Beverage Alcohol Legislative Changes to Watch in 2019

February 12, 2019 In Latest News

One hundred years after Prohibition, many of the original beverage alcohol regulations remain in place. But over the last several years, a number of court cases and legal reconsiderations have shaken up the industry.

As these cases come and go and evolve, it’s crucial to remain aware of how they could affect your retail store so you can be proactive in the face of big changes.

Let’s take a look at four legal issues buzzing around the industry and break down how they could change retail and what you need to know right now to take action.

Supreme Court: Tennessee Wine and Spirits Retailers Association v. Blair

  • What is it? The case is, on one level, a battle between Tennessee Wine and Spirits Retailers Association (TWSRA) and Total Wine & More. The chain opened a store in Tennessee without establishing in-state residence, violating a state liquor law that has been around since prohibition was struck down a century ago. On a broader level, the Supreme Court’s involvement could lead to sweeping, national changes that could open inter-state wine and liquor sales and create more uniform, national standards for retail operation.

  • Where do things stand? The case likely won’t be decided until June, but early statements from the Justices seem to lean against the TWSRA. That said, the Court understands that they must carefully word their decision to avoid creating “an Amazon of liquor.” Therefore, it’s very unlikely that they will eliminate inter-state restrictions entirely.

  • How could this change alcohol retail? In the most extreme case, a decision could open the floodgates, allowing for alcohol to be sold online and shipped to and from any state. (This is the “Amazon of liquor” that Justice Neil Gorsuch mentioned.) More likely, it will weaken some state laws, making it easier for competition to open stores and sell goods in multiple states. In some markets, that means preparing for competition from stores like Total Wine, which were previously kept out due to residency laws.

  • What does this mean for you, right now? Look at the laws in your state. If a liquor business needs to establish residency to operate, there’s potential that your market could change when the decision is passed. Instead of waiting for months to see what happens, start optimizing your business to be future-ready. Build loyalty with customers and talk with them to find out what would help keep their business in the face of Big Box competition. Most importantly, be proactive about adopting new tools, like 3×3 DataBar, to give your store an edge.

Colorado: The End of 3.2 Beer Law

  • What is it? Colorado got rid of a Prohibition-era law that prevented most grocery and convenience stores from selling full-strength beers above 3.2% ABV.

  • What’s happening now? The restriction was lifted on Jan. 1, 2019. Stores began stocking full-strength beers and working to sell off old low-ABV stocks.

  • How could this change alcohol retail? Liquor retailers have an entirely new tier of “convenient competition”. Now, shoppers in Colorado can pick up packs of beer while doing their regular shopping instead of adding a visit to the liquor store to their routine. Just one month since the rules went into effect, stores have already seen sales decline. The change is also spreading to other states with similar laws: Utah looks to be following in Colorado’s footsteps and eliminating the 3.2% law.

  • What does this mean for you, right now? This is a fairly localized change in legislation, so if you’re not in Colorado (or another 3.2 state that may soon change its laws), this probably does not affect your day-to-day operations. But it does speak to a softening of Prohibition-era protections at a broader level. Other laws in other states may come under more scrutiny as legal and consumer perspectives continue to change.  

    For retailers in 3.2-law states, the stakes are pretty high. Sales will change and you’ll need to shift your strategy. Think of it instead as an opportunity! Double-down on creating an incredible in-store experience with expert staffers. Use Databar to build a smarter store layout (based on purchase patterns) and discover the best time of day to host tastings and other events. These are the kinds of changes that will convince people to forgo the convenience of grocery.

Texas: Walmart Wants Package Store License

  • What is it? Last year, Walmart sued the Texas Alcoholic Beverage Commission for the right to sell wine and liquor in its stores. These restrictions were based on legislation instituted as a result of the 21st amendment. And in March of 2018, a district judge ruled in the company’s favor: corporate entities could now sell spirits in Texas.

  • What’s happening now? The Texas Package Store Association (TPSA) has appealed the decision, pushing the final verdict far into the future. Arguments will begin in the next few months.

  • How could this change alcohol retail? Similar to the Supreme Court case around Tennessee’s liquor laws, this could open up new competition for currently restrictive markets. If Walmart (and other Big Box stores like Costco or Target) are able to sell wine and liquor, the TPSA argues, they will drive down costs, meaning independent retailers with lower margins will suffer.

  • What does this mean for you, right now? Should the appeal fail, the market will become more crowded, driving the cost of wine and liquor down. Retailers in Texas (and states with similar laws that may also be vulnerable) should find ways to differentiate. While Big Box stores will be able to stock wine and liquor, your store could offer far more expertise, education and enrichment around products. Events like these help secure loyal customers and attract new ones, especially young consumers. Millennials prefer enriching experiences when making purchases and supporting unique brands (so enhance yours)!

U.S. Overview of Cannabis Legalization

  • What is it? A wave of legalization initiatives lit up the U.S. in 2018, pushing national opinion toward a potential federal law decriminalizing the sale and use of marijuana. Currently, the Democratic House of Representatives has scheduled a hearing to examine the business side of legalization.

  • Where do things stand? Currently, recreational marijuana is legal in 10 U.S. states. Many people predict that legalization will soon spread across the nation — especially after Canada legalized use late last year, and President Trump signed the Farm Bill (which legalized hemp and cannabidoil) into law.

  • How could this change retail? The jury is still out on how the cannabis industry could affect alcohol retail. Since the two industries compete for similar occasions, there is speculation that more cannabis in the market will lead to less alcohol consumption. While the existing statistics aren’t so black and white, some do indicate that cannabis consumption “steals share” from alcohol.

    Big beverage companies are trying to stay ahead of the curve. MillerCoors, Constellation, and AB InBev have spent billions on investments in cannabis research and Canadian partnerships. CBD beers are already on top (it’s still illegal to mix alcohol and THC) and companies are also exploring non-alcoholic drinks infused with THC. Stats from SweetWater, which released a no-high G13 IPA made with cannabis products, show that the beer became its second-best-selling draft available within two months of its release.

  • What does this mean for you, right now? If you’re in a state where cannabis is already legal, you’re probably learning to coexist with dispensaries already. The two markets likely see a lot of overlap in terms of consumers.

    If you’re preparing for this change, here’s what to know: It could mean lower volumes sold, or similar volume at a lower frequency. But, it could also open doors for new and exciting inventory additions, like CBD and cannabis-infused beers and liquors as well as non-alcoholic options for “drinkable THC”. There are even states that are trying to grant package stores the right to sell cannabis. That said, don’t bet on laws — be proactive and consider ways to take your business into your own hands, like joining the 3×3 Retail Network.