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Slowly Opening an Industry

First off: Yes, it has been more than 6 months since my last post.  Yes, that is lame. I have had the writing itch for a few weeks, though, so maybe this post is a harbinger of things to come.  Or maybe it’s the only post between now and Town Meeting 2012.  You never know.

Second off: Some of you will say, “you interrupted your hiatus for this?” To which I reply: “I have to start somewhere.”

You have to be pretty deep into either Massachusetts arcana or booze before you learn that Massachusetts restricts businesses to holding only 3 liqour licenses.  Yes, really.  Only 3.  That’s why you don’t see beer for sale at your local supermarket – they’re all owned by one big corporate chain or the other, and only three of the stores in a given chain can carry booze.  Most people think it’s just illegal for supermarkets in Mass to sell booze.  It’s not illegal – it’s just rare.  (See – here’s a Shaw’s with beer!)

This law means that the liquor store industry in Massachusetts never has any consolidation – it’s all mom-and-pop stores.  They can’t buy each other without breaking the license limit.  It also means that innovation and price pressure never spreads very far, either.  Anyone who tries to rock the boat is rocking it in only three places, and the rest of the state continues on, unperturbed, and unafraid that it will spread.

The law also has created some pretty weird politics.  The mom-and-pop driven liquor lobby has fought very hard to keep the status quo.  In 2006, there was a ballot question to change the system, and check the rhetoric the lobby rolled with: “It’s about large, foreign-owned convenience stores, grocery stores, drug stores, and gas station chains  lining their pockets with profits. All while compromising  the safety of our families, friends, and community.”  If there ever was a “please think of the children” campaign, this was it.  They won.

2010 was a different question, but the same dynamic.  The state had increased taxes on booze.  That was depressing sales.  The lobby fought to rescind the change: “The new sales tax has hurt small business owners who sell beer, wine, and liquor, particularly near New Hampshire, which has no sales tax on alcohol. Business has declined substantially for many of those stores.”  Note how the fact that they are all small businesses becomes a part of the selling pitch.  They won again.

All this is background for the point of this post: Times are a’ changin’. Tonight I read a memo from the Alcholic Beverages Control Commission (ABCC) that notes a change in state law passed this year by the legislature.  (What?  You don’t get memos from the ABCC? It’s one of the weird but cool things that happens when you’re on the Board of Selectmen). Starting in 2012, a business can own 5 licenses, 7 in 2016, and 9 in 2020.  I hadn’t heard about this change, and I have to wonder if the mom-and-pop lobby heard about it to.  Frankly, I’m surprised the change made it into law. Changes like this are a beginning to an end for the firewall they’ve built against big-company competition.  Can you imagine Kappy’s with a 9-store chain ringing Boston? I’m sure that Kappy can, whoever he is.

The memo is quick to point out that this doesn’t change the number of licenses available in a given town.  Arguably, that’s the point that killed the change in 2006.  Every town in Mass still has a limited number of licenses, whether there is a supermarket in town or not.

Bottom line?  This probably isn’t a big deal, but it should increase competitiveness in the industry in the long run.  I wrote about it because if you’re a Mass wonk, or a booze wonk, you’ll find the change interesting.

Comments

Comment from David Coletta
Time: December 29, 2011, 7:15 pm

If the result of this change is that the Trader Joe’s in Arlington Heights finally gets Three-buck Chuck, then I’ll be happy. Of course, you have to think of what’s going to happen to the traffic in that parking lot!

Comment from dunster
Time: December 30, 2011, 1:19 pm

That’s definitely possible. One thing to remember is there is a limit on the number of licenses available in Arlington – this new law doesn’t change that limit. So there is a real limit to how many stores that can sell in town.