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States with restrictive wine licensing laws are putting a cork in retailers' ambitious merchandising plans. Although self-serve tastings of 80 different wines are available on tap in Whole Foods' Fairfax, Va., store's wine tasting room, there's not a bottle to be found in any of the retailer's New York City units, because they're subject to restrictive off-premise licensing laws. The hardest thing

States with restrictive wine licensing laws are putting a cork in retailers' ambitious merchandising plans.

Although self-serve tastings of 80 different wines are available on tap in Whole Foods' Fairfax, Va., store's wine tasting room, there's not a bottle to be found in any of the retailer's New York City units, because they're subject to restrictive off-premise licensing laws.

“The hardest thing we've found in New York City is we really want to have a store that sells wine,” said John Mackey, chairman and chief executive officer of Whole Foods, during a July earnings call. “We're very frustrated, because the city keeps blocking us … particularly when Trader Joe's got their license.”

In New York state, food retailers can obtain as many off-premise beer licenses as they'd like. But, much to the chagrin of grocers, licensing laws restrict supermarkets from obtaining more than one license to sell wine. And even those will only be granted “provided it's sold in a separate wine shop that has its own outside entrance and there is no internal entrance linking the two stores,” said Jim Rogers, president and chief executive officer of the Food Industry Alliance (FIA) of New York State.

Trader Joe's used its license to open a wine shop beside its Union Square store in Manhattan last year. Whole Foods was granted a license for its Columbus Circle Manhattan store in 2005, but was forced to close its wine shop because it lacked a separate street-level entrance. Since then, it began offering six local beers on tap and 200 types of bottled beer for off-premise consumption in the new Beer Room of its Bowery store in Manhattan.

Still, its first choice seems to be wine.

“Profit margins are one thing that seem to be driving supermarkets to sell wine, but there is probably a greater belief that there is an image to be created that appeals to an upscale food consumer,” said Jim Hertel, managing partner of Barrington, Ill.-based Willard Bishop Consulting. “Wine is an important part of making a statement about your store.”

Indeed, earlier this month, Whole Foods became the first supermarket to receive the “Best Wine Retailer of the Year” Wine Star Award from Wine Enthusiast magazine. The publication recognized the supermarket for its wine sampling stations — which allow shoppers to sample wine by the ounce or by the glass — as well as for its locally produced, organic and biodynamic wine selections, plus the store's informational signage that helps shoppers pair wine with food.

“We are working hard to change the face of wine purchasing and merchandising within the supermarket setting to provide high-quality, affordable, unique wines,” said Geof Ryan, national wine buyer for Whole Foods Market's West regions, in a statement.

Whole Foods is hoping to obtain an off-premise wine license for a store in development on Manhattan's Upper West Side, according to Mackey.

If the FIA has its way, it won't be hard to come by.

“We've met with Governor Spitzer's administration,” said Rogers. “We're hopeful that he'll see fit to include the wine-in-grocery [proposal] in the budget, since it would produce $130 million in new revenue through no new taxes. We've chosen this course of action, since no one will vote against the budget just because it contains wine-in-grocery, whereas self-standing legislation could be voted against. Also, if it's added to the budget, it'd be difficult to take out, since that $130 million would have to be replaced.”

Sales and excise taxes gleaned from increased sales of wine — expected to result if the measure is approved — will contribute about half of the projected revenue. The difference will be made up by a one-time franchise fee that will be required of current off-premise beer licensees interested in selling wine in their grocery stores. Fees will be contributed per unit and will be based on sales volume.

“That'd raise a great deal of money, and our [supermarket] members said they'd be more than pleased to pay it,” said Rogers. “A larger store would have to pay in the neighborhood of $20,000 per unit.”

New York state's proposed budget will be introduced during the third week in January, and the deadline to have it approved is March 31.

“You could think of almost any supermarket chain in New York state and they're supportive of this,” said Rogers. “Wegmans is very excited about it.”

The Rochester, N.Y.-based retailer — which operates stores in New York, New Jersey, Pennsylvania, Maryland and Virginia — has good reason to be.

“Wegmans is a hell of a retailer,” said Hertel. “It asks itself, ‘How do we re-create a sensational food experience that shoppers can create at home?’ Wine is an important part of that.”

So much so that last year it became one of four anchor developers of the New York Wine & Culinary Center, Canandaigua, which functions primarily as a culinary tourism draw. Hands-on demonstrations and classes taught by guest chefs and lecturers are featured at the $7.5 million center, which also showcases New York wine and agricultural products.

Still, the retailer sees its prospects for selling wine alongside food in the state “a long shot, and not an easy haul at all,” Rogers said.

There is good reason for its skepticism. Grocers' efforts have been met with strong opposition in several states.

Last year, Massachusetts consumers voted down a ballot question that would have allowed approximately 1,000 of the state's 1,200 grocers to sell wine. A 73-year-old law prevents any chain in the state from selling wine in more than three stores.

