Wine sales in grocery stores is a contentious budget fix

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."

Last Thursday Patrick Hooker, commissioner of Agriculture and Markets, and Ron Greenberg, first deputy budget director, held a teleconference to express their excitement over the proposal.

Joined by Morgan Hook, press officer for the governor, and Dennis Rosen chairman of the state Liquor Authority, the four explained how the bill is going to positively impact the state's economy.

"This is an exciting day for people in the business of agriculture and wine making," said Hooker. "Currently there are 277 wineries in the state." Hooker went on to explain that wineries in the state produce about 180 million bottles of wine each year which adds up to almost a half a billion dollars of revenue.

"We want to increase consumer choice, increase agricultural growth and join the other 35 states that allow this," said Greenberg. Currently there are 35 other states that allow grocery stores to sell wine.