Wine in grocery stores sparks fight: Tennessee lobbyists, legislators gear up for booze battle royale

Wine in grocery stores sparks fight: Tennessee lobbyists, legislators gear up for booze battle royale

December 22nd, 2013 by Ellis Smith in Business Around the Region

A customer walks out of the grocery store section of Enzo's Market, where there is a separate entrance for a wine shop.

Photo by Maura Friedman/Times Free Press.

Rowena Belcher shops the wine selection at Enzo's Market. A bill that would allow grocery stores to sell wine is expected to come up in the state Legislature in 2014.

Photo by Maura Friedman/Times Free Press.

POLL: Should wine be sold in grocery stores?

Tennessee's lawmakers and lobbyists are gearing up for a booze battle in 2014 that could determine whether or not grocery stores can legally sell wine in the Volunteer State.

The upcoming fight, which in many ways will mimic ferocious annual clashes held in Nashville since 2008, will pit grocery and convenience stores owners, who wish to see wine sold alongside food, against the strange bedfellows of liquor retailers and alcohol critics, who prefer to keep the system just the way it is.

It's a fight over thousands of jobs, hundreds of millions of dollars in wine sales and an estimated tens of millions of dollars in tax revenue. Stonebridge Research estimates that grocers could sell as much as 5 million additional gallons of wine in the Volunteer State if consumption rises in line with the average level for southern states.

But this battle is also about fairness, opponents argue. It's about honoring a pledge made by the state to more than 500 small business owners across the state, and maintaining a controlled, heavily-regulated system that keeps dangerous drinks out of the wrong hands.

Each year, legislators and trade associations have lined up behind either the grocery stores or the liquor stores. Each year the outcome has been the same, and the measure has been defeated. But 2014 is going to be different, said Jarron Springer, head of the Tennessee Grocers and Convenience Stores Association. This year, Springer said the law - which is on the Senate floor waiting for lawmakers to return on Jan. 14 for their annual session - could pass.

"We've made progress every year," Springer said. "We're talking about alcohol law in America here. This is the American way."

The current proposal would allow for local referendums in cities that already allow either by-the-drink liquor sales or package sales, following a certified petition signed by 10 percent of the population that voted in the last gubernatorial election. It would create a new type of license specifically for grocery stores that would allow them to sell beer and wine, but not spirits.

The grocers, who stand to make as much as $350 million in new annual revenue if the law changes, contend Tennessee's law is outdated. In the 36 states that already allow grocery stores to sell wine, grocers note that there has been no breakdown of society, no mass unemployment. In fact, six of the eight states surrounding Tennessee already allow wine sales in food stores, and a public opinion poll conducted by Vanderbilt and MTSU shows that 70 percent of Tennesseans support joining their neighbors.

"We're not reinventing the wheel here," Springer said. "If we were going to be the first state to do it, that'd be one thing. But we're not, we're at the tail end of it."

The grocers association said it has offered an olive branch to the spirits retailers in the form of a series of amendments that would soften the blow of seeing as much as a third of their sales disappear across the street. Amendments would let liquor stores sell things other than alcohol, such as corkscrews, mixers and other complementary items. It would allow liquor store owners to own more than one store. It would allow them to negotiate directly with suppliers.

"Right now, they can only sell wine, spirits and lottery tickets," Springer said. "Well, that's crazy, they should be able to sell other things in their store that complement other things they sell."

The only problem with the grocers' stance is that it misses the point completely, claim the roughly 500 liquor retailers who have said that changing the rule would put many of them out of business.

Chip Christianson, a board member at the Tennessee Wine and Spirits Association, said all the amendments in the world can't mask the fact many small business owners will be losing everything they've worked to build, and many will be forced to shut down.

"Saying that we can sell beer and cigarettes, who cares," Christianson said. "Saying I can sell bread and milk, I don't want to sell bread and milk. I don't have room for it if I wanted to. Saying that we can sell corkscrews, whoop-de-doo. Saying we can have more than one store, I don't want more than one store."

The only way to avoid putting liquor store owners out of business may be some form of price controls to keep the Walmarts and Costcos of the world from negotiating better deals with distributors, he said. Retailers have also discussed some sort of a tax break that would allow them to stay in business. But there's no real fix for the fact that many liquor stores will be essentially put out of business as their reward following the rules that have been in place for decades, he said.

