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    Alcoholic beverages represent promising sales opportunities, but state laws for convenience stores are not created equally

    By Angela Hanson, Convenience Store News
    Tennessee Gov. Bill Haslam recently signed a bill that raises the state’s standard beer cap.

    On a typical Friday night in the United States, many consumers are ready to kick off the weekend by picking up a six-pack of beer or other alcoholic beverages to share with friends. Stopping by a convenience store to make a quick purchase should be easy, but the reality is that this depends entirely on which state and region the consumer is in.

    For instance, buying and selling alcohol in Tennessee can be a tricky business. Until recently, the division was clear: wine and distilled spirits could only be sold at licensed liquor stores, while convenience stores and supermarkets were the only retailers that could offer beer ? to a point. Only beer with an alcohol content of 5 percent or less by weight or 6.25 percent by volume could be sold at c-stores. Anything else qualified as ?high-gravity? beer that had to be sold in a liquor store.

    That cap on alcohol content ? the lowest in the region ? was at odds with neighboring states such as Alabama, where the cap is set at 8 percent by weight. This was a problem for Tennessee retailers that wanted to capitalize on the popularity of craft brews, which often have a considerably higher alcohol content. It was also a problem for the brewers themselves, who couldn?t create or sell high-gravity beer in the state without a specialty license.

    Because of this, the brewers and retailers united in support of the ?Fix the Beer Cap? campaign, and they succeeded in forcing a change. On May 1, Tennessee Gov. Bill Haslam signed a bill that raised the standard beer cap to 8 percent by weight or 10 percent by volume.

    ?It?s going to allow brewers to sell the beer at their brewery taprooms and for off-premise consumption,? said State Rep. Ryan Haynes (R-Knoxville), sponsor of HB0047/SB0289, the bill that raised the cap. ?It will clarify the law that allows liquor retailers to sell high-gravity beer growlers. And this will also allow high-gravity beer to be sold in grocery stores.?

    Breweries can take advantage of the new definition immediately, while convenience stores and supermarkets must wait until Jan. 1, 2017, to sell beer with the higher alcohol cap.

    Still, c-stores in other states are wrangling with equally or even more restrictive laws, and the likelihood of them effecting change is much more in doubt.

    THE BATTLE OVER BEER TEMPERATURE

    In Indiana, the controversy over beer sales in convenience stores isn?t an issue of alcohol content; it?s an issue of temperature. Liquor stores, grocery stores and c-stores can all sell beer, but only liquor stores can sell chilled beer. All other retailers must sell beer at room temperature.

    ?It?s really not based on any sort of rational public policy,? said Scott Imus, executive director of the Indiana Petroleum Marketers and Convenience Store Association (IPCA).

    The organization contends that the regulation is ?archaic? and illegal under both the Indiana Constitution and the U.S. Constitution, but it has had a difficult time proving that to the courts.

    In May 2013, the IPCA filed a lawsuit in federal court arguing that the cold beer law violates the equal protection clause of the U.S. Constitution by favoring one class of retailers over another. However, District Court Judge Richard Young upheld the status quo this June, when he ruled that since the Indiana state legislature drew a line on what it would allow and made a case for it, it was not his place to act as a super-legislature and overturn it.

    The IPCA has since filed a federal appeal to Judge Young?s decision. Additionally, the association filed a lawsuit in Marion County Superior Court arguing that the law violates the Indiana Constitution. Both lawsuits were awaiting their next court dates as of press time.

    Indiana consumers are solidly on the IPCA?s side, according to Imus.

    ?There?s certainly support,? he said. ?Unfortunately, the liquor store industry in Indiana is very powerful. And right now, they have a monopoly on cold beer sales.?

    If the law were to change, Imus said, it would present a new opportunity for c-store operators, as well as the need for shelving changes. ?There would be a lot of growth in that category for convenience stores,? he said, noting that stores would need to add more cooler space or swap out existing beverages in the cold vault. ?At the end of the day, you would see a lot of redesign of c-stores.?

    In addition to arguing against the constitutionality of the law, Imus dismisses the notion that allowing c-stores to sell cold beer would make it difficult for the Indiana State Excise Police to keep up with the increased sales and enforce the state?s liquor laws. Figures provided by the Indiana Alcohol and Tobacco Commission show that since 2005, liquor stores received 1.73 violations per permit holder, compared to just .321 violations per permit holder among convenience, grocery and pharmacy stores.

