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Proposed liquor law not the toast of the town

By Lee Howard

Publication: The Day

Published February 26. 2012 4:00AM
Dana Jensen/The Day
Alan Wilensky, right, owner of Max's Package Store in East Lyme and also the president of the statewide Package Store Association, helps customer Nancy Laffargue of East Lyme while at work Wednesday in his store.

Independent package store owners for years have fought successfully to defeat legislative proposals to allow Sunday sales of alcohol, proposals they say not only attempted to force them to stay open on the Sabbath, but also would have put them out of business.

"It puts us in a really bad situation," said Mike Edgerton, co-owner with his wife, Mary, of Universal Package Store in Noank. "Sunday sales is the least of it."

Now package store are again gnashing their teeth, this time over Gov. Dannel P. Malloy's proposed Bill 5021, which gets its first hearing Tuesday before the legislature's General Law Committee. This bill includes a provision that would allow a single company to own up to nine liquor stores. The state now allows only two stores to be owned by one entity.

Opponents of the bill say the plan brings the prospect of major supermarket chains opening huge liquor emporiums next door to their stores, significantly undercutting prices offered by smaller retailers.

But those who back the bill, including the Connecticut Food Association, say offering lower prices to consumers is exactly the intent of Malloy's proposal, along with giving state businesses a better chance of competing with package stores across the border in Massachusetts, New York and Rhode Island.

"It's time to put Connecticut consumers first," said Stan Sorkin, president of the food association, which represents small and large markets statewide.

Brian Durand, a spokesman for the state Office of Policy and Management, said Connecticut's current "price posting" system - which requires wholesalers to fix prices paid by retailers for a month at a time - is antiquated and artificially increases prices consumers pay at the checkout line. Malloy's proposal also would eliminate minimum pricing, allowing retailers to charge below cost for some items to attract consumers to buy other products, similar to the way grocery stores sell some foods at a loss to attract customers.

Under Malloy's system, Durand said, consumers would save anywhere from $2 to $5 on a case of beer and $2 to $8 on a bottle of wine, keeping some buyers in state who otherwise would cross the border to find significantly lower prices elsewhere. "This is pro business," Durand said. "It allows our businesses to compete."

It also is expected to bring in more tax revenue for a state that has been struggling to make ends meet. Sunday sales alone could boost state revenues by $6.4 million to $11.2 million, according to projections offered by the governor's office, though some say these numbers - including the $570 million in business that some say is being lost as residents cross state lines to buy alcohol - are plucked from thin air.

Lauren Jennings of Waterford, a sales representative for a local distributor, said whatever revenue is generated by the new law would not compensate for the number of people who might be put out of work.

Jennings said many of her smaller customers likely would go out of business under the governor's plan. To compete on price, they would have to buy 10 cases of certain products, but then would have no shelf space for the boutique items and special requests that attract customers to small neighborhood package stores, she said. "Consumers will be left with fewer options," Jennings said. "I might not even have a job if this goes through."

The independent package store, she and others said, likely would go the way of the small bookstore, the mom-and-pop hardware store and the locally run pharmacy.

But Sorkin, the supermarket spokesman, said similar changes in laws elsewhere have not resulted in mass die-offs of small package stores. And, he said, supermarket chains such as Stop & Shop - with 94 stores in Connecticut - and Big Y - with 27 - won't wind up dominating the package store landscape because of the nine-store limit.

'Favors larger retailer'

Alan Wilensky, owner of Max's Package Store in East Lyme and president of the Connecticut Package Store Association, has other concerns about Malloy's attempt to change liquor-control laws. No. 1 on his list is the elimination of population restrictions that allow no more than one package store for every 2,500 people in a given town. He also opposes what he calls the upheaval of current pricing structures that could keep store owners guessing daily about how much distributors will charge for their products.

Elimination of population restriction could wreak havoc on the valuation of stores, Wilensky said, and might mean some areas would see dramatic increases in competition while others are left high and dry. This becomes more likely, opponents of Malloy's plan say, because the proposal limits the number of package-store "medallions" - licenses - to the approximately 1,200 current licenses statewide, opening up the possibility of a business owner in Lyme, for instance, selling his or her medallion to a supermarket in Fairfield County.

Malloy's plan to eliminate "price posting," Wilensky added, could allow wholesalers to discriminate against smaller stores by changing prices so often that owners won't know until distributors show up what they are going to be paying. "It definitely favors the larger retailer," Wilensky said. "It's going to turn the state of Connecticut into the Best Buy and Home Depot of liquor."

But Durand, the state spokesman, said placement of liquor stores still will be subject to local zoning regulations. The changes, he added, should allow consumers to dictate where stores are located.

Edgerton, the Noank liquor store owner, said one of the initial effects of the law would be to erode profits for smaller retailers in an industry that sustains itself on only 5 percent to 7 percent margins. Edgerton said he would have the choice of buying large quantities of products at good prices - pushing other items off the shelves to make room - or purchasing small amounts at higher prices and making little to no profit.

Edgerton said one possible solution to that problem would be to develop cooperative buying arrangements that allow smaller retailers to pool resources and purchase items in large quantities. But the law, as written, wouldn't allow stores to create co-op buying groups, he said.

"If I can't buy and sell at competitive prices, I won't be able to stay in business," Edgerton said.

Sorkin, representing the supermarket industry, said he wouldn't have any objections to allowing small retailers to form co-op buying groups. But Durand said the state didn't want to upset the current three-tier system of alcoholic beverage manufacturers, wholesalers and retailers by essentially allowing small stores to bypass distributors and buy straight from liquor makers.

Standing in the 500-square-foot store that he bought last September from longtime owner Matt Fay, Edgerton acknowledged the new liquor regulations would include some benefits for the owners of small package stores, including the ability to sell snacks and hors d'oeuvres, which currently is restricted. But the bill's benefits are far outweighed by the negatives, he said. "Connecticut set up a highly regulated system to encourage the formation of stores like this," Edgerton said.

While bill proponents said the new medallion system would add value to small liquor stores that, if the bill passes, would be able to sell their licenses to other entrepreneurs, opponents such as Edgerton said Malloy's proposed bill likely would lead to so many business failures that a medallion essentially would become worthless.

It's going to put a lot of stores out of business," Edgerton said. "It's going to change the landscape of a lot of towns."

l.howard@theday.com

MORE

Liquor rules overhaul

• Would allow sale of alcohol on Sundays.
• Eliminates Monday closings on Memorial Day, Fourth of July and Labor Day.
• Extends alcohol sales at package stores and groceries till 10 p.m.
• Restaurants and bars can stay open to sell alcohol till 2 a.m. every night of the week (subject to local
restrictions).
• Eliminates "uniform pricing," opening up the possibility of quantity discounts and below-cost sales.
• Allows package stores to sell snack food, cheese, crackers, chips and nuts.
• Allows some convenience stores that sell groceries to offer beer sales as well.
• Creates a medallion system that allows the sale of the right to own a package store on an open market.
• Gives grocery stores greater leeway to operate separate package stores.
• Increases the maximum number of stores owned by one person or company from two to nine.

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