Thursday, February 24, 2011

More on the 3.2

It always warms my heart to read "economic freedom is generally a pretty good idea" as I did in Dan's post this morning about KS SB 54 which will allow wine, liquor and full strength beer to be sold in convenience and grocery stores. Unfortunately, even with the caveat "economic freedom is generally a pretty good idea", Dan still couldn't give his support to the bill. But, he makes some good points which I will try to dissect.
But that’s where reality steps in. In reality, liquor stores are some of the classic mom-and-pop small businesses that stand little chance of surviving when mega-corporations step in. In reality, that laid-back store you visit with the bell that tinkles when you open the door will get squeezed out by a corporate convenience store domiciled in Delaware pushing cardboard boxes of Natty Light along with a taquito, served up by minimum-wage servants while the profits go to international bank accounts. Reality is a lot uglier than theory.
This bill, without a doubt, will have an effect on mom and pop stores, everyone concedes this. But, "economic freedom is generally a pretty good idea" and these mom and pop stores only exist because of the economic restriction. This bill doesn't only allow the grocery store to sell liquor, it also allows the liquor store to sell snacks, mixers, fruit etc. Everyone is on a level playing field. It's not as if Missouri doesn't have little liquor stores, they do. These stores just have to figure out a way to compete, either through a good location, good service, good selection, whatever. Without a doubt, some will not survive, but owning a business is a risk and if your business can't compete, it's best for consumers for it to fail.

Also, the law set the stage for these mom and pop businesses to thrive. It's a shame that someone will lose a rather large investment taking advantage of the incongruity in licensing. But, their existence is not a reason to not fix the law. If we got rid of the tax code and went to a flat tax or consumption tax, the existence and ultimate failure of H&R Block should not be an argument against changing the tax code. If we reduce military spending, the firms that would go out of business because their goods are no longer needed should not be considered because reducing military spending is the goal, not the survival of military suppliers.
I care about craft beer, not mega-brands, and that’s where things get tough to figure. In Colorado, they’ve been fighting this battle for years, and the craft brewers have lined up on the side of the status quo. Micro-breweries don’t get deals with Quik Trip or 7-11 – they get deals with the mom and pop store that is responsive to the local community. The big grocery store chains and convenience store chains aren’t going to carry their products – especially not the nano-brewery that can only crank out a few hundred barrels a year. Small stores are better for small brewers. Think small.
Again, this is an argument I could get behind, but it also kind of negates Dan's first concern. The big grocery chains aren't good at beer retailing. And they really have no incentive to be. 90% of their sales are going to be the BMC triumvirate so that's what they will focus on. True, liquor and wine sales will take place at the grocery and that will undoubtedly hurt the little guys. But, they can make up for those losses by increasing their craft beer presence and offering expertise in that area. Or they can increase their wine section, focusing on smaller, high rated brands. Liquor stores could become the quality provider of alcoholic beverages. There's money to be made offering premium products.

Craft beer distributers and manufacturers will see a little bit of consolidation in their sales efforts, many stores will go away, many will merge, there will be less of them. They can focus their efforts a little better and maybe even get an exclusive with a large state retailer, "Price Chopper, your exclusive provider of Odell".  I don't know, anything can happen in the free market. The laws shouldn't exist to favor one industry over another, it should be a level playing field "economic freedom is generally a pretty good idea".

Lastly, this isn't covered in Dan's post or in my previous post, buying beer and wine at the grocery store is anathema to a Kansan. Being a lifetime Kansan, I don't think I've ever bought beer in a grocery store. It would take a while to get over that, let alone buying my Glenlivet or Maker's Mark at the grocery. Smaller retailers can take advantage of this time retooling for their new competition. Shielding mom and pop stores from competition only benefits those mom and pop stores. SB 54 will benefit consumers because "economic freedom is generally a pretty good idea". 

I'm sure your elected KS state senator or representative would love to hear your thoughts on this issue, you can find the contact information for your elected congressperson here. Drop them a line and tell them your thoughts.


  1. My feeling is that mom and pop shops that set up a business relying on an anti-competitive law have what is coming to them.

    If they can do something other than sling the same brands the mega-mart has on the shelf, like specialize in selection and service on wine, spirits and/or beer, I guarantee they will survive.

    No sympathy for mom and pop making money selling Budweiser and Cutty Sark because nobody else is allowed to sell it.

  2. Good comments, even though you're wrong and I'm right!

    More seriously, you raise some really good arguments. One great argument that both of us almost raise, but not quite, is one of the most persuasive ones to me - it would piss off the "family values" conservatives, and that is good enough for me to feel okay with whichever way you Kansans wind up going.

  3. As a new reader to your blog, I would like to make a couple arguments in favor of the status quo.

    First, current Kansas laws do prohibit liquor stores from selling snacks and grocery from selling liquor. But it does not prevent the owners from selling either. Many liquor stores have opened party shops for this reason. How come grocery stores haven't open liquor stores? Why hasn't QT changed their floor plans to accommodate having both a convenience store and liquor store like other gas stations have? There are options open to these larger chains.

    Secondly, these are not new laws. I think it's safe to say these laws have been on the books before any Wal-Mart, QT, Hy-Vee, etc. came into the Kansas market. These chains chose to come to Kansas will full knowledge of our liquor laws. Further, they choose to carry beer. If they felt/feel that these laws give them such a disadvantage towards beer sales, then why do they sell it? If selling 3.2 beer was truly hurting their ability to make money, they could easily use that space to sell other products.

    I do believe having two different strengths of beer doesn't make sense. But I don't agree with large corporations attempting to use their influence to change our laws for their benefit.

  4. Aaron, I see your point and I don't know the answer to why grocery stores don't start their own liquor stores. It might have to do with the laws against foreign (out of state) licensees or corporate licensees (which also will presumably be fixed with this legislation, I don't know the specifics).

    But, the issue is the law is stupid and outdated. It's just coincidence that this is one law that actually hurts the large corporations. They're actually being punished and I believe that it should be a level playing field. Nothing is gained by the state tying to handicap one group over another. And, in this case, it actually harms consumes and could really be costing the state of Kansas some revenue.

    Now, get to business and read some more. Thanks for taking the time to comment.

  5. I respectfully disagree that the larger corporations are being punished. Again, they knew the laws before they opened they're business, they were aware of the struggles of selling 3.2 beer. Kansas is a level playing field, it's different than most states, but the laws do apply the same to everyone.

    Also, I am not convinced of increased revenue. Larger chains work on lower retail margins (and in the case of WalMart, much lower). On a package that a liquor store might charge $15, a grocery or large convenience would only charge $12-$13. That leaves two dollars less of sales tax revenue. Also, that leaves less profit to be made on the same amount. The less profit made, the less money distributed to employees. I agree, the would be increased sales along the MoKan border, but I haven't been convinced it would result in any more tax revenue.

  6. As a Missouri resident who does shop in Kansas, I cannot wait for the day that I can buy DECENT beer at a Hyvee or Hen House in Kansas. It is so annoying to be running errands on the KS side, and then knowing I need to go to the grocery store, so I stop at the one on the KS side, but then remember I can't buy good beer there!