The Wine In Grocery Stores Campaign - And Response (2)

Monday, January 28, 2013

First, in the interest of full disclosure, my wife and I own a wine and spirits store in Chattanooga. There, that’s more honesty than you will get from the other side in the wine in grocery store debate. 

The Times Free Press published another editorial today pushing wine in grocery stores. It’s their third in recent weeks. They have also published purported news stories in the past basically repeating the claims of the wine in grocery store advocates.  

Today’s editorial castigates Tennessee wine wholesalers for, get this, wanting to make a profit. Do you wonder why the Times Free Press is so eager to get wine in the grocery store? If they were to disclose their true interests, they would have to admit that they get most of their revenue from advertising and grocery stores are among their biggest advertisers. If wine went into grocery stores, those stores would be expected to expand their advertising expenditures to include wine, thus adding to the paper’s profits. Apparently, it’s okay for the paper to make profit but not wine wholesalers.

The editorial goes on to point out that wine brands are limited to one wholesaler in each region of the state. That is true. But the wine in grocery store bill would change the retail system, not the wholesale system. So I am really not sure what the point of this editorial is.  

A few weeks ago, the Times Free Press published another editorial in which they repeated claims by Red, White and Food, an advocacy group supporting wine sales in retail food stores, that putting wine in grocery stores would “net nearly 3,000 new jobs and generate as much as $38 million in tax revenue.” It is disappointing that the editorial board of the paper chose to repeat these wildly implausible claims without any attempt at validating them. 

Let’s look at these claims for a moment. With Tennessee’s sales tax rate of 9.25 percent, $38 million in tax revenue comes to $411 million in additional wine sales. Tennessee’s population is 6.3 million and about 4.4 million of those are over 21. But 40 percent of adults don’t drink at all, and another 27 percent don’t drink wine, so only about a third of the adult population buys wine and half of them only buy it occasionally. So we are left with 17 percent described as core wine drinkers, those who consume wine at least three times a week. Doing the math you get 750,000 core wine drinkers in Tennessee. So the wine in grocery store crowd would have you believe these consumers would buy another $550 in wine every year if they could just buy it in the grocery store. But these people are already drinking wine at least three times a week, so they have to be getting it from somewhere. I can believe that grocery stores might sell $411 million in wine, but most of these sales will be cannibalized from wine and spirits stores, yielding little additional taxes. 

The claim of 3,000 new jobs is even more unbelievable. At an average price of $10 per bottle, $411 million new sales would yield 41 million bottles of wine, or 3.4 million cases. That’s 1,141 cases per year for each of the claimed 3,000 new employees. Divide by 365 days and you get three cases per day for these new workers. Are grocery stores going to hire 3,000 new people to handle three cases of wine per day? The editorial board could have run these numbers and asked some questions before repeating Red White and Food’s ridiculous claims. The fact that they didn’t, shows they are simply interested in pushing their agenda.

Finally, let’s look at just who Red, White and Food is. In reality, Red, White and Food is a front group run by a PR firm in Nashville and funded by the Tennessee Grocers and Convenience Stores Association. You will see the word “grassroots” in their material over and over. This is totally disingenuous. A campaign orchestrated by a top dollar PR firm with out of state money does not exactly fit my definition of “grass roots.” They now claim to have 25,000 signatures. Wow. That’s not even one tenth of one percent of the adult population of Tennessee. That’s not a grassroots campaign; it’s a grain of sand on the beach. By the way, how many of those 25,000 are employees of grocery stores?

As I mentioned, this whole campaign is being orchestrated by the Tennessee Grocers and Convenience Stores Association. The Association has a website, but you won’t find a member directory or sponsor list or anything like that. The reason you won’t find it is that they are almost all corporations headquartered out of state. The largest single member is Wal Mart. So while they claim they simply want to provide consumers a choice, what they really want to do is take some money out of my pocket and send it to Bentonville, Arkansas or Cincinnati, Ohio or some other corporate headquarters. It’s not the competition I mind, it’s the dishonesty.

Finally, let’s look at the consumer. Grocery stores say they want to offer a choice of locations to purchase wine and consumers should be interested in that. Consumers are also interested in price and selection. Here the grocers are less clear. They talk about competition, hoping the public will think this means lower prices. From what I have seen, this is just not true. On vacation in North Carolina two years ago, I went into two grocery stores selling wine. Because North Carolina has lower alcohol taxes than Tennessee, the prices should have been 50¢ to $1 lower than in my store. Instead, I generally found them to be 50¢ to $1 higher. There was exactly one wine that was lower than my prices. So grocery stores want to trade the convenience they offer for the higher prices they charge. 

Douglas Hamm

* * * 

I appreciate seeing an open response to the campaign to get wine into grocery stores. I'd also like to commend Mr. Hamm for calling out his bias up front. Mr. Hamm runs a great store that I frequented when I lived in the area a few years ago. That said, I have to question some of the statistics listed. 

Before I begin, I'll also make my biases known. I'm the president of a homebrewer and connoisseur club in Chattanooga. While I wouldn't go so far as to say I represent any certain group of people, I do have connections and loyalties in homebrewing, craft beer, wine making, and distilling. My primary personal interest is availability of 'craft' alcoholic beverages in the Chattanooga and surrounding area.  

