5 Myths of Having Full-Strength Beer in Colorado Grocery Stores

Full-strength beer forces market in a corner

 

Full-Strength Beer in Colorado

2013 will be the fifth consecutive year lawmakers attempt to tackle the state’s aging alcohol regulation. Rep. Kevin Priola, R-Henderson, wants to propose a statute that permits the retailing of full-strength beer in Colorado grocery stores.

What’s more than interesting is that brewers and liquor stores oppose any changes to current codes while major grocers, convenience stores and the Colorado Retail Council want to make the switch to full-strength beer in supermarkets.

But what do consumers want?

Let the laws of economics show you the results before you cast your vote (really, this issue may end up on a future ballot).

 

Myth #1: Supermarkets will offer more varieties of craft beer for consumers.

Being able to pick up a sixer of full-strength beer while grocery shopping is supposed to make it more convenient for consumers. And initially it will. But once beer becomes just another item on the shopping list, liquor stores will see a significant decrease in their craft beer sales, which is a major chunk of their profits. This trickle-down effect affords the national grocery chains more influence on the market, and subsequently the supply, empowering them to sell their shelf space to the highest bidder. Could you imagine if you’re craft beer choices were limited to those small batch brews from big beer conglomerates?

 

Myth #2: The craft beer industry is growing so rapidly it needs more outlets for competition.

Did you know a new brewery opens in Colorado every two hours? OK, kidding. But there’s a reason why local and craft beer is a big industry along the Front Range: Because of the current legislation! Right now, liquor stores and microbrewers have a mutually beneficial relationship. Since you can find a liquor store on every other street corner, brewers are able to strategically retail where the demand for their beer exists. This wealth of options helps to keep costs low for brewers, helping to fuel much of the new business growth in the Napa Valley of Beer.

 

Myth #3: More distribution channels make it easier for new businesses to enter the craft beer industry.

Once consumers spend their beer bucks at the supermarkets, mom-and-pop liquor stores will begin to vanish. According to the Denver Business Journal, a study conducted by Summit Economics, LLC declares that nearly half of Colorado liquor stores will close their doors within three years. So there will be fewer distribution channels for brewers, affecting new or less-established craft brewers the most.

 

Myth #4: Major commercial brewers support full-strength beer in all retail outlets.

Consumer choices will eventually comprise of the trifecta of international brewers and a few other craft brewers that are big enough to survive. By this point grocery stores will have abused the lucrative beer market, forcing even mass brewers to pay higher fees in order to compete with low-margin items over limited shelf space. Not to mention, watered-down 3.2 beer keeps the costs of ingredients down for big brewers.

 

Myth #5: Selling full-strength beer in supermarkets boosts the local economy.

Liquor stores have wreaked havoc on Sunday beer sales in supermarkets ever since Colorado politicians made the seventh day equal to the rest of the days that end in ‘y’ over four years ago. Safeway has publicly stated it plans to add one position to each store if the new legislation passes. Compare that to the 10,000 jobs that will be eliminated in the first five years of passage. (And don’t forget about all that missed tax revenue.) Independent liquor stores, microbrewers and their suppliers will also be affected, especially Colorado’s burgeoning hop industry.

 

Supposedly booze is a recession-proof industry and for good reason, but Darwinian economics are still at play.

How do you think having full-strength beer in grocery stores will affect the 75+ new breweries opening in Colorado in 2013?

 

About Lindsey Dulin


After discovering real beer since her FSU tailgate days, Lindsey Dulin is making up for lost time. She’s now an avid homebrewer and is ceaselessly finding reasons to celebrate the ordinary with a pint. In between beer sessions, Lindsey specializes in digital marketing communications and new media for SMBs. In her spare time she coordinates and participates in multiple volunteer programs and has been a veteran bartender and server for over 10 years. Contact her at lindseyrdulin@gmail.com.

  • http://twitter.com/SirCasio Jason Phillips

    If these are all myths, please explain how I can go into a grocery in Indiana and get a wider variety of micro brews than I can in my local packie here in Colorado?

    • http://www.facebook.com/monkeygurl Julie Elrod

      I would agree with you Jason. Coming from California originally there are several grocery stores that carry a great selection of craft beer – including some of the smaller, local guys (Sprouts, Whole Foods are 2 examples that have an awesome craft beer selection)

      • RogerWF

        Spent two weeks in Mountain View, CA in August. The locals told me the same thing: that Whole Foods had a great selection of craft beer. Went there, and I was EXTREMELY disappointed. A few Cali breweries, and hardly anything from out of state. Tried a liquor store and it was even worse. The beer selection at the liquor store in my little CO town of 2500 people is better.

