Liquor Stores

SIC 5921

Industry report:

Liquor stores are establishments engaged in the retail sale of packaged alcoholic beverages, including ale, beer, wine, and liquor, for consumption off premises. Stores selling prepared drinks for consumption on premises are classified in SIC 5813: Drinking Places (Alcoholic Beverages).

Industry Snapshot

In 2009, according to the Dun & Bradstreet, there were 35,582 establishments engaged in the retail sale of packaged alcoholic beverages for consumption off the premises, which generated over $16 billion in sales, with the average beer, wine, or liquor store accounting for about $500,000. The alcoholic beverage industry grew during the mid-2000s, primarily due to value growth as consumers moved away from beer and toward more expensive liquors. However, when the U.S. economy entered a recession in the late 2000s, consumers retreated to lower priced brands. As a result, although the retail alcoholic beverage industry managed around a 1 percent growth rate, it compared negatively to the 7 percent growth the industry experienced during the mid-2000s. However, considering that many U.S. industries posted significant losses during the late 2000s, liquor stores were considered something of a success story.

Organization and Structure

The liquor store industry is made up of mom-and-pop retail outlets, independently run chains, and corporate-owned stores. While the vast majority of stores are small, family-run operations, there are a rapidly growing number are superstores primarily engaged in other kinds of businesses. In some states, liquor stores are state-owned and state controlled, and laws governing the retail sale of liquor, wine, and beer vary widely among states.

Among the industry's top companies, most remained independently run during the 2000s. Increasingly, however, they changed their retail strategy, consolidating multiple outlets into fewer but bigger warehouse-style stores, thus saving on overhead and payroll while still moving a large inventory. The effect has been hard on smaller neighborhood retail operations comprising the bulk of the industry. Dun & Bradstreet reported in 2009 that about 75 percent of liquor stores fewer than five employees.

Background and Development

Throughout its history, the retail liquor store industry has been buffeted by changing social and political attitudes toward alcohol, and the sale of alcohol has always been highly regulated. The most severe period of regulation was the Prohibition era (1919 to 1933), during which alcohol consumption was completely outlawed by the federal government. Stores were forced to close en masse, and owners either left the business or went underground.

Liquor sales were legalized again in 1933, when it became clear that Prohibition had worsened bootlegging and facilitated the rise of organized crime. Responsibility for liquor regulation was returned to the states following Prohibition. Since then alcohol has been legally available in almost every part of the country, although a few localities remain "dry." But the nature of governmental regulation has varied markedly from state to state. Some states allow private ownership, while others restrict the sale of alcohol to state-run outlets. Some states permit grocery stores to sell wine and liquor, others do not. Some states tax liquor sales heavily, while others impose little or no taxation. In no state, however, is the production, distribution, and sale of liquor unlicensed or unregulated.

In 1978, many states deregulated liquor prices that had been set by the government. Deregulation allowed supermarkets and convenience stores to enter the business, which increased pressures on traditional corner liquor stores at a time they were already experiencing shaky profit margins. To compete, small retailers lobbied for permission to sell peanuts and other ancillary goods, such as finger foods, corkscrews, gift baskets, and lottery tickets.

State and local governments across the country have tried to address these problems. In 1994 residents of Barrow, Alaska, turned back the clock to Prohibition, voting to ban retail sales of all alcoholic products. A year later statistics showed a 70 percent drop in crime, a plunge in emergency room visits, and the virtual emptying of the town jail's "drunk tank," which usually had a full house, according to a report in the Wall Street Journal. Nevertheless, the ban was repealed after the one-year break, giving rise to bitter acrimony among residents (and an almost immediate refilling of the drunk tank). Some local Inupiat Eskimos and others charged opponents of the ban with a racist motivation to destroy native culture. Alcoholism, one state health official said, was the "worst problem facing native communities." Other Inupiats supported repeal, as did members of the majority community, who argued that the abuse of alcohol was an issue of individual, not social, responsibility. Pro-drink advocates also pointed to an increase in bootlegging during the dry period, as well as an increase in crime and hospital visits in neighboring communities.

Early in 1997 the Distilled Spirits Council (DSC) of the United States, a major trade group, decided to lift its self-imposed ban on television and radio advertising. The ban, included in its 1934 Code of Good Practice for Distilled Spirits Advertising and Marketing, followed the decision of the Seagram's distillery to advertise two of its scotch and bourbon brands. Even before the self-imposed ban was eliminated, nine states jointly petitioned the Federal Communications Commission (FCC) in December 1996 to prohibit such commercials: Hawaii, Iowa, Kansas, Maryland, Michigan, Minnesota, North Dakota, Rhode Island, and Vermont. Alaska had made the same request a month earlier. After hearing arguments about the state's concerns, the FCC announced in 1998 that it would postpone ruling on the petition because few distilled spirits ads were actually appearing. In 1999 the DSC itself responded to the states' petition in a statement issued by its president and chief executive officer, Peter Cressy, who said that the council was "open to considering new provisions that would strengthen all beverage alcohol advertising codes."

