Golden Goose Victor in Today's Wine in Grocery Battle in Tennessee

Golden Goose Victor in Today's Wine in Grocery Battle in Tennessee

January 28, 2014  was an historic day for wine in groceries in Tennessee.  As we blogged earlier today, a revamped wine in grocery bill was introduced in a key House Committee.  It cleared the committee - a major step forward for passage of the law.

It is a time-honored tradition to kill legislation in committee.  Failing to be approved by committees has been the final resting ground for wine in groceries in years past.

Calls to mind a classic Johnny Cash song:

But Gabriel, don't you blow your trumpet
Until you hear from me
There ain't no grave
Can hold my body down

A copy of the full amendment is here.  Tayo Atanda from our liquor team has a fairly short summary at Wine.  The Knoxville News Sentinel has a more-detailed summary of the 29 page bill here.

The amendment is choked full of huge changes for the liquor industry. Pharmacies and convenience stores will not qualify for licenses because of the 20% food requirement. Existing retail liquor stores will be able to sell beer and lots of other items. Groceries will not be able to sell wine until July 1, 2016.

Industry insiders expected many of these terms. But the Golden Goose won today's battle, in our humble opinion.

Tennessee wholesalers' biggest objection with wine in groceries was that industry giants like Wal-Mart, Kroger and Costco could negotiate volume discounts that would dramatically reduce profit margins. Kroger could say, we will carry Yellow Tail in all Kroger stores, but only if the wholesaler sold it at a very favorable price.  If the wholesaler failed to cut profit margins to meet the demands of the giant, the giant could easily not stock Yellow Tail.

Currently, wholesalers only have to negotiate with one individual liquor store.  Tennessee liquor stores cannot combine orders among multiple stores.

Tennessee liquor laws that favor wholesalers make wholesalers very valuable locally-owned "small businesses."  Although sales prices are not disclosed in ABC approvals of sales of wholesalers, we have heard that a successful wholesaler can fetch a price in excess of 100 million dollars.  If retail giants could reduce profit margins, the value of a wholesaler could be reduced by tens of millions of dollars.

The wine bill introduced today specifically provides that groceries cannot get discounts based on the purchasing power of all of the stores in Tennessee.  Each grocery can only get the same volume discount that is offered to liquor stores.  Meaning that although Kroger may buy thousands of cases of Yellow Tail among all its stores in Tennessee, it can only get a discount based on per store purchases.

Wholesalers offer discounts for large orders, but with the one grocery store limitation, Kroger and other giants will only qualify for volume discounts enjoyed by liquor superstores like Frugal McDougal in Nashville, Buster's in Memphis, Bob's Package Store in Knoxville and Jax Liquors in Chattanooga.

For longer than most folks can remember, the lobbyist for the Tennessee wholesaler association has been Tom Hensley, who earned the nickname The Golden Goose. Veteran reporter Tom Humphrey has a terrific story about The Golden Goose here.

Today, we crown The Golden Goose the victor of the wine in grocery battle. After staunchly opposing wine in groceries for years, he managed to give the wholesalers almost unimaginable bargaining power with the giants they feared.  The Goose certainly earned his fee and reaffirmed his reputation.

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