    • http://www.facebook.com/kyle.a.freeman Kyle Freeman

      Some of it has to do with proximity to the brewery-dense east coast. But you have a point. California is another glaring counterexample.

    • PJ

      I’ve always thought this, and the other two comments about other states also ring true. I think it’s due to the current laws that these small stores would suffer. If Colorado started out with the same laws as California or Indiana, it would be fine now. But because an industry grew up with the current laws, changing them would hurt the industry. In 5 years, consumers might not notice the difference, but there would definitely be a lot of business owners and employees hurting.

    • Lindsey Dulin

      I agree with PJ. The industry has grown up around legislation
      that has made Colorado’s market more volatile. Also, since Indiana is close to the hoppin’ Midwest market there’s a reason why those grocery stores offer more varieties of beer. (Please prove me wrong and tell me they’re all from the west coast.) Growing up in Florida, I can say that having a beer selection is a relatively new phenomenon there (ha) even though they’ve had full-strength beer in grocery stores and gas stations for quite a while. Having a local microbrew scene is also pretty new to Floridians (unlike Cali). Thanks for the comment!

    • drew

      Iowa is another counter example. No problem finding a nice selection of craft beer at the Hy-Vee stores around DSM. There’s a natural midwest bias to the selection (MO, MN, WI, etc) but there’s plenty of Rockies and coastal brews too. And Stone recently announced IA distro – if that isn’t a sign that good beer will be sold wherever peolple want it, I dont know what is.

      • PJ

        What about smaller breweries? I have no idea of the answer, which is why I ask. But breweries like Stone aren’t the concern. Stone, New Belgium, Dogfish Head, they’ll all be fine and always be available where their beer is legally able to be sold. It’s more a question of River North, Renegade, Funkwerks, etc.

        (You happened to mention Stone and not a small brewery, which is why I bring this up.)

        • drew

          Last time I was back I bought Peacetree (tiny brewery in Knoxville) at Trader Joe’s. And Templeton Rye (small distillery) had no problem selling their whiskey throughout the state. If you make a quality product that people want, you can find distro for it. If your business is only viable due to government interference in the market, the problem is your business, not your competitors.

          • PJ

            I don’t disagree with you on that. It would suck for 10,000 people to lose their jobs, though.

          • http://www.facebook.com/kyle.a.freeman Kyle Freeman

            That number show up a lot, but it’s coming from a study commissioned by the liquor stores, so you really should be careful with it. What I’m curious about is whether the bill would make small neighborhood grocery stores economically viable. Currently Denver has very few.

          • Alan

            That’s not entirely true. There are plenty of quality products that people want that have a hard time finding their way to the shelf or get pushed of the shelf due to the tactics of the much larger competition.

            If you’re truly worried about government interference perhaps we should do away with the 3-tier system that is mandated by the government. Guess who keeps that system intact with their millions of lobbying dollars.

  • http://twitter.com/tbeseda T Beseda

    How do you spot a Californian in Denver?
    They’re the one buying beer at Safeway.

    I doubt full-strength at Soopers is going to put Argonaut down in the long run, but it would seriously harm the smaller, single-location shops around town.

    On a sentimental note, I couldn’t stand to lose my corner store [currently more than 30 craft beer choices (50+ if you include the bottle fridge)], where the owner knows my usual and saves me a selection of new/rare stuff.
    I doubt I could get that service from Paul the cart pusher or Janet the gum-smacking checkout clerk (two time winner of the “Most Effective Use of Bag Space” award).

    • http://twitter.com/tbeseda T Beseda

      *No offense to people named Paul or Janet, they seemed appropriate for my narrative.

  • Ben

    in Portland OR the grocery stores all have excellent selections of even the smallest micros. There is also plenty of room for independently owned beer specialty stores. These stores specialize in growler filling(which will still be illegal in CO) and craft bottles. Nobody complains in OR about who can sell beer. If the consumers want it the retailers need to adapt. specialty stores are selected geographically by neighborhoods and the LQ’s can still have the suburbs and compete with the grocery outlets. They also have made it so that you cant buy Hard Liquor in grocery stores, you still have to go specifically to LQ’s to get the hard stuff. Makes sense.

