THE GIST
Four years after one of the biggest post-Prohibition alcohol reforms in Colorado history, owners of liquor stores across the state are feeling a renewed sense of worry. Having lost millions of cases of beer sales to grocery and convenience stores since 2019—the first time those outlets could legally sell full-strength beer across the state—small and privately owned liquor stores fear a new law allowing wine to be sold in grocery stores could upend their industry further.
Advocates of the legislation say it’s a chance to expand accessibility and ease for customers. Proponents say this latest change could force hundreds of independent liquor stores to close. The outcome may be somewhere in the middle for a state law that was passed by voters last fall on a narrow margin of just a couple percentage points. Coming into effect on March 1, Proposition 125 will bring wine to the same grocery store aisles that now stock beers like New Belgium Brewing’s Voodoo Ranger Imperial IPA and Breckenridge Brewery’s Palisade Peach Wheat, and it’s already causing heated debates in Colorado communities. (Similar anxieties are now being felt in Connecticut, where residents and politicians are debating legislation to allow wine sales in grocery stores.)
“Competition is good if it’s on a level playing field,” says a general manager at Boulder’s Pettyjohn’s Liquor & Wine who asked not to be named, citing sensitivities over a recent change in ownership. Four years ago when Senate Bill 197 (SB-197) altered beer laws, they add, it was assumed beer was the end of major alcohol-related changes.
What feels like an existential crisis today has history that can be quantified:
Since 2018, the last year that liquor stores were the primary place to buy full-strength beer, outlets tracked by market research company IRI lost -6.6 million cases of beer. For comparison, that’s more than the combined annual outputs of Odell Brewing Co., Left Hand Brewing, Ska Brewing Co., Great Divide Brewing Company, and Denver Beer Company.
That volume has since been picked up by grocery stores (+3.7 million cases) and convenience stores (+2.9 million cases) during the same time period.
The increased revenue grocery, convenience, and big box stores earned from beer went from about $70 million in 2018 to $430 million last year. (The 2018 figure was from beer at 3.2% ABV and lower, which was legally allowed, as well as the previous law providing one license per business, so a grocery chain could designate one store in the state to sell full-strength beer.) Dollar sales of beer in trackable liquor stores declined slightly from 2018-2022, from $686 million to $674 million.
These numbers show an exodus of sales from liquor stores, and for some, grease an already slippery slope ahead of Prop 125 going into effect. It’s possible this newly competitive environment will establish clear spaces in which grocery stores and liquor stores can find their respective niches, perhaps maintaining a healthy smattering of options for consumers. Still, liquor store owners express a feeling of déjà vû as they prepare for another policy change that will alter their business plans and what they see as their very purpose in the market.
WHY IT MATTERS
When full-strength beer above 3.2% ABV appeared on grocery and convenience store shelves in Colorado for the first time in 2019, there was plenty of anxiety from in-state breweries and liquor store owners. Breweries feared it would invite increased competition from out-of-state beer producers, driving out smaller players. Liquor stores feared widespread closures, with the Colorado Licensed Beverage Association (CLBA) predicting a drop of -30% in sales.
In the first month after Senate Bill 197 went into effect, beer sales increased +20% across the board, according to the Colorado Department of Revenue, up +1.6 million gallons over the previous year. But a long-term view shows that those sales rose most in chain retail outlets like King Soopers (owned by Kroger), Whole Foods, and more. With the passage of Prop 125, worries from 2019 are being renewed. About 7 million cases of wine were sold in IRI-tracked Colorado stores last year, putting nearly $1 billion of trackable retail sales up for grabs starting next month.
The 2019 beer law was part of a “grand compromise” between lawmakers, grocery stores, and liquor stores—“a middle ground that’s fair to all the players.” This agreement was enshrined in a follow-up bill that slowly phases in new liquor licenses that expand access to alcohol sales for grocery and other major stores while allowing independent liquor stores to adjust to increased competition.
Chris Fine, executive director of the CLBA, sees Prop 125 as a purposeful violation of that compromise. He points to the wide gulf of campaign spending as Exhibit A:
According to data from the Colorado Secretary of State office, grocers and third-party delivery services raised $14.59 million to promote Propositions 125 and 126, ballot measures to sell wine in grocery stores (Prop 125) and a failed measure to allow for third-party alcohol delivery (Prop 126).
David and Robert Trone, co-owners of Total Wine, put nearly $12 million into Proposition 124, which failed to pass and would have increased the retail liquor store licenses an individual can own or hold a share in.
Meanwhile, the CLBA led the “Keeping Colorado Local” campaign, which invested $903,220 in driving public awareness of the potential implications on liquor stores.
“There’s about 1,600 independent liquor stores from the state of Colorado,” Fine says. “We anticipate probably a third to a quarter are in serious jeopardy of losing their business. So, you’re talking about 400 to 600 businesses going out of business in the next one to three years.”
It’s a similar point of information that was used as a warning before the law change for beer sales, although just 16 independent liquor stores have reportedly closed since 2019. Fine says that without pandemic-era financial support from state and federal governments, that number would have been higher.
“For the last two and a half years, I’ve heard that our members struggle with not having had a consistent sales year,” Fine says. “They can’t gauge things going back to 2018, and now with Prop 125 rolling out, we do feel as though it’s going to be a big, big impact. There’s no way around it.”
