traditionally their one big day of the week for beer.

This is not entirely accurate.  Due to a quirk in the regulatory regime, grocery stores can sell full-strength beer, wine, and liquor at one outlet per chain.  That is why we have liquor sales at the Super Target on Colorado Blvd, for example, but not at any other targets.

This issue has been percolating for quite a while:

For three years, grocery and convenience interests have run bills to allow them to sell full-strength alcohol in some form. But each have been defeated in legislative committees, with the opposition led by liquor-store owners warning that they’ll be run out of business if the bills pass and craft beermakers saying that their businesses will be endangered by national corporate grocers who won’t sell their products.

There is some truth to this.  My personal experience living in and visiting places that allow regular alcohol sales in grocery stores indicates that the quality and variety of wine, beer, and liquor available tends to be significantly lower than we have in Colorado liquor stores.  That may be a reflection of local tastes, but I suspect that it is also a reflection of homogenization caused by central buying for grocery chains. 

I expect also that it would be more difficult for some independent liquor stores to compete if one-stop shopping were available at grocery stores.  It would be a pity if local liquor stores suffered.  As a consumer, I enjoy having a large variety of beers and wines available to me, and liquor stores are likely to offer the best variety. 

But at the end of the day, I do not believe that government should be involved in this kind of regulation of private commerce.  The debate is all about protecting or attempting to invade turf, as the case may be.

Grocery stores want to sell everything, so they can offer one-stop shopping (invading).  Meanwhile, they want to end or limit liquor store sales on Sunday so the grocers can sell more 3.2% beer (protecting).

Convenience stores want to sell full strength beer (invading).  Or they want to limit liquor stores as above or have the “state [to] consider whether those stores’ licenses actually allow them to sell cigarettes, as many stores do now” (protecting).

Liquor stores want to operate on Sundays (invading).  Meanwhile, they want to limit liquor sales by grocery and convenience stores to 3.2% beer (protecting).

Note that the debate is entirely about market protection.  It is not about the general health, safety, and welfare of consumers or the public.  Pretty much everyone seems to have abandoned any notion that more package liquor outlets harms the community.

The government should not be protecting market players, or managing success and failure by regulation.  Reduce regulation (perhaps with a suitable phase-in period), let the competitors compete, and things will work themselves out.  Yes, there will be displacement.  Some liquor stores may not survive.  Some craft beers and liquors may lose some outlets.  Some consumers (like me) will not like those aspects of the change.

But such displacement leads to efficiency.  Liquor stores will continue to offer the greatest variety, convenience stores will offer a quick stop for a six-pack of real beer, and grocery stores will allow one-stop shopping for dinner and, with a modest selection, a bottle of wine.

Published in: on August 24, 2010 at 2:42 pm  Leave a Comment  

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