"One guy said, 'Calm down, you're getting emotional about this,'" Christianson said. "I told him damn right I am, this is life and death."

Others oppose changes to the law for completely different reasons. The law, old as it may be, was designed to regulate a dangerous chemical that State Rep. Richard Floyd, R-Chattanooga, said is at the root of many family breakups, highway fatalities and teenage delinquents.

"If my vote's the deciding vote, it won't pass," said Floyd, an influential lawmaker who opposes all bills loosening restrictions on alcohol sales. "I can tell you, I have some convictions on that thing."

Floyd personally does not consume alcohol and has long criticized the carnage on Tennessee highways caused by drunk drivers.

He said he wishes he "could close down every liquor store."

But he said he also believes in being fair. Liquor stores are small businesses, the lawmaker noted. If grocery and convenience store chains are allowed to sell wine, they'll quickly snatch as much as 40 percent of existing sales from small business owners, he said. A study supported by the grocery stores, conducted by Stonebridge Research, said sales losses at package stores could total between 5 percent and 28 percent.

Moreover, Floyd predicted, the state Alcoholic Beverage Commission, which oversees the industry, will have to hire "at least 30 or 40 new alcohol enforcement people to keep up with this stuff."

Regulation is relatively easy to keep up with right with the agents it now has in place, Floyd said.

Still, he acknowledges he may be in a losing battle.

"I tell you, the alcohol industry owns Nashville," Floyd said.

The wine-in-grocery-stores effort does have a number of strong supporters in the state capital. In fact, the top legislators in the state Senate and House both have supported the grocers' wine bill in the past, and said they'll do so again this year.

Still unclear in the debate is which side the powerful liquor wholesalers and beer distributors will support. Both have traditionally contributed hundreds of thousands of dollars to legislative contests, and both have opposed the measure in the past. However, their solidarity with the liquor retailers and distributors -all of which by law must be operated separately - may be slipping.

At one point during the last session, the beer distributors appeared to drop their opposition, and a new amendment to the house bill would allow beer distributors to store beer and wine together and deliver on the same truck. Such an exception could be worth millions of dollars in new sales - and also allow beer and wine sales in stores with less than 100,000 population. This would allow them to bypass opposition by the liquor wholesalers, who traditionally have been solely responsibly for distributing wine.

Senate Speaker Ron Ramsey, R-Blountville, said he isn't sure "there's a hotter issue out there really" than the wine-in-grocery stores, based on feedback he gets at home from constituents.

"It affects people's day-to-day lives," Ramsey said. "We could change the tax structure and they don't see it; their accountant does."

Ramsey's district includes Bristol, a town in the north of the state that is literally split by the Tennessee-Virginia line. Virginia allows wine sales in grocery stores, and Ramsey said that many constituents hop over the border to make their purchases there.

"This is something in my area that you can go 100 feet and buy it in a grocery store and 100 feet the other way and not," Ramsey said. That "does affect day-to-day life."

Chattanooga consumers face the same issue. Go into a Scenic City grocery and wine isn't sold. Cross into nearby Georgia and it is. Grocers said that was a major factor in Costco's decision to locate its store just south of Chattanooga in Georgia.

Ramsey dismisses critics' contentions it will lead to increased drunken driving. Many constituents clamoring for the change are women who are taking the bottles home to have with dinner, he said.

"If I did think that, I wouldn't pass [it]," the speaker said. "It's more just something you take home and have with dinner. I do believe that. I just think, a couple of things that affect me, is being on the state line, and No. 2, the way things happened last year."

The wine measure was narrowly derailed last year when a compromise with a referendum provision fell apart in a House committee as the chairman, Rep. Matthew Hill, R-Jonesborough, abruptly switched his support from yes to no.

"When the event happened in the House, keep in mind it was a legislator from Northeast Tennessee, yes, I still hear about it. That may be the one issue that people stop you about more than anything and talk to you about. Really."

But such claims of grassroots support are more AstroTurf than fescue, said Christianson. The reality is that the 600 liquor stores are being outspent and out-lobbied by their opponents, which include more than 9,000 food stores, he said.

"They say our customers are demanding this? Baloney, when's the last time you saw somebody running around with a plaque asking for this?," Christianson said. "That's not the driving force. The driving force is they see an opportunity to make some more money."

Contact staff writer Ellis Smith at esmith@timesfreepress.com or 423-757-6315.