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Did the end of 3.2 beer spell doom for liquor stores? Photo by Jay Bouchard

Are Grocery Store Beer Sales Killing Colorado’s Liquor Stores?

Nine months after Colorado allowed grocery stores to sell full-strength beer, we set out to see what’s changed.

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Mark 2019 as the year when Colorado beer (finally) escaped the shadow of prohibition, as laws designed to restrict access to beer—like grocery stores only being able to sell 3.2 swill—fell, thanks to Senate Bill 197. The new rule passed in 2016, but went into effect on New Year’s Day this year.

Overnight, the number of stores where you could pick up your favorite Colorado craft brew grew by more than 100 percent. And folks were more than a little nervous about the impact on Colorado liquor stores—perhaps for good reason.

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But how is the transition impacting liquor stores? Ron Vaughn, co-owner and COO of Argonaut Wine and Liquor, the alcohol supercenter in Capitol Hill, has already seen changes in the market. “You have all of these small businesses that work out of the parking lot of grocery stores and the competitor is 150 feet away,” he says. “So, it’s dramatically affected the fabric of the independent market here.”

“It’s been really tough to compete,” says Jeanne McEvoy, president and CEO of the Colorado Licensed Beverage Association. A high number of store owners in her association are women or immigrants. She says some estimates have shown that 500 independent liquor stores could close by the end of 2021.

The most vulnerable stores are those competing directly with the larger stores. Morgans Liquors, owned by Jim Archibald, shares a parking lot with Safeway, while Total Wine and More just opened their first store about 1.5 miles west of their location on Evans Avenue. He says the effects of the law have been dramatic.

“I had thirteen employees total, and I had to lay off four full-time people,” Archibald says, noting his competitors’ advantages in discount campaigns and distribution deals. “I’m back to the volume I was doing eight years ago.”

The focus by the newly crowned beer sellers has been on presentation. Grocery stores like King Soopers and Safeway were stocked to capacity with other goods before the beer rush and had to reconfigure store plans to accommodate an expanded selection now that 3.2 beers are, virtually, dead (RIP). “It was a massive undertaking” Kris Staaf, director of public affairs for Albertsons-Safeway’s Denver Division, says of the preparation, but adds that the transition has been positive. “Full-strength beer sales have continued to grow. It’s a big win for our customers.”

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Both King Soopers and Safeway say they want to tailor the experience to highlight local breweries, so the selection in Fort Collins might differ from the selection in Glendale. King Soopers spokesperson Kelli McGannon says that the company regularly adds local products by asking: “How do we make sure that our [selection] reflects their trends and their taste buds?”

At Argonaut, Vaughn acknowledges beer sales have gone down by about 20 percent since the start of the year. However, in recent months they’ve seen a rebound as more people have returned to the store looking for expert advice about what products to buy. “People missed going to the liquor store to chat about the latest release or the seasonal beer. That’s the piece that grocery stores don’t have,” Vaughn says, noting that grocery stores are strictly in the business of “put it on the shelf and get it out the door.”

Overall, the full impact of the transition depends on what comes next as independent stores fight to hold onto a profitable share of the market. There are provisions in the new laws that would allow for expansion for big retailers (with pharmacies for some reason) to include wine and hard liquor, but this won’t happen quickly because of the finite number of liquor licenses in the state. Part of this expansion would require stores to buy out nearby liquor licenses. Archibald says he would consider selling Morgans if approached.

“I’m on the record years ago saying I wouldn’t sell,” Archibald says. “But now when I see how dramatic and quickly everything’s changed, I would be interested to see what I could get for the store and start a new business.”

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