The proposal has come up in the past:  allow grocery stores and others who today are allowed to sell beer to obtain a license to sell wine. New York would join the 35 states including California that currently permit wine sales in grocery stores.  The liquor store owners beat back the proposal the last time it came up but the odds are against them this time because the Bureau of the Budget estimates the franchise fee alone will bring in more than $100 million.  Given the choice between allowing wine to be sold in grocery stores and having their taxes go up another dime, most New Yorkers will vote for wine sales.

Here’s how the new law will work.  Any store that wishes to obtain a franchise to sell wine will have to pay a fee equal to .46% of their previous year’s gross sales.  For chains like Stewarts that number would be calculated per store not across the entire business.  This is a one-time fee and while no one knows how many stores will apply, it’s a good bet that the larger supermarket and convenience store chains would rush to do so.  Being able to add another high margin product to their shelves should easily justify the initial outlay.

Naturally the liquor store owners are up in arms.  They claim that as many as 1,000 of the state’s 2,700 independently owned liquor stores would close, resulting in a job loss of 4,000.  However, they offer no factual basis for such claims.  Undoubtedly some liquor stores will close if the measure is approved. Some are probably going to go out of business anyway given the state’s overall economic climate.  For others this might be the final straw.

New York does not allow liquor store owners to operate multiple stores.  Thus each store represents a unique owner.

Interestingly the liquor store owners do not feel confident enough to stand on the economic argument alone.   Perhaps they recognize that the self-interest of 2,700 versus that of 19 million consumers is not good odds. Instead they are try to cement opposition by claiming that allowing groceries and others to sell wine will increase teenage drinking and drunk driving and they’ve enlisted law enforcement organizations to help them defeat the Governor’s proposal.

While building a coalition against proposed legislation is good politics, it can backfire – especially if the argument is as shoddy as this one.  It defies logic to think that teenagers will have any more luck buying wine from the Liquor Store that currently sell beer than they do buying beer. If a teen can’t find an adult willing to buy beer for them on what basis can we imagine that that same teenager could convince that same adult to buy them wine? Further, what percentage of teenagers would rather drink wine than beer?

There’s also the possibility that the liquor stores will not come off half as bad as they want us to believe.  Most of the wine sold in groceries will come from large volume suppliers.   One proprietor made the point when she stated: “The consumer will be relegated to drinking Yellow Tail.”   Sophisticated wine buyers will continue to buy their wines from liquor stores because they won’t settle for Yellow Tail.  Young adults, however, may start consuming wine by buying Yellow Tail at a grocer’s.  It will then be up to the liquor store owners to convince them to graduate to better quality wines.

By the way the convenience store owners are not happy with the Governor’s proposal either.  They view the franchise fee as being too high which would put the opportunity out of reach of small stores.  They are also opposed to allowing liquor store owners to sell beer and tobacco in return for allowing their members to sell wine.

Of course that brings up a solution the Governor’s office might want to consider.  If liquor store owners could sell beer and wine they might drop their objection to allowing grocers to sell wine.  It would also enable the state to bring in even more franchise fee revenue.