Representatives from King Soopers, Kroger, and Whole Foods in Colorado did not return multiple requests for interviews to talk about alcohol laws in the state.
In Colorado, liquor stores are never far from grocery stores, now a competitor unlike ever before. Gabriel Rooney, a manager for Divino Wine and Spirits in Denver and the owner of Oasis Wine, a small distribution company and importer, estimates that 90% of Colorado liquor stores are nearby or adjacent to grocers, and his own Divino location is only 750 feet from a Sprouts Farmers Market. While this setup was key to the success of establishing liquor stores for decades, it’s now become an albatross.
Rooney says his store noticed “an immediate slowdown” in beer sales following SB-197, but he estimates Divino’s business is two-thirds wine. Most of the shift has been around “local-ish commercial craft brands” that non-specialist grocers took in. That tracks changes across the state:
Since 2018, brands from New Belgium, Blue Moon, Odell, and Oskar Blues Brewery saw the most growth in grocery, convenience, and other big box stores while also going flat or declining in sales in IRI-tracked liquor stores.
Meanwhile, smaller producers like Crooked Stave, 4 Noses Brewing Company, and Avery Brewing Co. have thrived in liquor stores since the law change with a mix of gains in grocery and convenience.
“Most [liquor stores near grocery stores], they’re not bottle shops, they sell a lot of crappy stuff,” Rooney says. “So, we’re gonna see those stores either switch their product mix, which will probably be beneficial for me as a distributor, or just shut down or sell.”
What has happened since the change has set up a battleground scenario to establish specialities for consumers. Grocery stores have competed most fiercely over the highest-volume beers: imports and everyday brands like Coors Light, Michelob Ultra, Busch Light, and more. Liquor stores have succeeded most with craft and some imports, while minimizing losses with big gains in premixed cocktails and spirit-based seltzers.
The deviation in consumer trends across the two channels is likely to continue with wine, according to Alex Butterfield, manager of Loyalty Liquors in Fort Collins. Wine is even more specialized than beer, and what sits on a King Soopers shelf is going to vary greatly from something recommended by a trained wine seller in a bottle shop—grocery consumers are more likely to just grab a Stella Rosa or Bota Box to stash in the fridge, but someone needing a recommendation for a bottle to pair with a beef filet is more likely to turn to a specialty store. Butterfield expects a dip in business, but because Loyalty Liquors is a small bottle shop, he sees a place for his store in the evolving ecosystem of Colorado stores.
“Liquor stores will have more of a bigger variety and specialization,” Butterfield says. “The same as, if you’re going to a farmers market for vegetables, there’s going to be more vegetables there.”
The general manager from Boulder’s Pettyjohn’s expresses similar concern about “an asymmetric level of standards” for mom-and-pop stores like theirs, which is just a few hundred feet from a King Soopers grocery store. New stores are required to go through a community need analysis before being granted a liquor license. But those grocery stores that will become wine retailers via Prop 125 are bypassing this step and entering the competition without a key barrier.
“Liquor stores are specific for alcoholic products, and they are held to very high standards,” they say. “We maintain high standards, and we only sell to people who are qualified. I’m not sure how that’s going to work at a very big, 30,000-square-foot store.”
SB-197 was intentionally never taken to a vote. In 2016, then-governor John Hickenlooper signed it into law despite pressure from a coalition led by King Soopers and Safeway to put it on the bill as a ballot question. Five years later, grocery advocates succeeded in getting Prop 125 on the ballot, a measure that rectified what they called “flawed and unconstitutional legislation” and put the future of Colorado booze sales in voters’ hands.
Prop 125 passed by a hair—52% to 48%—and was the second time in recent history that wine in grocery stores was on the ballot. The last time was in 1982, where the measure was defeated with a 65% majority “no” vote.
Fine says that, unlike SB-197, which was negotiated in good faith, Prop 125 was pushed by out-of-state corporations. The coalition that raised $14.59 million to promote Prop 125 and 126 was led by Whole Foods Market ($1.7 million), Albertsons Safeway ($1.6 million), and Kroger ($1.3 million).
“That’s really where the groundswell came from,” Fine says, noting that only 18 of Colorado’s 64 counties voted to approve Prop 125. “Consumers weren’t asking for this.”
Opponents of the ballot question also criticized the language of the proposition, saying it was too difficult to understand. According to Ballotpedia, a person would need at least a college education to understand the structure and full meaning of a near 100-word, single-sentence ballot question.
“It makes sense for a majority of the voters to vote yes on this without really doing any of the reading,” says Rooney. “The language was really convoluted, and these aren’t short propositions. You can read them, and there are several pages of legalese and mumbo jumbo.”
Now, in the last weeks before Prop 125 goes into effect, Colorado liquor stores are questioning how the will of the voters will affect their very purpose for existing. When beer, wine, and maybe eventually liquor are sold in every store in town, is specialization enough of a justification for having stores that only sell alcohol?
“Eventually, everybody’s going to be a big supermarket of liquor, and the little guy gets squeezed out,” Butterfield says. “But that’s just capitalism in a nutshell, right?”
Words by Jerard Fagerberg