Committee passes bill changing how Colorado grocery stores can sell alcohol

A Colorado House bill that would alter liquor licenses for mostly large grocery stores so that they can only sell beer and wine, not spirits, cleared the Business Affairs and Labor Committee on a 6-5 vote Thursday.

House Bill 1373 drew hours of testimony from both sides of the issue and a rally on the Capitol steps.

It comes just two years after Proposition 125, a 2022 ballot measure narrowly passed by voters that allows grocery and convenience stores to sell wine, which makes up the majority of sales in liquor stores.

The 30 stores that could be affected by the legislation are operated by Safeway, King Soopers, Costco, Walmart, Target and Sam's Club. All but one (in Grand Junction) are located along the Front Range. It would also affect five drug stores that are not grocery stores in Denver, Limon, Aspen, Oak Creek and Fort Collins.

The debate goes back to 2016, when the "Grand Compromise" was agreed on between small liquor stores and certain grocery and convenience stores, which were then threatening to go to the ballot to ask voters to allow the grocery stores to sell beer.

The compromise meant grocery stores that wanted to sell alcohol had to buy out any liquor licenses within 1,500 feet of the grocery store.

Proposition 125 changed that to 500 feet for the beer and wine-selling stores.

Owners of independent liquor stores and members of Colorado's craft beer and spirits industry from around the state gathered on the steps of the Capitol before the hearing to show support for the new legislation.

The rally was put on by Colorado Independent Liquor Stores United (CILSU), which represents over 1,500 stores throughout Colorado.

Bruce Dierking co-owns Hazel’s Beverage World, 1955 28th St. in Boulder, and said he is hopeful about the bill, saying he thinks “our elected officials are here to serve the people.”

In general, small liquor stores across the state are down about 30% to 50% on sales since beer and wine were allowed in grocery stores, Dierking said.

While his and other liquor stores are willing to compete with the large corporations, they want a level playing field, which is what the bill heard Thursday would help do, he said.

At his store, Dierking has seen lower foot traffic rates in the past year. Beer and wine sales have gone down, but their spirit sales have also gone down due to fewer people entering the store overall, he said.

“Big corporations use their national power to get competitive advantages,” he said. “We’re willing to compete, but we can’t compete with one arm tied behind our backs.”

Rep. Judy Amabile, who sponsored the bill, said the bill is vital to helping small businesses thrive.

“What I am interested in is making sure that we have a robust economy, and a big part of that is small businesses,” she said. “The vitality that they add is that they spend money that they make in your community.”

Meanwhile, opponents of HB 1373 claimed the measure would abolish the system set up under the compromise and create alcohol safety issues.

Chris Howes, president of the Colorado Retail Council, said the safety record for grocery stores is better than the safety record at liquor stores.

He also said the bill, if passed, would eliminate any future opportunity for small liquor store owners to be bought out by grocery stores.

Audrey Ramsden, representing the Wine and Spirits Wholesalers of America, said their organization opposes the bill, saying that the three-tier structure helps maintain health and safety, she said. 

"As a result, the U.S. has the safest and most diverse alcohol market in the world, largely because of the success of the three-tier system," she said.

Allowing unlimited amounts of alcohol purchases between retailers "opens the door for Colorado's largest retailers to exploit their market power and essentially act as distributors to smaller retailers but without the same regulatory safeguards like record keeping and traceability," Ramsden said. 

While opponents of HB 1373 argue that the bill would go against voter wishes and the grand compromise, small liquor stores argue that they didn't have the money to fight a ballot measure and instead agreed out of obligation to a phased-in approach for grocery stores to sell everything, according to several small liquor store business owners who testified Thursday.

By 2030, there will be no limitations on what a grocery or convenience store can sell, giving the liquor stores time to adjust to the market changes.

HB 1373 also addresses grocery store display practices, requiring beer and wine retailers to display their alcohol beverages in a single location, as well as prohibit those stores from selling alcohol beverages with greater than 14% alcohol by volume.

An amendment to the bill would make the alcohol limit for wine 17%, since many wines are higher alcohol content than 14%. It would not change the 14% limit on other alcohols.

Currently, some of the grocery stores temporarily display wine and beer in "end caps" — those shelves at the end of an aisle that may be shelved further from the actual alcohol section.

These "end cap" displays raise serious safety, theft, youth access and alcohol abuse concerns, according to the Colorado Independent Liquor Stores United.

The measure would also eliminate a limit on the amount of liquor a restaurant, for example, could buy from a liquor store.

Restaurants buy their alcohol wholesale, but sometimes run out and want to supplement their supplies from a liquor store, instead of waiting two weeks for a wholesaler to restock. Current state law caps the annual purchase limit at $2,000.

"Wine and beer in grocery stores are not going away," co-sponsor Rep. Naquetta Ricks said. 

If something doesn't happen in the next year to help the small liquor businesses, she said, the landscape of alcohol in Colorado will change to only large businesses. 

Colorado Rep. Chad Clifford said he was a 'yes' vote on the bill, saying he went to eight liquor stores near him and heard a unanimous agreement that they were struggling and needed the help of HB 1373.

Rep. Mike Lynch said the idea of the bill is good, but it would mean retailers would lose "millions of dollars" due to how quickly it changes the alcohol scene, meaning retailers would lose money in agreements and deals that have been made.

Colorado Politics reporter Marianne Goodland contributed to this report.