I believe Mr. Hamm's listed percentages of drinkers to be a bit low. A 2010 Gallup poll showed that the percentage of drinkers in the U.S. was 67 percent. Thirty-two percent of those drinkers preferred wine. That's 21.44 percent of the adult population. Granted, that percent won't always buy wine but neither will beer or liquor drinkers always buy beer or liquor. This brings the number of wine drinkers closer to 1 million (943,360). With the figures given ($411 million additional), this means every one of these consumers would purchase an additional $435 of wine per year, right? Well, not exactly. While Mr. Hamm mentioned the 9.25 percent sales tax, he didn't mention the Tennessee gallonage fee of $1.21 paid by wholesalers. This adds an additional $1.21 to the tax revenues for every five (750 ml) bottles of wine sold. That may not sound like much, but when you're talking about a scale of millions, it adds up. Also not mentioned (and admittedly harder to quantify) is the number of people who would drink wine occasionally but won't walk into a liquor store because they believe there's a stigma associated with it. That may sound old-fashioned and yes, I've heard the jokes, but it's still reality for many in our area.

What so many from both sides have failed to mention in this debate is craft beer. Tennessee laws prohibit any beer over 5 percent ABW (~6.2 percent ABV depending on original gravity) from being sold anywhere but a liquor store. Craft beer is currently experiencing a boom that's likely to continue for the foreseeable future. Market share of craft beer has doubled since 2004. Wait, Chattanooga --you didn't know that? That's because many breweries and distributors won't bother with Tennessee for two reasons: 1 - they can't sell their full product line in grocery stores, and 2 - most liquor stores won't give them cooler or shelf space. There are a couple of liquor stores in the area that are seeing the light, but they are few and far between. As it stands, most of my craft beer purchases happen at a craft beer and wine store in Fort Oglethorpe. If you count my friends and acquaintances, that's easily thousands of dollars in monthly revenues my relatively small circle is sending to Georgia.  

I want to be clear: I appreciate and support Chattanooga liquor stores. I'd like to see them continue to thrive and I believe they can --most states that have no restrictions on alcohol sales in grocery stores still have thriving specialty liquor store segments. But I think we need to be honest about the sales and tax figures across the board. Most importantly, we need to admit that our arcane laws are turning off some big businesses and employers (breweries, distributors, distillers, Costco, Trader Joe's). I don't want to see small businesses fail but we can't continue to support laws that isolate our market and send money a short drive across the state line. 

Brad Lumley

* * * 

Mr. Hamm hasn't gotten out in a while, at least into other states in this union where wine has been sold in grocery stores for decades. The mom-and-pop hardware stores had to deal with Ace, Lowe's and Home Depot. Smaller furniture stores compete with IKEA, Wal-Mart, Target, and a multitude of other big box stores. 

It's a fact that around this country wine is available in grocery stores. Not liquor. The Alcohol and Beverage Commission is probably going to be amending their guidelines if and when grocery stores are dispensed licenses to sell wine. It will cost grocery stores more because all their checkers/scanners will have to be 21 years of age and get a permit to dispense (like a cocktail waitress). 

What it boils down to, Mr. Hamm, is that you've voluntarily selected to sell a product that other retailers sell. Your choice. No external influence (outside the wife). No one held a gun to your head to start a business that already had plenty of competition. My advice is to stop caterwauling about the eminent future of wine sales and either diversify and come up with an awesome spiel that will attract consumers, or move on. You do not have an exclusive on wine. Period. 

Wine is a significant portion of almost any meal around the world, as much as bread. A grocery store is where you buy the ingredients to make a meal. Why a consumer is compelled make two stops when one will do seems silly and a waste of gasoline. It's coming, Mr. Hamm, and there is nothing you can do about it. This year or next, wine will be sold in grocery stores. It's a natural conclusion for consumers regardless of the convoluted path of unfairness you ascribe to the proponents in government and the Times Free Press. 

As far as railing against the rising tide of media bias, it has always been there. Hearst and Remington are people you should be familiar with from History 101. 

Please also remember there will be plenty of stores unwilling to dispense wine. Either because of business or moral ethics, lack of floor space (a wine aisle would take up a full aisle) or not enough consumer interest to make it happen. I think your panic is premature, unless your wine store is next to a Publix. Ooops. 

One final note about the Times Free Press: not all their political recommendations are elected. Not all OpEds are paid any attention (including this one). But let's be honest - If the TFP had the opposite opinion and were attempting to prevent wine in grocery stores, you would be up there with the newspaper in a nano-second augmenting their "Bully Pit" for you own interests. Business is business. And regardless of how you perceive yourself, your position is biased. That's not bad and it couldn't be any other way. 

Consider the rip tide. No matter how much effort you spend attempting to get back to the beach, you will exhaust yourself very quickly only to be carried out to sea. Use your brain instead and swim cross current to get out of the rip. The edge of the rip could be five feet away. Then swim to shore. 

If you can't fight it, learn to work with it. 

David D. Fihn, Sr.
Hixson


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