What’s In Store?

A
voter initiative proposed for November’s ballot could
radically change how wine is sold in Massachusetts by
expanding the number of wine retail outlets by as many as
2OOO – about double the number of outlets now licensed to
sell wine. The proposal, sponsored by the Massachusetts Food
Association, would create a new class of license called
“wine at food store licenses” to allow convenience stores,
supermarkets, club, warehouse-type, and other stores selling
food to sell wine, too. Although no single licensee could
hold more than 1O percent of all the proposed new licenses,
theoretically this means one owner could have 15O to 2OO
licenses.

“I am writing to
update you on a campaign that has been initiated which, if
successful, will put you out of business,” wrote Frank
Anzalotti, Executive Director of the Massachusetts Package
Store Association, in a letter sent to members last
November. The letter asked members to donate money to
establish a $2 million legal and public relations campaign
to help defeat the initiative. “It’s the biggest challenge
I’ve seen to members since I’ve been here,” he says. “It
will certainly pick our pockets and those of others by
people shopping for a roast chicken for that night who go
over and pick up a bottle of Chardonnay,” says Michael
Cimini, President of Yankee Spirits in
Sturbridge.

So far, MFA’s
proposal has received 85,OOO citizens’ signatures supporting
its inclusion on the ballot. Next, Secretary of State
William Galvin will submit it to the legislature, where
lawmakers must approve it as legislation. Alternatively,
lawmakers could offer their own measure to be placed on the
ballot, too, but such action is uncommon. Once approved, the
MFA has until the end of June to collect an additional
11,OOO signatures. Then, Galvin must approve the initiative
before it is placed on the ballot. No one interviewed on
either side of the issue doubts it will make it to the
ballot. Anzalotti says he and his staff were planning to
contact legislators about the issue as soon as the
legislature reconvenes.

If approved by
voters, towns and cities with up to 5OOO residents could
grant five “wine at food store licenses”. One more license
could be issued for each additional 5OOO residents. The
proposal worries many package store owners, some of whom
believe the measure is just the first step toward letting
supermarkets sell beer and spirits as well as
wine.

“The proposal is
an end run to get into the liquor business. They don’t like
the idea of owning only three licenses,” says Ted Galanis,
who owns Route 1 Liquors in Rowley, referring to the state
law approved in 1934 that limits any one person or company
to a maximum of three retail liquor licenses in
Massachusetts. “They’re trying to break the three license
limit. They’ve been wanting to do this for years.” If large
supermarkets are allowed to have wine licenses, “they’ll
turn around next year and say ‘Things are going so well,
let’s get beer licenses,’ then spirits,” predicts
Galanis.

Not so, stresses
Chris Flynn, President of the MFA, who says competition will
benefit customers. “The Massachusetts Package Store
Association is just a protectionist group protecting their
monopoly,” he declares. As for expanding into other
products, “That’s really not on the table. The initiative is
not a precursor for other products. It will be years before
(MFA member) companies can get their license applications
approved. The procedure could be quite cumbersome.” Unlike
34 other states that let food stores sell wine,
Massachusetts package stores “essentially have a monopoly on
wine and liquor licenses in the state,” he says. “It’s not
the end of the world,” he adds, explaining that package
stores survive in these states. “There will still be an
opportunity for wine aficionados to go there.”

“As far as finer
wines are concerned, people will still be going to
(traditional) liquor stores. Those looking for selection
aren’t going to go to Stop & Shop or BJ’s,” says Carly
Alboth, an owner of Merchant’s Liquor Mart in Danvers, which
is only a few miles from a BJ’s store that sells wine. “We
weren’t concerned about BJ’s getting a wine license. It
hasn’t really affected our business,” she says. “There’s
room for everybody.”

“My competition
is myself. Good stores that sell cheeses and wine are good
for the neighborhood. We sell wines no one else gets. Good
niche stores will still attract people wanting wines,”
states Keith Mills, owner of Espirit du Vin in Milton. While
Mills predicts he may suffer some loss of business, he says
he has a bigger concern. “Does this open the door for
Marty’s and other large wine stores to get more licenses?”
Would, he asks, such stores say: “Shaws has six licenses,
why can’t we have another three?”

MFA’s proposal
states new licenses would be administered under the same
issuance, suspension, renewal, and termination procedures
municipal governments practice now for alcoholic beverage
licenses. Although Flynn says towns and cities will not be
obligated to issue any of the new licenses, there appears to
be some disagreement and uncertainty on this
point.

“They do not
have the authority to deny. There is no clause in the
proposal that says licenses are granted based on public
hearings. All they base it on is population,” says
Anzalotti, who says the organization plans to launch a print
and television ad campaign to educate consumers about MFA’s
initiative. “Technically, if a license is available in a
town and you apply, you are entitled to that license,”
barring any criminal background in an applicant’s history,
notes Galanis.

