March 31, 2013

Bill creating spirited debate over SC’s retail liquor law

When he retired, Ed Andino invested his savings from his Army career into a small liquor store at a shopping center on Forest Drive.

When he retired, Ed Andino invested his savings from his Army career into a small liquor store at a shopping center on Forest Drive.

Andino and his wife put a lot of thought into what type of business they wanted to own, and when they finally chose to open a liquor store in 2011, they picked East Forest Plaza because it appeared insulated from competition.

“Sam’s can’t open another liquor store,” Andino said. “There’s no place for Costco to build here. There’s no way for Total Wine to come over here and build.”

Now, Andino believes his livelihood is threatened by a bill that would allow businesses to hold seven retail liquor permits in the state instead of three, the maximum currently allowed under South Carolina law. The bill, sponsored by Sen. Chauncey Gregory, R-Lancaster, and Sen. Brad Hutto, D-Orangeburg, is working its way through the Senate Judiciary Committee.

It has created a spirited debate about marketplace competition between mom-and-pop liquor store owners and Total Wine, a major retailer with three stores in South Carolina. A representative of Costco, a discount membership chain, has said his company also supports the bill.

Two independent retailers along the Grand Strand fear that the opening of just one of the chain liquor stores locally would hurt all the smaller retailers.

“It’s going to put a lot of your smaller retailers out of business,” said David Owens, owner of Owens Liquors on N. Kings Highway.

Owens likened the chain liquor retailers to other big box stores and said there is no way independents can compete with the lower prices of an outfit like Total Wine. In addition, said Seymour Port, general manager of Pavillion Discount Beverages in North Myrtle Beach, the chains, like some big box and chain grocery stores, have their own brands of liquor that they sell at an even greater discount than their other stock.

The encourage customers to try the house brand, and Port said that alone will cause some people to shop the chain just to get that brand.

Owens said he has talked with Sen. Luke Rankin, R-Myrtle Beach, and has calls into the rest of Horry County’s legislative delegation. Port said he’s emailed all of them.

Owens was surprised that Rankin seemed to know little about the bill, but he said Rankin told him he would research it and see what effect Total Wine has had on local liquor stores in other states where it operates.

Port said the company he works for also has a store in Murrells Inlet. Between the two, there are 10 employees, and Port estimates that at least three of them would have to go if the businesses faced competition from a chain.

Owens worried that he as well as other independent liquor stores would close their doors from the onslaught. If it happened to him, he said that area charities would lose the $10,000 to $15,000 he contributes to them each year.

Port said area governments would lose liquor tax revenue because the chains sell at a discount that would ring up less taxes. Owens said a chain like Total Wine would take its profits out of state whereas the independents spend it where they make it.

Port said he’s talked with many of the state’s 900 liquor retailers and has found none who disagree with him.

“It’s a terrible bit of legislation,” he said. “If we had wanted the law changed, we would have done it ourselves.”

The bill’s critics say that if Total Wine were allowed to open more liquor stores, it would drive the little stores out of business.

“It would be what Home Depot did to the neighborhood hardware store,” said John Kelsey, president of the ABC Stores of South Carolina, a trade group that represents the state’s liquor stores.

But David Trone, president of the Potomac, Md.-based Total Wine, said the bill would benefit consumers by providing a larger selection, lower prices and great customer service to people who buy whiskey, vodka, tequila and other liquor products.

“Frankly, the limit is protectionism, and protectionism is bad,” Trone said. “Competition is good.”

Liquor retailers filled a Senate subcommittee hearing two weeks ago, leaving more than a dozen people to stand in the hallway because the meeting room was at capacity. The audience cheered and jeered as the bill’s merits were debated during public testimony. At least once, a security officer had to order the crowd to be quiet.

Total Wine’s Trone said it is unfair for the state to limit competition in one industry. Groceries, clothing stores and other types of retailers don’t have state laws that aim to protect one business from another, he said.

Total Wine is pushing the bill, Trone said.

The company has a South Carolina lobbyist, and Trone and Total Wine are regular contributors to political campaigns in the state. In 2012, Trone donated $1,000 each to Gregory and Hutto, the bill’s sponsors.

If the bill passes, Trone said Total Wine would open second stores in Columbia and Greenville, one in Mount Pleasant and one in Myrtle Beach.

“The competition doesn’t want to compete with me and other people who want to offer lower prices and great selection,” he said.

Trone, a Furman University graduate, started Total Wine in 1991 when he opened his first liquor store in Delaware. He said he saved money and opened a second store that his brother managed. Together, they built the company into a retail giant that has 90 stores in 15 states.

“They can’t say the bigger company puts them at a competitive disadvantage,” Trone said. “I was that mom-and-pop outfit that built a better mousetrap.”

But Andino said there is no way he could compete. In the liquor business, everything revolves around volume. The more you buy, the bigger the discount. And there’s no way he could buy the same amount as Total Wine and in turn receive the same discounts.

“They have the budget to invest in one product what I have invested in my entire inventory,” Andino said.

He cited the pricing on a 750 ml bottle of Crown Royal as an example. He can buy 15 cases of the popular Canadian whiskey for $270 each, so he pays $22.50 per bottle. His distributor recommends at least a 20 percent markup, which means he would sell a bottle for $27.

On Friday, he checked Total Wine’s website and found the same 750 ml bottle of Crown Royal for $17.99.

“How can they sell it for $4.50 below cost?” Andino said. “The Senate doesn’t see that.”

Kelsey, of the ABC Stores association, said legislators need to pay attention to the small businesses that make up the backbone of the state’s economy.

“If Total Wine comes in, the profits will go to Maryland,” he said. “What’s the benefit to the people of South Carolina? They can buy liquor cheaper at a big store or they can buy liquor from a locally owned store.”

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