Alcohol Sales to be Allowed in Grocery Stores

Alcohol Sales to be Allowed in Grocery Stores
01 Jul 2016

Grocery store chains in Colorado will soon be able to add new store locations that sell liquor, wine and full-strength beer. However, in order to do so, grocers will have to buy up all liquor store licenses within 1,500 feet of the proposed location (or within 3,000 feet in smaller jurisdictions with less than 10,000 people). So, what does this mean if you’re trying to get or keep a liquor license in this situation? Ireland Stapleton regulatory attorney John Jennings explains:

In this last legislative session, Governor John Hickenlooper signed a bill allowing grocery stores and drug store chains to expand their sales of liquor, wine and full-strength beer beginning January 1, 2017. Senate Bill 197, which commentators are calling the biggest change to Colorado’s liquor laws since Prohibition, creates a new phased-in liquor licensing system for grocers and major retailers. Under current law, grocery store and drug store chains can only sell liquor, wine and full-strength beer at one designated location in the state. All other chain locations statewide are limited to 3.2% beer sales. The Bill also separately eliminates Colorado’s 3.2% beer category effective January 1, 2019, however, allowing licensed grocers and convenience stores to sell full-strength beer in the future.

Under the Bill, grocery store chains must follow a new application process for additional liquor, wine and full-strength beer licenses that includes: (1) a transfer of ownership of at least two existing liquor stores that meet certain requirements, (2) a change of location of one of those liquor store licenses, and (3) a merger and conversion of the liquor store licenses into a new single license for the grocery store (a “liquor-licensed drugstore license” in Colorado Liquor Code terminology).

If any existing liquor stores are located within 1,500 feet of the grocery store in municipalities with a population greater than 10,000, or within 3,000 feet in municipalities with a population of 10,000 or less, the grocer must purchase each of those liquor store licenses. As part of the application process, a grocery store will likely go through the traditional “needs and desires” public hearing process to obtain the new license. To receive approval from the local municipality, the grocery store must prove that there is a need and a desire for the new license in the neighborhood on the part of residents and business owners or managers. Grocers must also obtain a manager’s permit for one employee who will be in control of on-site alcohol beverage operations. The Bill includes legislative encouragement for the manager to purchase and promote products from Colorado’s local breweries, wineries and distilleries.

Finally, the Bill establishes a phased-in structure for the number of liquor, wine and full-strength beer licenses that grocery stores can obtain. By 2022, grocers can hold a total of five licenses; by 2027, a total of eight licenses; by 2032, a total of thirteen licenses; by 2037, a total of twenty licenses; and after 2037, an unlimited number of licenses.

For Colorado’s independent liquor stores, the Bill presents both challenges and opportunities. Effective July 1, 2016, a new liquor store license cannot be issued within 1,500 feet of another liquor store or a liquor-licensed drugstore (or within 3,000 feet in smaller jurisdictions with less than 10,000 people). On the other hand, liquor stores may now move to a new location anywhere in the state, where previously such a move could only occur within the same municipality where the license was originally granted. Further, a liquor store owner will now be allowed to own multiple stores under a phased-in process, where ownership was previously limited to only one liquor store license in Colorado. With the establishment of the grocery store licensing structure described above, liquor stores will face increased competition but will enjoy a level of protection with the distance setbacks and license purchase requirements.

After similar legislative efforts failed in recent years, Senate Bill 197 represents a significant compromise for the interests of grocery stores, drug store retailers, convenience stores and independently owned liquor stores. The Bill will have immediate practical effects on the state’s liquor licensing landscape beginning on July 1, 2016. With its long-term implementation, the impact on competition and regulation of Colorado’s alcohol beverage industry will develop over the next several decades.

For more information on how to obtain or protect your liquor license, contact John Jennings at jjennings@irelandstapleton.com or 303-628-3636.

What is written here is intended as general information, and is not to be construed as legal advice. If legal advice is needed, you should consult an attorney.


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