Even if local
officials can hold hearings about the licenses, they are
under pressure to compensate for the revenue shortfalls
faced by most Massachusetts cities and towns, something that
will compel them to grant each license and create new income
streams, says Drew Marc-Aurelle, owner of Community Package
Store in Hamilton and Marcorelle’s Package Store in Ipswich.
Should MFA’s proposal become law, he predicts many smaller,
“mom and pop” package stores will go out of business because
supermarkets will focus on selling jug wines such as
Woodbridge or Sutter Home, which he says are the bread and
butter of small store sales. With their immense buying power
and volume discounts, large stores or supermarkets may be
able to sell wines at lower prices than some smaller stores
that buy them at wholesale, he and others say. “All the ‘mom
and pop’ drug stores are gone. Are we better off without
them? I would say no,” says Mills. “If all the little people
are driven away, the big boys will set prices.”

“One important
thing people don’t understand is we’re not adding a 5O
percent markup, it’s usually 15 to 25 percent. If someone
buys at lesser volume and sells for less to compete, you
have to sell for almost nothing,” explains Melissa Winters,
who owns The Wine Rack in Greenfield. “I would probably have
to change way I do business (were the measure approved).
Obviously when anyone competes against a big store, you push
personal service. And with liquor you still have an edge.
Also, there are thousands of different wines so you can
stock – items not sold at those other stores. But for common
items, if people know they can buy them for $2 to $3 less,
yes, they’ll buy there,” she says.

Publicly,
wholesalers are staying neutral about the initiative. But
behind the scenes, it may be different. “Almost to a man the
wholesalers have told us they’re on our side. They’ve raised
a good bit of money to help us fight the fight,” says
Cimini. “There isn’t a lot of business out there.
Massachusetts is a declining population state. The economy’s
not as good as some say, there’s no extra market out there.”
Should the initiative become law, the number of accounts
wholesalers service will double, as will each sales
representative’s work load, he observes.

Speaking on
condition of anonymity, employees of several Massachusetts
wholesalers agreed with Cimini’s reasoning. Should the
ballot measure pass, they say supermarkets won’t buy medium
to high end wines, package stores with marginal finances
will close, and the risk of minors getting wine is
high.

And, while a new
tier of wine licenses would have the potential to reduce
sales at some package stores, the proposal’s biggest threat,
warns Anzalotti, is to the value of licenses held by his
members. “All those who hold licenses bought them from
someone else who was in the business. Their investment in
life is that piece of paper. A lot of them don’t have IRAs
or 4O1k plans. What happens to the value of these licenses
should the number of licenses double?” he asks. “It’s the
loss of the value of my business,” Galanis says. Cimini
echoes this position: “There’s no question that the value of
the licenses will go down. Basically, someday, we’re going
to sell our business based on volume. If you’ve got a little
store and you’re in a town with a supermarket, you’re
license’s value is reduced.”

A major premise
pushed by MFA’s Flynn is that food store wine sales would
help consumers by creating healthy competition among
retailers, breaking what he terms the “monopoly” of package
stores, and adding convenience. “A fundamental flaw with the
free enterprise argument,” notes Cimini, “is that we’re
handcuffed to three licenses. They will still have the
purchasing power of 2OO stores.” If the initiative is
approved, Shaws and other huge stores “would immediately
take out 15O licenses or so,” he predicts. “I don’t think
anyone will be close to that,” replies Flynn on the issue of
how many licenses any one owner will have under the plan.
“Those package stores who have what customers want will do
well,” he adds.

But some package
store owners question how realistic it is to expand their
food product offerings. The initiative defines an eligible
food store as any that “Sells at retail food for consumption
off the seller’s premises either alone or in combination
with grocery items or other nondurable items typically found
in a grocery store, provided such items are sold to
individuals for their own personal, family or household use;
and provided further, that such food store must carry fresh
or processed meat, poultry, dairy products, eggs, fresh
fruit and produce, baked goods and baking ingredients,
canned goods, and dessert items.” The number of package
stores capable of meeting these criteria is minimal,
observers say. As for adding convenience, many say the
majority of package stores are within one mile of most
supermarkets, making it easy enough for consumers to buy
wine.

Underage
drinking and shoplifting are added concerns, as the
initiative does not call for adding more Alcoholic Beverages
Control Commission enforcement staff.

“The legislature
has said for years that (the three license limit) is a
protectionist strategy to keep things safer,” Cimini says,
pointing out that since minors don’t shop at package stores
very often, they’re presence quickly becomes conspicuous to
store staff. “If a 16-year-old kid walks into a supermarket,
nobody notices him. Supermarkets are trying to generate
business, we’re trying to protect ours. We’re selling
safety, they’re selling convenience.” All retail and food
stores suffer from a one to two percent inventory theft, or
“shrinkage” rate, he says. Adding wine to the mix risks
putting more alcohol into the hands of minors, he and other
initiative opponents contend.

Minors tend to
mirror adult consumers, Cimini suggests, countering an
argument some offer that teenagers don’t drink wine. “If
it’s easier to get a bottle of Arbor Mist from their buddy
in the supermarket, that’s what they’ll be drinking.
Basically, we’re talking about doubling the number of
licenses. It’s going to be a compliance nightmare. Who’s
going to be in the 2OOO supermarkets watching a kid move a
case of Woodbridge to get to another product?” he says,
referring to a regulation requiring all retail employees
handling alcohol to be at least 18-years-old.

“Voters might
look at the measure as a matter of convenience and not be
aware of the public safety issue,” Anzalotti says. “At end
of the day, it will be about convenience, but at the price
of selection and putting more alcohol onto the streets into
the hands of minors,” warns Cimini.