Case Study: Local Liquor Store’s Fighting A Sea Change

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There is a fascinating case study playing out for business geeks (and wine lovers) across the state of TN.

Should grocery stores be legally allowed to sell wine?

Thirty-three states currently allow wine sales in grocery stores.  In Tn., the sale of wine is prohibited in grocery stores, so if you’re a wine drinker, you’re forced to go to one of the 600 some odd packaged liquor stores across the state. Where there is money at stake, there is lobbying on both sides (grocers and packaged stores) to get laws passed that will either protect or enhance one’s bottom line.  The debates are fierce.

Interesting things happen in business when law changes present game-changing business scenarios.  When these scenarios play out there are often clear winners and losers.  Choices are made early on that determine the businesses survival, or profitable exit.  More often than not, time becomes the enemy as inertia (lack of decision or wrong decision) eats them alive.

Grocery stores have more to gain, packaged stores are on defense, thinking about their protected distribution channel now being put up for grabs and the thought of Deborah buying her Chardonnay next to the fish counter.

Sometimes businesses can’t control when external forces (government) put them on defense.  But when they are put there, they need to make 1 of 2 clear choices as soon as possible for playing defense effectively:

  1. Get consumed with the game changing issue (law change) and fight to PREVENT it from occurring.  In other words, prevent the future from changing.
  2. Accept that future change is not IF, but WHEN.  Then do 1 of 2 things.
    1. Exit the business if you can’t envision a profitable scenario, and do it fast.
    2. Get off your heels and figure out how to compete, Re-tool your business, get ready to compete since the big boys are coming.

Choosing 1 or 2 comes down to placing a bet if the future is likely to change or not, weighing the scales of both arguments.

Predicting the future sounds daunting, but is really just an educated guess and “weighing the scales.”  To do that, try the following:

  • List out all the stake-holders.  What different groups are involved?  
  • Ask yourself the following:  Will the proposed future change benefit or hurt the respective stakeholder?
  • Is there more $’s TODAY chasing the future proposed state or maintaining the current?  Will that be the case tomorrow, or will it shift?

You need to weigh the scales, for each stakeholder and judge which one wants the future to happen and which one does not.

Depending on which way the scale leans should usually HEAVILY influence you decision.  As it relates to this case, here’s how I see it.List out all the stake-holders.  What different groups are involved?  Where do the interests lie, changing the current or NOT changing or supporting a law change?

  • Consumers
    • Clearly, convenience is a driver and more choice and eliminating shopping trips, this law is a win for consumers.  No you may not have the variety, but if I have some basic choices, there is only a benefit.  In addition, more competition tends to lower price, so two benefits for consumers with the law change.Winner:  Change
  • Grocery Stores
    • A big category I can’t sell today and now I can compete?  No brainer.  In addition, it will likely increase complementary categories if merchandised well.
    • Winner:  Change
  • Liquor Store
    • No brainer, government controlled competitive barriers equal “buy here only.”
    • Winner:  Don’t Change, keep status quo
  • Distributors (Direct: Wine distributors)
    • Expanded points of distribution always equates to more sales.
    • Winner:  Change
    • Manufacturers (Direct, Wine Vineyards)
      • Expanded points of distribution always equates to more sales.
      • Winner:  Change
    • Indirect Manufacturers & Distributors (Potential benefactors of more distribution outlets of wine, cork screws, glass ware, other ancillary categories that get expanded etc)
      • Expanded points of distribution always equates to more sales.
      • Winner:  Change
    • Local Governments (tax revenue)
      • More sales $’s equals higher tax revenue
      • POSSIBLE concern over increased consumption, under-age drinking increase.  Possible.
      • Winner:  Change.  Hard $’s always trumps softer concerns.  
      • See legalized gambling growth, not long ago there used to be 2 states in the country with legalized gambling.  
    • Summary: 8 stakeholders, 7 would likely favor a law change.  
  • Is there more $’s TODAY chasing the future proposed state or maintaining the current?
    • This is hard to tell, if I were to take a guess I would say it’s about even.  The law has been bantered about for years, but seems to be mounting support.
    • Winner:  Neutral
  • Will that be the case tomorrow, or will it shift?
    • Hard to say.  But this is a fact.  Grocery stores in the aggregate, TRUMP the interests of those that are supporting the law. It’s not even close.  Who sells more $’s, a grocery store, with nearly every category in packaged goods or a packaged store?  If they went after this in a bigger way, they can simply out-spend the current interests.
    • Winner:  Grocery Stores

The scales clearly tip in the direction of a law change.

If I owned a Liquor store I would put ZERO energy in fighting this legislation. ZERO.  I would put 100% of my energy preparing for the inevitable day when I have a 75,000 square foot store selling the same category I’ve been insulated on.  And if I couldn’t build a winnable plan, I’d be preparing for an exit.

How is it playing out?  Not research based, but doing a simple internet search on the issue, the overwhelming information says that the 600 packaged stores are clearly focused on #1, preventing a likely future from happening.  Even some well-known stores with great followings, as you’ll see in this video.

http://www.wmctv.com/story/23076993/group-in-favor-of-selling-wine-in-grocery-stores-kicks-off-new-campaign

Sea Changes, and the disruptions they create among industries are common.  It is also common to fight them, as is happening before our eyes in the marketing community and social media adoption among the Fortune 500.

Liquor stores in the state of Tn. are no different.  They have and will continue to fight this law, in hopes of maintaining the balance (or lack of) competition they have enjoyed.  Business as usual will continue for the majority vs. accepting the future that is inevitable.

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