TN: Grocery, liquor stores get ready for wine sales
By Richard Locker
November 30, 2015
NASHVILLE — As Tennesseans enter their last holiday season unable to pick up a bottle of wine in their local grocery stores, state regulators and Tennessee’s liquor wholesalers and retail grocers are gearing up for the launch of wine sales in grocery stores next July 1.
Grocers say they’re making plans and designing layouts for their wine aisles or sections, but with seven months to go, it’s too early to clear out shelf space yet.
It’s a different story for the 51 liquor wholesalers across the state: they’re the businesses that will deliver wine to grocery stores in the 83 Tennessee towns, cities and counties whose voters have already approved grocery-store wine sales in local referendums since the state Legislature authorized it in 2014. Wholesalers are moving from a business environment in which they service retail liquor stores and restaurants to one where they will be delivering to eligible food stores as well.
Estimates vary on how many stores will sell wine.
“From what we have been told — and it fluctuates — we’re looking at an initial onslaught of applicants of 150-350, but I’m sure there will be others,” said Keith Bell, executive director of the Tennessee Alcoholic Beverage Commission, which will start accepting applications for food-store wine licenses in January.
Some of those involved won’t even shoot for an estimate.
“I would not venture to guess a number,” said Rob Ikard, president and CEO of the Tennessee Grocers & Convenience Store Association.
Voters have approved food-store wine sales in Knoxville, Farragut and unincorporated Knox County, plus nearby Clinton, Norris, Oak Ridge, Alcoa, Maryville, Lenoir City, Loudon, Harriman, Kingston, Gatlinburg, Pigeon Forge and Sevierville.
Other East Tennessee cities where votes have approved sales are Athens, Bristol, Chattanooga and five of its suburbs, Church Hill, Cleveland, Crossville and unincorporated Cumberland County, Elizabethton, Etowah, Greeneville, Johnson City, Jonesborough, Kingsport, Morristown, Newport and Rogersville.
Earlier this fall, Tom Hensley, director of the Wine & Spirits Wholesalers of Tennessee, told an ABC meeting that his members believe they could be delivering to as many as 500 food stores.
“That’s a big change for our industry,” he said.
As a result, wholesalers have been going to the ABC getting approval for major expansions and location changes of their businesses, Bell and Hensley said.
“Over the last year there has been an increase in expansion of operations of wholesalers as well as modernization of their systems, such as new scanning and inventory control systems,” Bell said.
On one recent monthly ABC agenda, West Tennessee Crown Distributing Co. in Memphis won approval for a move into a larger warehouse. Henry Hildebrand, a Nashville attorney who represents several wholesalers on regulatory issues, told the ABC the move was to get ready for wine in food stores.
“We’re about to have a lot more customers, and we need a whole lot more product. It’s a large operation,” he said.
Bell said wine in food stores is the biggest change in Tennessee’s alcoholic beverage laws since Prohibition was repealed in the state in 1939 (national Prohibition was repealed in 1933, but states were still free to prohibit “the importation and transportation of intoxicating liquors” as they saw fit). The 1967 legalization of liquor-by-the-drink sales in Tennessee restaurants, subject to approval in local referendums, was another milestone.
After years of failed efforts, the state Legislature approved food-store wine sales in 2014, but as a concession to retailer liquor stores, delayed the effective date for two full years. The same law, negotiated between food stores and liquor wholesalers and retailers, allowed liquor retailers to begin, on July 1, 2014, selling beer, cigarettes, cigars, lottery tickets and a long list of other items they had been banned from selling previously, including bar accessories and mixers, nonalcoholic beverages, gift items, snacks, party supplies, clothing bearing the logos of beverage products, and ice chests.
Bell said “the vast majority” of the approximately 650 retail liquor stores opted to sell beer and the other newly permitted items.
“I know of a few that are not doing that,” he said.
The law contains another concession to liquor stores: no grocery store within 500 feet of a liquor store can sell wine before July 1, 2017 — a year later than other food stores — unless the liquor store owner gives written permission to start selling in 2016. However, a liquor store refusing to give permission to a nearby food store that requests it is prohibited from selling beer and the other previously prohibited items during the year starting July 1, 2016.
Joe Bell, Memphis regional director of Kroger stores, said two or three retailers have declined permission, but he said talks are ongoing “and they still have time to make up their minds.”
“We are looking at where wine will go in any particular Tennessee store, but there’s really nothing to do yet. There’s still a whole lot of moving parts on this. The retailers are still working, the wholesalers are still working and the ABC is still working on fine points that will have to be resolved,” he said.
Grocers, the liquor industry and regulators have discussed possible tweaks in the 2014 statute in the upcoming legislative session. The law says the ABC can start issuing wine licenses to food stores July 1 (although applications can be accepted Jan. 1), and it prohibits food stores from receiving wine shipments before July 1.
The parties generally agree that to start wine sales on July 1, food stores will need to receive products and their state licenses before July 1.
The ABC has a public hearing Dec. 9 on the rules drafted to implement the 2014 statute, but Bell said the Legislature may be asked for some alterations in the law itself.
“It’s the view of the staff of the commission that the ABC does not have authority to permit stocking before that (July 1) under current law,” Bell said. “That will be up to the General Assembly. My understanding is there will be some movement in the next legislative session to allow that.”
Tennessee becomes the 38th state to allow wine sales in food stores, according to the Wine Institute, a trade association, although a handful of those states impose heavy restrictions, such as limiting food stores to the sale of wine from small, in-state wineries.
“Food retailers are looking forward to becoming wine retailers where allowed to,” Ikard said. “Preparations are being made. Relationships between food stores and liquor wholesalers are being established, and everyone is looking forward to July 1.”