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With wine in the grocery aisles, some liquor stores may have to specialize to survive

This image shows a woman holding two bottles of wine walking out of liquor store that features a large neon Corona Extra sign and several other beer and wine brands taped to the front window.
David Zalubowski/AP
A customer walks past a sign advertising Corona beer while exiting a liquor store Friday, March 27, 2020, in Bergen Park, Colo. The newly passed Proposition 125, which allows grocery stores to sell wine has many independent liquor stores wondering how their sales will be impacted.

As a result of voters passing last year's Proposition 125, Colorado grocery stores started selling wine this month. Many independent liquor stores considered the ballot initiative a big threat to their business and store owners and researchers are watching trends to see what kind of impact the law could have on customer behaviors and business' bottom lines.

A recent study out of Colorado State University looked at how beer sales in grocery stores in Colorado and Kansas impacted liquor sellers a few years ago. Researchers used cellphone data to look at customer movement. Overall, the damage appeared minimal. There was a 5% decrease in foot traffic in liquor stores.

Professor Marco Costanigro co-authored a CSU study that looked at how allowing beer and wine sales in grocery stores affected independent liquor sellers.
John Eisele/Colorado State University Photography
Professor Marco Costanigro co-authored a CSU study that looked at how allowing beer and wine sales in grocery stores affected independent liquor sellers.

The study also looked at Oklahoma, which gave grocers the green light to sell wine in 2019. In Oklahoma the study showed that foot traffic to liquor stores dropped 10% in urban and rural areas. With this in mind, many believe Colorado's new liquor law might make the landscape tougher for small businesses and could possibly even force some stores to close.

"It's gonna be the ones [stores] that are located very close to grocery stores, they're smaller, and they're just selling the same type of macro product that the grocery stores are selling, and to survive, they will have to specialize in providing a wider variety of product," said study co-author Marco Costanigro, a professor of agricultural and resource economics at CSU.

Costanigro said he expects Colorado will see a similar trend of urban and rural customers buying more wine and beer at the grocery store instead of visiting a stand alone liquor store.

"They are going to have a hard time following the grocery stores in price for the simple reason that the grocery stores have the scale of operations - economy of scale - that allow them to charge lower prices," said Costanigro.

Some liquor stores can probably weather a drop in foot traffic because they have good locations, a loyal customer base, or sell specialty products that aren't widely distributed.

"If you want to survive you just have to offer something that grocery stores can't," he said.

Costanigro is working on new research to highlight what types of stores survive after these liquor law changes.

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