To say that the Massachusetts beverage alcohol retail landscape has changed in the last decade would be an understatement. Out of some 3,000 off-premise licenses, only about 1,800—or 60%—are now owned by independent operators, with the remainder held by the likes of supermarket chains or national corporate retailers. Since 2019, more than 600 licenses held by independents have been transferred to new owners, largely corporate operators. And with the chains continuing their efforts to loosen cap restrictions and control a larger share of the business, traditional package store operators in the Bay State are fighting back.
Steve Rubin, owner of Huntington Wine & Spirits in Boston, says that if legislative efforts to decontrol liquor license caps and other requirements are successful, locally owned package stores will go the way of independent drug and hardware stores. “Consumers don’t want that,” says Rubin, a second-generation liquor store owner. Moreover, Rubin and other package store operators say Massachusetts could serve as the proving ground for similar attempts to change regulations in other states.
In an effort to hold back continued inroads into the business by large retailers, the Massachusetts Package Store Association (MPSA) filed a ballot initiative last year to revise existing state law on off-premise licensing limits and other related matters. The 21st Century Alcohol Retail Reform ballot initiative—expected to go before Massachusetts voters in November—would increase the number of licenses a single company can hold to 12 starting next year, and to 15 in 2027, and 18 beginning in 2031. But only up to seven of those licenses would allow for full beverage alcohol sales, while the remainder could be for beer and wine. Under current Massachusetts law, an individual or corporate entity is limited to nine full beverage alcohol licenses. The ballot initiative provides that any licensee with nine all-liquor licenses would be grandfathered.
Olive Branch
Rob Mellion, executive director of MPSA, calls the ballot initiative, which increases the total number of licenses a company can hold, “an olive branch to food retailers.” While at press time, the Massachusetts legislature hadn’t introduced the customary bill that replicates the ballot initiative—a move that Mellion and others say isn’t likely to proceed—the MPSA was preparing to secure an additional 12,000 or so signatures this spring to certify the measure on the November ballot.
Mellion points to the 2019 Supreme Court decision that ruled against state protectionism and the Covid-19 pandemic as catalysts for the challenges his members are now facing. The High Court’s decision in the Tennessee Wine & Spirits Retailers Association case, which deemed it unconstitutional for Tennessee to require residency status for retail liquor applicants, “created a springboard for a bunch of bills aimed at vertical integration, direct consumer shipping, and marketplace control,” Mellion says. The pandemic, meanwhile, “created a make-it or break-it opportunity for a lot of disruption,” he continues, including the ability for various industry members to sell drinks to go. In addition to license caps, the MPSA-backed initiative seeks to ban self-checkout of beverage alcohol, stiffer fines on retailers for selling beverage alcohol to minors, and the ability for all licens- ees to rely on identification from another state as a reasonable defense against allegations of sales to a minor.
The ballot initiative was filed last summer in the aftermath of an onslaught of bills—many of which would adversely impact package store operators—that was introduced by state lawmakers (Massachusetts is in the second year of a two-year legislative session). Mellion says that at the start of 2021, the association faced 150 measures that could affect the future of member companies, and by the end of the year the number was pushing 200. He participated in more than 25 hearings last year and this January the association provided testimony before a joint committee on H318 and H414, bills which would either increase the number of licenses per individual or corporation or eliminate caps entirely.
Decade of Change
While the past year has seen unprecedented activity in the state legislature pertaining to the interests of package store operators, the last decade has been marked by big changes, including the entry and expansion of major retailers into the marketplace. In 2011, the MPSA and the Massachusetts Food Association (MFA), which represents independent and chain groceries, agreed to endorse a measure that increased the cap on full licenses from three to nine. But according to Mellion, who joined the association in 2018, “a lot of hard lessons were learned from that experience, which we were forced into. We didn’t have the means for an alternative action that would have preserved our interests. Going to nine licenses has been great for out-of-state interests and very good for the supplying tiers, but it’s been horrible for our members. It’s resulted in consolidation and a repositioning of the retail industry at the expense of independent retailers.” He points to the expansion of businesses like GoPuff, Target, and Total Wine & More in the state in recent years, and says, “it’s changing the industry.”
