Full-strength beer in grocery stores did not hurt craft beer industry

DENVER – Just how much will expanding wine sales to big name brand grocers and convenience stores hurt mom-and-pop liquor stores in Colorado? Only time will tell, but a recent study out of Colorado State University found the sale of full-strength beer in grocery stores that began in 2019 caused minimal harm to the craft beer industry and had minimal impact on liquor stores across the state.

The study, which surveyed 76 Colorado craft breweries on things like total production, packaging practices, distribution strategies and volume sold by market channel in 2017 and then again late 2019 – nearly a full year after then Gov. John Hickenlooper signed the measure into law – found that full-strength beer sales “did not appear to have harmed the regional competitiveness of the craft beer industry, but neither has it produced visible benefits.”

Using cell phone tracking data to analyze liquor store traffic, researchers found a 5% decrease in foot traffic in liquor stores, “which all things considered, wasn’t gigantic,” said Marco Costanigro, a professor of agricultural and resource economics at CSU and one of the study’s co-authors.

Researchers do note, however, that there’s no evidence from their study that this reduction in foot traffic corresponded with a reduction in sales.

The study showed the sale of full-strength beer in grocery stores mainly benefitted larger craft breweries and macro-brands, but the growth of regional craft brands was counterbalanced by a decline in liquor store sales, which Costanigro said was more pronounced in rural markets where consumers tend to buy beer from national rather than regional brands, according to Allison Sylte, who summarized the findings of the study for the CSU College of Business.

The study also found that small breweries had a hard time getting on grocery store shelves due to the high costs of insurance and requests to distribute to a minimum number of stores, which created logistical barriers that many of those small businesses weren’t equipped to handle, Sylte wrote.

Those challenges made it easier for those smaller breweries to partner with smaller liquor stores that had fewer logistical challenges to get through in terms of distribution, according to study co-author Joe Cannon, a professor of marketing a CSU.

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A second recent study by CSU’s Regional Economic Development Institute (REDI), which compared data from Oklahoma and how much a law passed there had an impact on foot traffic once beer and wine sales expanded to grocery stores, found that foot traffic decreased by 7% and 9% at urban liquor and rural liquor stores, respectively.

So what does that mean for Colorado liquor stores now that wine sales are expanding outside of those confines?

“I think the sale of wine in grocery stores will further erode the share of liquor store sales that happen in liquor stores,” Cannon said. “However, we’ve seen some smaller liquor stores respond by stocking a greater variety of craft beer, which in turn helps those small brewers.”

But Cannon and Costanigro agreed – in order to survive this expansion, mom-and-pop liquor stores will need to specialize in offering more niche products to consumers if they hope to remain in business.

“What you need to do is provide products and wines that are a little bit more intended for the more involved consumer, somebody that spent some time searching for specific types of wines from specific regions,” Costanigro told Denver7 Tuesday. “The liquor stores will have to provide something different from the grocery stores in order to survive; it’s going to be a competitive pressure for them to try to do that because they’re going to have a hard time following them [grocery stores] on price.”