Marylanders have renewed a decades-long fight to legalize sales of beer and wine in the state’s grocery stores and other chain retailers. The state is currently facing a budget shortfall exacerbated by the COVID-19 pandemic, and will be welcoming roughly 70 new legislators in the state house following this year’s election. As a result, proponents of legalizing chain sales see next year’s legislative session as a key opportunity. Currently, advocates of legalization are drumming up public support, and trying to identify legislators who might act as sponsors for next year’s bill.
Two groups—Marylanders for Better Beer & Wine Laws (MBBWL) and Maryland Alcohol Choice—are leading the charge. They face opposition from the state’s liquor stores and distributors, who benefit from the status quo. Liquor stores currently have a monopoly on beer sales, and distributors see chain sales as adding many more accounts for them to service without an equivalent spike in sales. (An economist hired by MBBWL estimated overall alcohol consumption in the state would increase 6% as a result of legalized chain sales, while potentially doubling the number of retail outlets in the state. Distributors would likely see an increase in their workload without an equal increase in consumption/sales.)
The Free State is one of only four states that outright prohibits beer sales in groceries, big-box stores, and chain pharmacies like CVS and Walgreens; it is one of 11 states that do the same for wine sales.
“There is no real one-stop shopping in Maryland,” is how Fritz Hahn, a reporter who covers beer and nightlife for The Washington Post, puts it.
This state of affairs stems from a 1978 law that restricted the sale of alcohol to liquor stores, stipulating that only one liquor store license could be awarded per person, and mandating that that person be a Maryland resident. (Twenty chain stores were grandfathered in under that bill, and continue to operate as exceptions.) Bills at the county and state levels have unsuccessfully tried to undo the 1978 law since 1981.
Maryland counties are granted a wide berth in setting their own liquor laws, and some restrict sales of hard alcohol to county-run stores. This means that in Montgomery County, for example, a person preparing for a party would have to buy food at a grocery store, beer and wine at another store, and hard alcohol at a county-run liquor store.
Efforts to legalize chain sales in Maryland are a microcosm of the battle to loosen liquor restrictions playing out nationally during the pandemic.
Backers of changing Maryland law cite studies that show a potential $200 million tax windfall from new licenses and increased sales under chain store legalization, which is badly needed as the state faces an estimated $2.6 billion budget deficit for fiscal year 2021. But opponents warn of drunk driving, underage drinking, and other health consequences they say would result from changes to the status quo. These are familiar arguments against looser alcohol laws that proponents of chain sales say have no basis in data or fact. These arguments may prove persuasive, though: Maryland politicians previously relied on potentially biased experts during 2018’s fight over beer-related laws.
In his address at the National Beer Wholesalers Association’s annual convention, the group’s incoming chairman, Patrick Blach, warned against making legal changes in response to the pandemic. Such loosened laws would provide more flexibility in terms of how, when, and where drinkers can purchase alcohol, and would give producers more freedom to sell and distribute that alcohol. The existing distribution system, Blach said, is “under attack from all sides.”
“Over the coming year, we must work together to preserve effective state alcohol law to promote public health and safety, competition, and variety for consumers,” he said.
The push to legalize chain sales in Maryland also comes on the heels of recent franchise law reform and last year’s increased cap for taproom sales in the state, both of which were seen as victories for breweries at the expense of distributors.
“There had been stasis in a lot of ways, but in recent years there’s been a real push to reform these laws,” Hahn says.
If the time is finally right for reform, that could mean additional loosening of Maryland regulations that deal distributors another legal blow. Historically, distributors nationwide have been able to afford strong lobbyists to protect their financial interests in the three-tier system, but in Maryland at least, their fortunes have shifted over the past two years.
A recent poll conducted by Gonzales Research & Marketing Strategies and cited in an op-ed in The Baltimore Sun found 75% of Maryland residents support changing the law to allow chain sales of beer and wine. But whether there’s political will to make such a change is another question.
In pitches to Maryland lawmakers, MBBWL and Maryland Alcohol Choice point to Oklahoma and Colorado, both of which legalized beer and wine sales in grocery stores in 2018 and 2019, respectively. Neither state, they say, has seen negative public health impacts or widespread closures of liquor stores as a result—and they’ve collected plenty of tax revenue. The Tulsa World reported the state saw a “historic spike” in revenue following the change, posting revenue of nearly $14 million in fiscal year 2019, up from $7.5 million in 2017.
Meanwhile, traffic fatalities have not increased in either state. The Colorado Department of Transportation reported an upward trend in fatal highway accidents between 2013 and 2017. Since 2017, fatalities have decreased each year, including 2019, when grocery stores sales of beer were legalized. That year, CDOT reported 544 highway fatalities, compared to 588 in 2018. In Oklahoma, alcohol-related traffic fatalities have fallen every year since grocery store sales were legalized.
“Forty-seven other states do this and have done this for decades,” says Cailey Locklear, president of the Maryland Retailers Association, one of the groups behind Maryland Alcohol Choice. “You look to states like Colorado and all of the sky-is-falling arguments don’t come to fruition.”