The retail liquor store industry experienced an increase in sales from $21.7 billion in 1990 to $22.5 billion in 1995 (preinflation figures), but the industry's real income declined 10 percent during the same period. This was on top of a 17 percent drop in real income from 1980 to 1990. Real income began to revive slightly 1996, registering a growth of 2.4 percent. Factors accounting for the industry's sagging numbers included a renewed public hostility over the relationship between alcohol sales and crime, which led to prohibitions on the sales of such alcoholic products as small bottles of strong, fortified wine and single cans of beer. State efforts to curtail the growth of liquor stores, competition from alternative sources of supply, and a nationwide crackdown on alcohol-related driving offenses also contributed to the drop in sales.

Other developments in the 1990s boded well for the industry. In 1996, the Joint Committee of the U.S. Department of Health and Human Services and the Department of Agriculture issued dietary guidelines indicating that a moderate intake of alcohol among adults may be beneficial to health. That same year the American Heart Association issued a scientific advisory noting a 30 percent decrease in coronary artery disease incidence for persons who consume a moderate amount of wine. Researchers at Colombia University released a study in 1999 showing that moderate alcohol consumption can reduce the risk for stroke. Additionally, the liquor industry itself has taken action to improve sales. In 1996 national distillers voted to end their voluntary abstention from advertising liquor on broadcast media. In the first year, after the ban was lifted beverage marketers spent $609 million at retail for point-of-purchase advertising. By 1998 that figure had doubled. Many liquor stores reported increased earnings because of vigorous advertising. However, the jury was out as to whether the liquor store industry as a whole will enjoy a resurgence.

Liquor store revenues during the 1990s may have suffered from the publication of studies showing the cause-and-effect relationship between alcohol and crime. A 1996 Brookings Institution report entitled "Broken Bottles: Alcohol, Disorder, and Crime," by John J. DiIulio, Jr., found that 60 percent of convicted homicide offenders drank heavily just prior to committing the crime, the same percentage of those committing other violent felonies. The report, which observed that alcohol "acts as a multiplier of crime," also cited studies showing 30 to 90 percent of convicted rapists were drunk when they raped.

Several studies focused on alcohol abuse among youths, and on the relationship between liquor stores and poverty. A 1996 report by the National Institutes of Health concluded that "Young adults have a higher prevalence of alcohol consumption and binge drinking than any other age group. . .Rates of alcohol abuse and dependence are disproportionately higher among those between the ages of 18 and 29. . ..Young adults are also over represented among alcohol-related traffic fatalities." In 2005 the Substance Abuse and Mental Health Services Administration's (SAMHSA) report titled National Survey on Drug Use and Health indicated about 11 million underage drinkers throughout the country and that about 5,000 alcohol-related fatalities occurred annually for those 21 years and younger, which represented the primary injury-related cause of death for that age group.

In Atlanta a mayoral task force prepared recommendations requiring new retailers to locate at least 1,000 feet--three city blocks--away from other alcohol sellers, and at least 600 feet from libraries, schools, residences, parks, hospitals, and places of worship. Texas liquor storeowners sought to limit the number of permits for retail operations to one for every 1,000 inhabitants. A few cities in the South sought to curtail permits issued for liquor stores located in poor neighborhoods. Some municipalities in other parts of the country chose to regulate liquor store hours, banning sales altogether on certain days. Other communities restricted the amount and type of gaming paraphernalia that could be sold by retail liquor stores.

In New Jersey police officers from the state's Alcohol Beverage Control Division placed themselves in liquor stores in college towns to apprehend youths trying to purchase liquor. By August 1996, the Cops-in-Shops program had arrested 363 people, including 58 adults who had attempted to purchase alcohol for persons under age 21. In 1998, almost 200 people were arrested during June, July, and August alone, most for using fake identifications. The program ultimately expanded to Atlantic City, Avalon, Wildwood, and Seaside Heights.

Another threat facing the liquor store industry beginning in the 1990s was the emergence of cooperatives that arranged for distributors to deliver hard-to-find microbrews directly to consumers' homes. Beer Across America was the largest such cooperative in the United States, claiming 100,000 members in 1997. But the threat posed by beer cooperatives may be waning. With assets of $3.4 million and liabilities of $7.7 million, Beer Across America filed for bankruptcy in 1998. Their business was able to resume with a "Beer of the Month Club" that was run in the mid-2000s by a company called Amazing Clubs of Stamford, Connecticut.

Several states also toughened their laws punishing motorists who drive while intoxicated (DWI). By 1999, 17 states and the District of Columbia had lowered to 0.08 percent blood-alcohol content the legal limit at which drivers could be prosecuted for DWI. The remaining 33 states allowed the higher limit of .10 percent. In July 1999, Vice President Al Gore announced that under the Transportation Equity Act for the 21st Century federal grants of more than $500 million over six years would be made available to all states that had lowered their limit to at least 0.08 percent. A number of localities went further than lowering the legal limit for DWI offenses. By the mid-2000s, the lower blood--alcohol level had been adopted by all states.

