Matthew Daneman •
March 1, 2009

When it opened almost 10 years ago, Good Spirits Discount Wine & Liquor occupied what would prove to be a prime piece of Geneseo real estate — just doors down from the Wegmans supermarket.

And since November 1999, Gregory and Barbara Brown of Geneseo have built their enterprise, occupying slightly less than 3,000 square feet in Genesee Valley Plaza along Route 20A, into a successful business.

The store enjoys revenue growth of about 15 percent annually while the Browns work close to 100 hours a week combined, with six employees picking up hours part time. Some of their sales are to people coming from the neighboring Wegmans, sometimes even still pushing their shopping carts.

But Wegmans Food Markets Inc. may soon become a liability to the wine and liquor store. Good Spirits and 2,500 other wine retailers across the state are worrying that a proposed change in state regulations to allow grocery stores to carry wine could crush their livelihoods.

If the rule change happens, Gregory Brown said, “a lot of liquor stores will not survive it. For the big box stores, it’s one more item it’d be nice to sell. For liquor stores, it’ll be a life-and-death issue.”

Grocery stores in 35 states already are permitted to carry wine, according to Steve Gross, state relations manager for the San Francisco-based Wine Institute.

The last state to make the move was Iowa, in 1983. The state also increased the sales tax on wine, and the move benefited both grocers who were looking to add to their offerings and the tax-strapped state as it was dealing with the farming crisis, said Jerry Fleagle, president of the Iowa Grocery Association.

Now a similar situation exists in New York. Gov. David Paterson has proposed, as part of his 2009-10 budget, that grocery stores be allowed to carry wine. Paterson has depicted the plan as a win-win-win — greater convenience for consumers, vastly more outlets for New York wineries to sell their products and more revenues for the deficit-ridden state government.

He has the backing of food retailers, including Wegmans, the dominant grocery chain in the Rochester area.

“Our customers want this, and it’s right for New York state,” said Jo Natale, director of media relations for Wegmans. “Wine in supermarkets will help balance the budget, give a boost to the New York wine industry and create new jobs overall.”

Gregory Brown’s response: Yes, perhaps, but at the sacrifice of small-business owners who have invested in their businesses under one set of rules only to face the possibility that those rules will change. For Brown, the story of how he and his wife achieved success could soon become the story of how that success was snatched away, he fears.

Competing petitions

The dispute is evident at the grass-roots level. In Brown’s store, at the checkout counter, there is a clipboard where customers can sign petitions opposing wine in supermarkets. At Wegmans, customers can fill out postcards supporting the change. Natale said that during the weekend of Feb. 21-22, about 48,000 customers did so. The state Legislature has until the end of March to decide. If the new rules are included in the adopted budget, the state, which faces a $14 billion budget gap, expects to receive $105 million in licensing and franchise fees from stores during the 2009-10 fiscal year that starts April 1, said Matt Anderson, a spokesman for the Budget Division.

But the pushback is strong, with numerous New York wineries joining liquor stores in the Last Store on Main Street Coalition to lobby against losing their exclusive franchise to sell wine. The group says as many as 1,000 liquor stores could close.

If groceries start selling wine, liquor stores likely will have to boost liquor prices to make up for the lost revenue, Brown said. Increasing their product line is typically not an option, he said, because adding something like beer would require substantially more store space than most shops have.

Running a liquor and wine store can be a costly proposition. Brown said he and his wife invested almost $190,000 on inventory before opening as well as $10,000 in fixtures such as shelving. And opening required a seven-month wait for a state liquor license.

The liquor industry’s dribble of new products every year has become a flood as each distributor has 10 to 15 new ones it is pushing each month, Brown said. “I could literally fill my store with just vodka, all the flavors. You can’t order every single one.

“It’s a decent living,” Brown said. “You don’t really get rich in the business. It’s not like sporting goods, where the markup is 100 percent, 200 percent.”

Tennessee proposal

As New York tries to figure out how to proceed, other states are entertaining similar revenue-raising ideas.

Tennessee state Sen. Bill Ketron Jr. introduced a bill in the 2008 session of the state Legislature to allow grocery sales of wines because he saw increasing numbers of people move to Tennessee from other states.

He said the Legislature’s fiscal review indicated the move could generate $17 million a year. The bill didn’t come up for a vote in 2008, but Ketron said he would reintroduce it.

“From a free-market economy and consumer rights point of view, wine should be available in grocery stores,” said another Tennessee senator, Mark Norris.

But there are concerns in Tennessee that echo those in New York about the jobs impact of sweeping change to a decades-old regulatory structure.

“Timing is everything, and right now we’re focused on how folks will put bread on the table, not wine,” Norris said.

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