Stop & Shop, Hannaford Bros., Price Chopper, Big Y Foods, Demoulas Super Markets, Rouche Bros., Trader Joe's, Whole Foods Market, Bozzuto's and the Food Marketing Institute contributed more than $2.8 million toward the initiative, called “An Act to Increase Consumer Convenience and Choice by Permitting Food Stores to Sell Wine.” Stop & Shop was the single greatest contributor, donating $1 million.

“Voters supported the initiative in our polls and showed the measure passing by 57% to 38% 10 days prior to the election, based on consumer convenience and choice,” according to Chris Flynn, president of the Boston-based Massachusetts Food Association. “The measure went down in the last 10 days when the opposition doubled what they intended to spend on ads from $3 million to $6 million and got a police chief to do an ad in uniform that misrepresented the question and turned the issue to one of public safety.”

MFA still plans to pursue the issue, “but it's not at the top of our agenda,” Flynn told SN. “We're sort of letting the dust settle, and we intend to revisit it down the road.”

An aggressive campaign waged by Minnesota supermarkets earlier this year produced similarly disappointing results.

“Thirty-three other states can offer wine in supermarkets, so why can't we?” Lee Ann Jorgenson, community relations manager for Supervalu's Cub Foods, Stillwater, Minn., asked SN in January.

Knowlan's Super Markets, Kowalski's, Cub Foods and Miners are among the retailers that distributed window clings and grocery bags bearing ads for the “Wine with Dinner” proposal that sought to allow grocers with at least 8,000 square feet of retail space to sell wine. Direct-mail pieces and store tours for state legislators to demonstrate how they can adequately check customer identification were also among the retailers' strategies.

Despite an independent consumer poll that found 68% of consumers were in favor of the plan, the “Wine with Dinner” bill failed to move forward in the Minnesota House of Representatives' Commerce Committee, noted Jamie Pfuhl, executive director of the Minnesota Grocers Association, St. Paul.

“The bill didn't get a yes or no vote, it just wasn't heard by the committee,” she said. “Its author was the chairman of the Commerce Committee, but there just wasn't enough support for it.”

MGA will push for the bill during the next session, which begins Feb. 12.

“We'll see a reduced effort at the store level during this session, because the legislative landscape hasn't changed,” she said. “This past year we had newly elected officials, and now, with other events like the bridge having collapsed, their priorities will have changed.”

Meanwhile, state grocery associations in Tennessee and Kentucky are taking steps toward getting their respective states' wine licensing laws changed.

“We've got a progressive group of [retailers] who want to take this to the capital and see if we can change the law,” said Ted Mason, executive director of the Kentucky Grocers Association, Louisville. “For the last year we've been working on our messaging, and we developed a ‘one-pager’ for retailers who want to get the message to their legislators.”

KGA organized a Food with Wine Coalition to execute lobbying efforts, since some of its retailer members operate stores in dry counties, where proposed wine licenses wouldn't be available.

The Tennessee Grocers & Convenience Store Association, Nashville, is discussing the issue with retailers and has hired a third party to poll consumers on how they feel about it, according to its president, Jarron Springer. Its next steps will depend on what it learns.

“I expect to have favorable numbers,” said Springer. “We haven't really talked about what happens if [consumer opinions] come back against us.”

Gus Valen, managing partner of The Valen Group consulting firm, Cincinnati, noted that women might appreciate having the option to purchase wine in the supermarket, where they feel more comfortable than they would in a liquor store.

“They also frequent the supermarket two or three times a week, so its availability becomes a convenience that fits into their everyday shopping habits,” he said.

Still, what shoppers are thinking in any given region is anybody's guess. Some consumers are opposed to making alcoholic beverages more readily available, because they think it'll lead to alcohol-related problems.

A recent poll commissioned by the Malt Beverage Distributors Association of Pennsylvania and conducted by Terry Madonna Opinion Research, Lancaster, Pa., found that the majority of Pennsylvania adults polled (54.6%) saw beer in supermarkets leading to more alcohol-related problems.

“Statewide, people were pretty evenly split over suggestions that we expand the retail sale of beer into supermarkets and convenience stores, with 48.9% opposed, vs. 47.9% favoring,” said Terry Madonna, president of the research company.


Of the top brands in the top five beverage categories, Bud Light beer and store-brand bottled water were the only two to grow their market share vs. the previous year.

Whole Milk
$2.00B 3.88 16.80 -0.42
$1.43B 3.92 15.45 0.12
Refrigerated Juices
$1.06B 4.80 24.37 -2.6
PET Bottled Water
$636.1M 24.62 12.41 1.35
Table Wine
$202.0M 3.42 3.46 -0.15
* Sales in food, drug and mass outlets (excluding Wal-Mart) for the 52 weeks ending Oct. 7.
Source: Information Resources Inc.