According to Dun & Bradstreet figures for 2007, overall volume is concentrated in a few states. States representing the majority of stores were California with 5,365; New York with 2,872; Texas with 2,613; Florida with 1,932; New Jersey with 1,702; Michigan with 1,482; Illinois with 1,428; and Colorado with 1,399. Together, they controlled more than 50 percent of the market value.

Liquor stores were the largest sector within industry, with 21,463 establishments for a nearly 58 percent share of the market. Hard liquor stores represented 16.1 percent edging out wine stores' share of about 12.9 percent of the market. Packaged beer stores held 11.7 percent and wine and beer stores had 1.6 percent.

Current Conditions

In 2010 there were 19 states that controlled alcoholic beverage sales. In these states, liquor stores can sell liquor and sometimes wine but not beer. They are often called ABC or state stores. These states were Alabama, Idaho, Iowa, Maine, Maryland, Michigan, Minnesota, Mississippi, Montana, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Virginia, Washington, West Virginia, and Wyoming. Some states (including California, Louisiana, Missouri, Nevada, New Mexico, and Wisconsin) allow liquor, wine, and beer to sold in a variety of formats such as liquor stores, convenience stores, grocery stores, and drug stores. In Connecticut, Georgia, and Massachusetts, liquor stores must package merchandise in a sealed container or a bag when it leaves the store, thus they are commonly referred to as package stores.

Conventional wisdom is that liquor stores and donut shops are two of the most recession-proof industries in the United States. "While the spirits industry may be recession-resilient, it's not recession-proof," Ben Jenkins of the Distilled Spirits Council of the United States told Boston Globe. Nonetheless, it was not surprising that the industry stayed in the black--albeit barely--even during the worst of the economic woes that struck the U.S. economy in the late 2000s. As a results, numerous cash-strapped states that controlled liquor sales looked to the industry to help support the failing state budget.

For example, during the summer of 2010, Massachusetts raised its overall state sales tax from 5 percent to 6.25 percent and eliminated the exemption on alcoholic beverage sales during the summer of 2010. However, the state's residents, already trading down to lower priced brands to save money, did not react kindly to the state's attempt to raise funds from liquor sales. Liquor sales dropped as consumers began crossing the border into tax-free New Hampshire. At the polls in November, Massachusetts residents successfully passed an initiative to repeal the tax.

Other states were attempting to raise money by selling off their state-owned liquor stores. If the Pennsylvania legislature was succeeded in pushing a 2011 measure, the state's 750 retail and 100 wholesale outlets would enter the private business domain. Similarly, Virginia Governor Bob McDonnell was pushing a plan to auction off the state's 332 state-owned liquor stores to pay for highway improvements.

Workforce

For the category of beer, wine, and liquor stores, the U.S. Department of Labor's Bureau of Labor Statistics reported a total employment of 137,390 in May 2009. The largest portion (79 percent) of the workforce is dedicated to sales and related occupations. Roughly 13 percent of workers are employed in positions related to office and administrative support. About 3 percent are involved in moving and transportation.

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News and information about Liquor Stores

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United News of India; September 19, 2017; 283 words
...Deputy chief minister Manish Sisodia today announced that liquor stores near schools would be closed and action taken against those officers who issued them licences."Liquor stores near schools shall be closed and action taken against...
Checks Won't Be Accepted at State Liquor Stores after Sept. 30
Deseret News (Salt Lake City); August 30, 2017; 592 words
...LAKE CITY - Customers at Utah's state-controlled liquor stores soon will no longer be able to write a check to pay...require the same processing.Signs are being posted in liquor stores to let customers know checks will no longer be accepted...
Police: Man wanted for using stolen debit card at Joliet liquor stores
Chicago Sun-Times; September 6, 2017; 258 words
...stole someone's debit card and used it at multiple liquor stores in Joliet before it could be reported stolen, according...the man wanted for using a stolen debit card at Joliet liquor stores on Sept. 2. | Joliet police
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Dayton Daily News (Dayton, OH); November 2, 2017; 469 words
Three new state liquor stores are coming to the greater Dayton region, and Ohio will add 20 new liquor agency stores statewide in the coming months, the Ohio...
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...except Alberta, which eliminated its liquor board) should consider selling recreational marijuana only in government liquor stores, because they have the secure infrastructure to deal with a drug with narcotic properties. They also have well-trained...
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States News Service; November 3, 2017; 509 words
...has a similar prohibition on the books. This week, the St. Paul City Council approved the measure that only allows liquor stores and tobacco shops to sell mint, wintergreen and menthol tobacco products. The council took only a month to hear from...

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