A September report from Colorado State University’s Field to Foam Institute helps explain how legalized grocery store sales impacted the state’s beer retail landscape. (Prior to the change, breweries could only sell beer less than 3.2% alcohol by weight, about 4% ABV, in grocery stores.)
The report found the change was a “glass half-full” scenario for Colorado breweries. Overall, the law increased demand for beer, growing its market share relative to wine and spirits. After grocery store sales of full-strength beer began on Jan. 1, 2019, the volume of wine and spirits sold in Colorado fell by -7% and -5%, respectively, while the volume of beer sold grew by +4%. Maryland’s sales may play out a bit differently, because beer and wine sales would expand at the same time; one would therefore expect both categories to grow relative to spirits.
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In Colorado, breweries of different sizes experienced the new landscape differently. Colorado’s regional breweries, those that produce between 15,000 and 6 million barrels of beer—such as Left Hand Brewing Co. or Odell Brewing Co.—were most likely to take advantage of grocery stores. CSU’s report found that for regional breweries, grocery store sales increased from +5% to +19% of total sales, while liquor store sales declined by the same -14%. Essentially, regional breweries were now selling the same portion of beer they once sold in liquor stores at grocery stores.
It’s a different story for smaller breweries, which face logistical challenges selling in large chains: Only half of Colorado’s breweries that have distribution agreements decided to enter grocery stores in 2019.
Maryland’s breweries have largely sat out the public discussion around legalizing chain store sales, likely because there’s no consensus as to how the legal change would play out for them. Larger breweries might see a potential benefit, but are also wary of publicly supporting a measure their distributor partners oppose. (Flying Dog Brewery, Maryland’s largest craft brewery, declined to comment for this story.) Maryland’s small breweries, many of which self-distribute, are unlikely to begin chain sales right away. Small breweries don’t see this effort as especially relevant to them, while larger breweries risk straining their relationships with wholesalers by publicly supporting it. Hence their silence.
Small breweries in Maryland are less likely than regional breweries to take advantage of grocery store sales, because such sales require logistical efforts that are harder to muster on a small scale. In explaining why their brewery decided not to sell in grocery stores, one Colorado brewery owner—whose company produced fewer than 1,000 BBLs of beer—told CSU researchers: “[Our choice was] due to relationships with smaller retailers, difficulty in stocking requirements in larger stores, lack of personal relationships with these retailers, and a lack of knowledgeable salesforce within these retailers.”
The report’s authors note that they suspect it’s “significantly less profitable” for small breweries to sell in grocery stores as compared to larger breweries that employ more salespeople, produce more beer, and are accustomed to servicing chain retailers in other states. But if a small brewery did see an opportunity for increased sales in chain stores, that brewery would likely have to hire more employees to service those accounts—a potential employment boon.
What do these legal shifts then mean for drinkers? For many, the convenience factor of buying beer where they buy food is the most obvious win, especially as the pandemic puts a premium on one-stop shopping. The price of beer overall might also be slightly cheaper, depending on how a particular customer shops: An analysis conducted by the University of Denver’s Daniels College of Business before Colorado’s law was passed estimated grocery store sales of full-strength beer would save the average household $750 over three years.
For a drinker who actively seeks out the latest releases from small, local breweries, though, liquor stores are still the place to shop for those beers.
“A lot of liquor stores have shifted away from the macro beers because those are probably cheaper and easier to get at supermarkets. I’ve seen a shift towards wine and craft beer since that’s now where they’ve got the edge,” says Jonathan Shikes, a reporter covering beer and business for Westword.
If legalizing grocery store beer sales plays out similarly in Maryland, that would mean small breweries that don’t want to sell in those stores would deepen their relationships with independent liquor stores, while larger breweries would focus on chain sales. Maryland liquor stores would be incentivized to focus on small, local brands with in-store events and knowledgeable sales staff.
Overall, Shikes says, if Marylanders are looking to Colorado as a case study, they’re unlikely to find any radical changes to the beer market as a result of legal grocery store sales.
“It sort of died out as a thing people talked about after it came into effect,” he says. “It just became part of the landscape.”
Many Marylanders are hoping for a similar success story when their legislature convenes in January. Adam Borden, president of MBBWL, says his group has had “very fertile conversations of late” with legislators, and is hoping to shore up sponsors for the bill in the coming weeks and months. He says he hasn’t spoken to Maryland Governor Larry Hogan about it since five years ago, but suspects Hogan—nearing the end of his term in 2022 and suspected to be considering higher office—will be eager to close the state budget gap without raising taxes. This, Borden feels, bodes well for legalizing grocery sales of beer and wine in the state.
“When I see the thriving communities in other states that are earning the income and tax revenue, that are seeing the support for their local producers in so many more outlets, it makes me as a native-born Marylander sad that we are not enjoying the same benefits,” he says.
Words by Kate Bernot