New Jersey’s beverage alcohol retail landscape appears poised for significant change. A 1962 state law limiting corporate entities to two liquor licenses statewide is in the political crosshairs. The issue, which has been festering for years, is back in the political arena for another round of hearings, debate, and legislation.
New Jersey State Assemblyman Joe Danielsen, chairman of the Oversight, Reform, and Federal Relations Committee, is holding hearings on the state laws that govern the retailing of beverage alcohol. “Some of our laws aren’t as competitive as those of other states,” says Wayne Dibofsky, Danielsen’s chief of staff. “We are going to see if we can fashion some changes.”
Danielsen’s second hearing is planned for May 13, possibly followed by a third, if necessary. While any potential legislation would not be passed until after the November elections, the issue remains pressing. Participants in the first hearing, held March 21, included the New Jersey Retailers for Responsible Liquor Licensing Coalition, the New Jersey Restaurant Hospitality Association, the New Jersey Gasoline-Convenience-Automotive Association, and the Beer Wholesalers Association of New Jersey. The May hearing will include the New Jersey Wine and Spirits Wholesalers Association, the New Jersey Liquor Store Alliance, the New Jersey Licensed Beverage Association, and the Brewers Guild of New Jersey.
A.J. Sabath, executive director at New Jersey Retailers for Responsible Liquor Licensing Coalition, is an advocate for a bill (A-1278/S-2282) that would gradually increase the number of liquor licenses a grocery store can own to ten after ten years in business. These changes, however, face opposition from such organizations as the Beer Wholesalers Association of New Jersey, which says that expanding the number of licensed retail liquor stores could lead to job losses for distributors.
Conditions in Massachusetts, however, tell a different story. Until 2012, Massachusetts businesses were permitted to own up to three liquor licenses. The new law—which was actually based on idle New Jersey legislation—passed in 2011 and was enacted January 1, 2012. It allows entities to gradually phase in more liquor licenses, with the maximum for one entity being nine by 2020. A study by the Massachusetts Alcoholic Beverages Control Commission from June 2015 to June 2018 found that the law increased tax revenues and jobs without negatively impacting smaller liquor stores.
An estimated 1,200 dormant liquor licenses throughout New Jersey are also at stake because of a lack of demand. If the two-license cap gets lifted, grocery chains are expected to acquire some of these licenses, so no new licenses would be issued. “There are more than enough licenses out there,” Sabath says, noting that municipalities can have one retail liquor license per 7,500 residents.
Depending on location, a New Jersey liquor license price is estimated to range from $50,000-$1 million. Under the 1962 liquor licensing law, grocery chain A&P had 21 liquor licenses that grandfathered in. Many A&P stores in New Jersey were purchased in a bankruptcy sale beginning in 2015 and reopened as Acme or Stop & Shop stores without beverage alcohol departments, because Acme and Stop & Shop already each own and operate two liquor licenses in New Jersey.
Meanwhile, large liquor store chains in New Jersey such as Buy Rite Liquors (more than 50 stores), Spirits Unlimited (22 stores), Bottle King (14 stores), and Joe Canal’s Discount Liquor Outlet (11 stores) have worked around the two-license limit because LLC, consortium, and franchise business structures allow multiple individuals to own different stores under the same name. A person can purchase up to two liquor licenses and have management agreements with a particular chain or franchise, or multiple members of a family can each purchase two licenses and operate their own chain. Publicly traded corporate entities are viewed as one entity, however, and as such are strictly limited to two liquor licenses. Along with the New Jersey Beer Wholesalers Association, entities such as the NJ Liquor Store Alliance have voiced opposition to expanding license caps, saying the change could cause smaller stores to lose business and force them to close.
A March 2017 decision in South Carolina could also affect New Jersey’s beverage alcohol retailing future. The state’s Supreme Court ruled that a law preventing an entity from holding an interest in more than three off-premise liquor licenses was unconstitutional because it provided “economic protection for existing retail liquor store owners.” The ruling stated that “the three-store limit unfairly treats large retailers differently from small retailers.”
Ultimately, Sabath is hopeful about reaching a compromise in the Garden State. “Negotiations with those who support the two-license limit are ongoing,” Sabath says. “We believe that in time, New Jersey’s grocery stores will also be able to provide beverage alcohol to consumers, and we’re open-minded about how we get to that point.”