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CO Liquor Stores & Craft Brewers Against Consumers?

After running into the owners of a Colorado Brewery this weekend, I stumbled on a battle going on in the state between, as the Brewers see it, liquor stores and grocery stores. Really, it is a battle between liquor stores and consumers. While it is predictable that liquor stores would try and block legislation that would allow any other store to carry beer I was extremely surprised to find that many craft brewers are adamantly taking the side of liquor stores and actively lobbying Colorado legislators to keep beer off grocery store shelves.
It is a very sad thing when businesses ask government to shield them from competition. It is even more depressing to see small businesses, which survive by their flexibility and loyal customer base, exhibit such anti-competitive and anti-consumer behavior.

The situation: In the state of Colorado, grocery stores and convenience stores are allowed to sell beer, but only if it is under 3.2% ABV which is lower than the average brew. They argue that they should be allowed to compete with liquor stores and serve their consumers better by lifting the percentage barrier on beer.

The arguments: Grocery stores, faced with increasing food prices and falling profits demand the ability to offer their consumers the products they want—including full-strength beer. Independent liquor stores as well as *some* craft brewers claim that grocery stores will carry only the top selling brands of beer and that changing the law will put independent and small liquor stores out of business resulting in reduced availability of craft beers.

The liquor store-craft brew argument is pure bunk. And it isn’t even a new argument. It’s the same old Wal-Mart myth repackaged in a beer cask. The oft heard claim is that a large store (like a Wal-Mart) moves into an area squeezing out smaller Mom-and-Pop competition. The truth is that any business moving into a new market will increase competition within the market. As in the case of Wal-Mart, if grocery stores enter the malt beverage market some independent stores probably will go out of business—but don’t blame the grocery stores. Blame the liquor stores for being uncompetitive; for not finding some way (either product variety, more convenience hours or location, better advertising) meet the demands of consumers—they should go out of business if they can’t provide what consumers want. The question then is, will craft brewers go out of business as a result of all this change? The answer is the same for the liquor stores: not if they are good craft brewers.

While the brewers that I spoke with touted the importance of the craft brew movement in Colorado (no argument here) and the variety that exists in the state (again- that’s a fact) he didn’t seem to want to listen to the argument that grocery stores selling beer might open a whole new market for distribution. In fact, he downright admitted that “maybe” and “might” isn’t comforting when the system they currently have “works right now”.

So, there you have it, small businesses preserving the status quo. These brewers, who already have distribution contracts set in place with these small liquor stores, simply don’t want to think about how they could work to convince grocers to carry their beers or incense their fans to demand stores carry their brand, and liquor stores don’t want to have to think about how to carve a niche in a market where competition can enter freely.

In fact, the respective arguments of liquor stores and craft brewers are self-defeating when put together. If grocery stores will refuse to carry craft beer (as the brewers believe) and the liquor stores will lose customers to grocery store beer…liquor stores can devote more inventory to the craft beers that consumers obviously want and keep making a profit. As Philadelphia beer reporter “Joe Sixpack” said “If supermarkets squeeze out craft beer, it'll only create alternative specialty beer retailers. Look at gourmet cheese. You can't buy it at the Acme, but you still find it easily, in specialty shops, farmer markets and upscale places like Whole Foods.”

When I brought up the fact that Whole Foods grocery stores carry many craft beers and are often right next to liquor stores, the craft brewer I spoke with had to admit that Whole Foods was the exception to his vision of generic grocery store selection. But if selection in CO grocery stores really would be that bad, it would simply create more opportunity for stores like Whole Foods that recognize the demand for craft beers.