Wine sales coming to Colorado grocery stores could impact liquor store sales by 10%
Researchers with Colorado State University predict local liquor stores could lose an additional 5% of sales starting next week when the wine is permitted to be sold in grocery stores.
Voters narrowly chose to allow wine sales in grocery stores last year, paving the way for bottles of wine to be on store shelves next Wednesday.
A study by CSU researchers in the Department of Agricultural and Resource Economics found that sales at liquor stores in Colorado dropped by roughly 5% after full-strength beer was allowed in grocery stores.
Then, by reviewing data from Oklahoma where beer and wine are sold in grocery stores, they found overall sales could dip in Colorado by a total of around 10% starting next week.
"This is going to be more of a challenge for local liquor stores," said Marco Costanigro, professor at CSU. "We don't know what the survival rate is going to be."
Costanigro says many liquor stores were able to maintain their operations with the introduction of full-strength beer in grocery stores.
However, it is yet to be seen how many will be able to handle an additional five percent lost revenue once the wine is allowed in grocery stores.
"Liquor stores have a symbiotic relationship with grocery stores. They open as close to grocery stores as possible to intercept traffic. They were selling products that were not available in grocery stores. Now, as we start liberalizing more the distribution, grocery stores are becoming more competitors," Costanigro said.
Costanigro and his peers found that microbreweries had more difficulty getting on the shelves of Colorado grocery stores due to limited shelf space.
Also, consumers buying alcohol at grocery stores are more likely to purchase macro-brews like Coors or Budweiser.
"The vast majority of the volume sold in the grocery stores is the larger breweries," Costanigro said.
The study suggested that liquor stores can continue to survive this challenge if they start to alter their business model.
One researcher suggested that liquor stores emphasize their ability to offer more craft brews that grocery stores do not offer, or to bolster their variety of liquors as grocery stores still cannot sell those.
"If you are just the small store that sells the macro brands, the typical high-volume products that the grocery store is also going to have, you are going to struggle. This could be a push to more specialization of the liquor stores," Costanigro said.
The study also found that rural communities are more likely to gravitate to name brands like Coors and Budweiser, whereas urban consumers prefer more craft brews when it comes to beer.
However, it is predicted that wine will have an overall impact that will be felt equally in urban and rural stores.
While the change may pose a threat to the stability of some liquor stores, Costanigro said the convenience of one-stop shopping isn't the only benefits consumers will likely experience.
"We are for sure going to see prices decreasing," Costanigro said.