  • http://twitter.com/focusonthebeer ericmsteen

    I’m all for full strength beer in convenience and grocery stores and I’ve written about it a lot. I think this Summit research report is quite a bit overstated as well. I also think a lot of the liquor stores that will be affected the most probably suck in the first place. Having beer in grocery stores will certainly get more people to buy gateway beers and liquor stores will still happily sell tons of beer along with wine and liquor. I think the example set in Oregon is a good one.

    • Rent Schlumaker

      Look at California as an example of how this doesn’t work in favor of the consumer. Also, I trust your writings on this topic don’t usually have statements like “liquor stores that will be affected the most probably suck in the first place”. If so, I don’t think you truly understand the dynamics of supply-and-demand nor how small business works.

  • Nathan

    Lindsey, please do yourself a favor and read Henry Hazlitt’s “Economics in One Lesson.” You have presented here five different permutations of an economic fallacy Hazlitt thoroughly demolishes; the simplest example is the “broken window fallacy” first outlined (if I recall correctly) by Frederic Bastiat in his 1848 work “The Law” (also recommended reading).

  • Jason

    “Lindsey specializes in digital marketing communications and new media for SMBs.” In interest of full disclosure I am curious what SMB is? Thanks

    • Lindsey Dulin

      SMBs refers to small businesses.

      • Jason

        Thanks! Do you work for breweries or have any potential conflicting interests? Curious because this conversation is often muddled by bias.. Since we all are biased one way or another I think context becomes important.. I am a consumer only.. Not involved in industry. I have a difficult time accepting these myths given other states’ examples and my personal experience. As a beer drinker I would like to remove legal limitations to purchasing a product that I enjoy. The market will adapt as always. Good beer always wins.

        • Lindsey Dulin

          I wish I could say I have a bias! I’ve worked in a variety of industries including retail, photography, nonprofit, construction, compliance, hospitality, etc. though I do not and have never worked for any breweries or organizations that represent them. I’m from Florida where this topic doesn’t even exist. When I first moved to Denver five years ago I thought it was especially silly that I was unable to buy full-strength beer at the grocery store [not that I was devastated; I frequented liquor stores even though I usually had to go out of my way to find a decent selection (liquor stores are not as prevalent as they are here)]. I don’t necessarily think that the CO system should stay the same … I believe the current structure has made the local market and economy more vulnerable to change, which only amplifies the more it grows.

          • Jason

            Thanks for the reply!

  • Alan

    For all those people saying, “look at the success in State X,” are you also referring to locations within those states that are less metropolitan. I live in Summit County Colorado, and we aren’t a metropolitan area. We have some awesome local corner liquor stores and most are next to a grocery and/or convenience store. I can drive 5 minutes to my local and usually find something unique. If full strength is allowed in groceries, I can assure you most of these stores will not survive. Guess what, then I’ll have to drive to Denver to find something other than Boston Lager, Fat Tire or Stone IPA. I don’t want to do that. So comparing all of Colorado to your experience in Portland, Indianapolis, Seattle, Los Angeles, etc., isn’t really a fair comparison.

    The Colorado craft beer industry has succeeded, in part, because of these laws. Not in spite of them. People that are for this think they will have more selection or more convenience, but I can assure you that start-ups like Crooked Stave, Grimm Brothers, Dry Dock (a couple of years ago), or your other favorite local won’t find as much or any success finding shelf space in these grocery stores. Shelf space will be reduced with the loss of the mom and pops stores that have historically been willing to shelve new breweries. Sure, big bottle shops will survive or spring up, but where will they be? Will it be convenient for everyone. Will you be able to score those hard-to-finds There is a reason why most Colorado craft brewers are against this. Maybe you should ask yourself why.

  • Jlo

    The reason there is, and always will be a big push for this change is because of discounting. Colorado requires a 3 tier system – manufacturer – the Brewer, distributor, retail sales outlet. The only legal guideline that can be applied to pricing is the distributor can not sell it to the retail outlet at a price lower than they paid the manufacturer . This law, especially when applied to large retail outlets, creates a very skewed pricing landscape. That is why we have some of the behemoth, destination, liquor stores that we do – Arrgonaut, apple Jack’s, etc. They buy a ton of product – think pallets, not cases, and then can pass along a lower price point to the consumer. Right now there overall number of products / selection is good, because they are a destination. Outlets of similar size in every neighborhood – chain grocery stores, would effectively take out the “destination” designation from these locations as well as close the majority of small liquor stores in their respective neighborhoods. More later…

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