Further disruption arose in 2020 when convenience store chain Cumberland Farms filed a ballot initiative that sought to ultimately remove all caps on liquor licenses in the state, as well as the emergence of the Covid-19 pandemic and temporary measures allowing for drinks to go. Cumberland Farms withdrew the initiative, but its language is included in H318, while the drinks-to-go battle rages on, with restaurants permitted to sell alcoholic drinks for takeout until May 1.
While package store operators first supported the ability of restaurants to sell cocktails to go in the early days of the pandemic, they object to its usage today. “Cocktails-to-go has morphed into drinks-to-go, in that a brewery in the state can sell a case of beer and a bag of potato chips,” says Ryan Maloney, owner of Julio’s Liquors in Westborough, and MPSA president. He’s concerned that an extension of the waiver may lead to to-go sales of packaged RTD cocktails and “a mixer and a nip. “That’s not what the measure was designed for,” he adds.
Similarly, Ben Weiner, founder of the four-unit Sav-Mor package store chain, says, “I’m not against a restaurant delivering a couple of beers, but I am when it comes to distilleries selling direct.” Mellion adds that due to a loosening of regulations since the pandemic began, “the producer tier sees an opportunity for direct-to-consumer shipping. They’re using this as their window, as a tool to make gains where they haven’t been able to do so in the past.”
According to John Bodnovich, executive director of American Beverage Licensees (ABL), while a handful of other states have gone through similar challenges to license limits over the past decade, “the situation in Massachusetts has been notable. Most states, including control states, regulate the number of retail licenses that can be held by an individual entity, so it wouldn’t be abnormal or unprecedented for Massachusetts to maintain a limit.” Mellion adds that the Bay State is a “big marketplace for alcohol,” which makes it attractive to outsiders. “There’s a lot of money to be made here. If you can change the system in Massachusetts, you can change it anywhere,” he says. Huntington’s Rubin, meanwhile, believes that the availability of shuttered big box stores such as Office Depot has made Massachusetts an attractive market for out-of-state players. “They can get some great deals on real estate, along with tax breaks,” the retailer notes.
Investment in the Future
To defend itself, the MPSA and its members have been lobbying, fundraising, and communicating with consumers about the role the businesses play in local communities. According to Mellion, an outside company helped obtain the necessary signatures for the ballot initiative. At Huntington Wine & Spirits, Rubin says he reminds customers about the special services his staff provides— gestures out-of-state retailers typically don’t—such as free local delivery and price matching.
Massachusetts package store operators say the battle to protect their future is worth the high cost, but they express disappointment that they haven’t received much support from other industry members. They particularly question the perceived neutral position of the state’s wholesalers at a time when suppliers are seeking greater opportunities to sell direct. A representative for the Wine & Spirits Wholesalers of Massachusetts didn’t respond to a request for comment.
For its part, the MFA, whose members include chains such as Whole Foods, Aldi, Trader Joe’s, and Wegman’s, takes issue with the ballot initiative’s reduction in full licenses. “We surveyed our membership and they all said they wanted full-service licenses,” says Brian Houghton, senior vice president of government affairs and communications at the MFA. “Supermarkets are full-service businesses. Liquor stores now sell food, so why shouldn’t supermarkets be allowed to sell liquor?” Total Wine & More, which currently operates six stores in Massachusetts, is also opposed to the initiative. Edward Cooper, vice president of public affairs and community relations at the company, says the 2011 measure “laid out a graduated structure that allowed package store licensees in the commonwealth to expand the number of licenses they may hold and determine how they could best grow their businesses.” The ballot initiative “would seek to submarine that legislative intent with a new scheme that gives advan- tages to certain retailers over others,” Cooper continues.
Drinks industry members say the debate underway in Massachusetts could easily expand to other states. “We anticipate there will continue to be a push to deregulate state alcohol markets by those who are interested in expanded access, instead of the existing orderly alcohol marketplace that continues to create record profits for manufacturers, delivers reliable tax revenues to fund important state programs, and meets the needs of consumers,” says Bodnovich at the ABL. He encourages retailers in other states to work with their state retail associations to educate legislators, regulators, and the public on how the current systems “promote competition amongst retailers large and small, and why that ultimately benefits the consumer.”
Julio’s Maloney adds that while package store operators in Massachusetts remain fierce competitors, they’re aligned on supporting the ballot initiative and defending their businesses. “It’s important to look at the big picture,” he advises other retailers. “We’ve banded together for our future. There’s strength in unity.”