    Additionally, the Excise Police?s own Survey of Alcohol Compliance found that since 2010, stores with liquor permits averaged an 18.9-percent failure rate in preventing the sale of alcohol to minors, while stores with grocery permits ? which convenience stores are usually issued ? saw an average 7.7-percent failure rate.

    Liquor stores are unlikely to suffer much if c-stores do get the chance to offer cold beer, Imus also pointed out. Along with the other kinds of alcohol they can sell, liquor stores have the capacity to offer greater variety. ?In Indiana, there?s a massive variety of beers. It?s more than just your major manufacturers,? he said. ?There [are] craft beers from all over. There?s no way a c-store is going to be able to stock that many.?

    While the IPCA continues to fight for cold beer, Imus believes Indiana officials may warm up more quickly to the concurrent push around expanding alcohol sales to seven days a week. ?I think Sunday sales have more of an opportunity,? he said.

    PUSHBACK IN PENNSYLVANIA

    C-store retailers in Pennsylvania, meanwhile, face a different dilemma. In the Keystone State, it is specifically forbidden for beer to be sold at the same location where gasoline is sold.

    Wine and spirits are only sold at state-owned stores and to buy beer, consumers must visit a restaurant, bar, licensed beer store or beer distributor, which primarily offer cases and kegs and do not sell beer by the bottle or six-pack. Even at locations where six- and 12-packs are available, there are restrictions.

    ?One of the weirdest parts is you can?t actually buy three six-packs in the state of Pennsylvania,? said Scott Hartman, CEO of York, Pa.-based Rutter?s Farm Stores. Customers who want more than two six-packs but less than a case of a single brand must make multiple, separate purchases. And if a customer wants to buy food plus beer, wine or liquor, they could potentially have to make three separate stops in the course of a single shopping trip.

    To adapt to the state?s restrictions, convenience store chain Sheetz Inc. went so far as to transform its business model by becoming more than a convenience store. Sheetz converted its flagship site in Altoona, Pa., into a two-part location. The c-store business is physically and legally separate from an on-site restaurant that offers beer.

    Even once a liquor license is issued, though, that doesn?t mean the battle is over. Only weeks after Sheetz began selling beer at a second c-store/restaurant site in Shippensburg, Pa., it had to lock up the coolers pending resolution of a new legal challenge from the local Civic Club.

    The primary opponent to c-store beer sales in the Keystone State is the Malt Beverage Distributors Association of Pennsylvania, which works to block change through its own efforts and by working with other organizations, according to Gary Zimmerman, assistant vice president and legal counsel for Sheetz.

    Zimmerman dismisses the argument that allowing c-stores to sell beer would harm local mom-and-pop beer distributors. ?Since we?ve been selling beer in Altoona, I don?t know of one distributor in Altoona that has closed,? he said.

    Some distributors have also claimed that c-stores would have an unfair advantage in attracting customers if they were allowed to sell beer alongside their other products like snacks. But beer distributors are legally allowed to sell certain other products, too, and choose not to, Zimmerman pointed out. ?I understand that business decision, but if they don?t want to sell certain snacks and other items that they?re allowed to sell because they choose not to, that?s their business.?

    Retailers and trade organizations including the Pennsylvania Food Merchants Association continue to work for change via the ?Free My Beer? campaign and by meeting with lawmakers.

    Several c-store operators express optimism that change is on the way ? either through legislation or the courts ? but only time will tell whether such confidence is warranted.

    Whatever changes might occur, though, Hartman made his position on Pennsylvania?s alcohol sales laws clear. ?They need to get rid of the prohibition-type rules,? he said.

    By Angela Hanson, Convenience Store News
    • About Angela Hanson Angela Hanson is associate editor for EnsembleIQ's Convenience Store News and Convenience Store News for the Single Store Owner, where she is responsible for primary coverage of the candy, snacks and packaged beverages categories. Since joining CSNews as assistant editor in early 2011, she has played a key role in helping CSNews.com maintain its position as the No. 1 news source for the convenience store industry. Prior to joining CSNews, Hanson served as junior editor at Creative Homeowner book press and as managing editor of Anime Insider magazine. She has degrees in creative writing and visual communication technology from Bowling Green State University.

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