Maryland Considering Expansion of Beer and Wine Licenses to Retail Grocery Stores

By Emma Craig
3/16/2021

Many consumers wonder why they may purchase beer and wine from grocery stores in other states but cannot do so in Maryland. Currently, 47 states and the District of Columbia allow grocery stores to sell beer while 40 states and the District of Columbia allow them to sell wine. According to one report, 98% of Americans can buy beer and 85% can purchase wine in grocery stores.

Grocery stores in Maryland may soon be able to sell beer and wine to consumers. During this 2021 Session, the Maryland General Assembly is considering a Bill, “Alcoholic Beverages – Class A Licenses – Retail Grocery Establishments (the Health Food Accountability Act of 2021)" (House Bill 996 and Senate Bill 763), which would allow retail grocery stores to hold beer or beer and wine licenses.

Currently, alcohol distribution in Maryland is constrained by a 1978 law that prohibits grocery and other stores from obtaining alcohol licenses, with some exceptions. Under the current Maryland Alcoholic Beverages Code, a local liquor board may not issue a beer, wine, or liquor license to a chain store, a supermarket, or a discount house. However, establishments that held a beer, wine, or liquor license prior to the enactment of this law were exempted from this prohibition, allowing a few retail grocers in Maryland to sell beer and wine to consumers. For example, three grocery stores in Montgomery County may sell beer and wine because they were licensed to do so before the law changed.

Under the proposed legislation, a local liquor board would be empowered to issue beer and wine licenses to retail grocers that carries at least six of the seven following items: fresh produce, fresh meat, dairy products, canned foods, frozen foods, dry goods, and nonalcoholic beverages. Additionally, the legislation would require a local liquor board to issue a beer and/or wine license to such establishments that are located in priority funding areas, which includes municipalities, areas inside the Washington and Baltimore Beltways, and areas designated as enterprise zones, neighborhood revitalization areas, heritage areas, and existing industrial land.

In a committee hearing on House Bill 996, Delegate Lily Qi, who is sponsoring the legislation, explained that the bill was intended to address food insecurities in the State, based on priority funding areas. Grocery stores operate on thin profit margins due to high competition in the industry, which keeps supermarkets from entering remote rural regions and dense urban areas because of heavy reliance on government subsidy programs. Delegate Qi believes that the bill would encourage grocers to move into these food insecure areas to offer fresh food options by allowing them to improve their profit margins by offering beer and wine to consumers.

In addition to addressing food insecurity, the proposed legislation would satisfy consumer wishes. Data from a poll released by Marylanders for Better Beer and Wine Laws (“MBBWL”) indicates that Marylanders favor allowing chain stores to sell alcohol by a 2-1 ratio. The poll found that 71% of Marylanders approve of beer sales in grocery stores and 73% support wine sales in grocery stores. While only 56% of Marylanders think grocery stores should be able to sell liquor, this is comparable to the 52% of Marylanders that favored legalization of table gaming, which was legalized in Maryland in 2012, and the 57% that support legalization of recreational marijuana, which is also being considered this legislative session.

While consumers are largely receptive to the expansion of liquor licenses to grocery stores, specific interest groups are avidly in favor of or opposed to the legislation. MBBWL and the Maryland Retailers Association (MRA) are vocally supportive of the legislation. Supporters offer a number of justifications for the expansion. First, they claim that the legislation will help balance Maryland’s budget, which is especially salient during concerns over the pandemic’s impact on the State budget. MBBWL estimates that the expansion can generate $200 million in economic benefit to the State. A prior 2012 study had also projected that the expansion would generate significant economic gain for the State, almost $100 million in economic benefit and an additional 500 jobs. Supporters also argue that the expansion would be more convenient for consumers and would improve choice and cost. Consumers would be able to make one stop for beer, wine, and groceries, which is attractive given contact dangers with the coronavirus. Additionally, expanding suppliers will offer more choices to consumers and could drive down costs. MBBWL projects that a popular bottle of wine at a chain store would be 33% less than the price at an independent liquor store in the State.

Those opposing the legislation largely argue that the expansion would harm independent liquor store owners, many of which are small business owners. The same 2012 study that MBBWL relied on years ago projected that liquor stores would lose $13,624 in beer sales revenue and $3,489 in revenue from wine sales. This year, the Fiscal and Policy Note for House Bill 996 noted that while “[s]mall business grocery stores and convenience stores are likely to benefit meaningfully from the authority to sell alcoholic beverages[,] . . . small businesses that are licensed to sell alcoholic beverages under current law are likely to lose business as grocery stores and convenience stores begin to sell alcoholic beverages as well.” The Distilled Spirits Council of the United States has testified on other states’ legislation that allowing grocery stores to sell wine would put independent stores out of business and threaten local jobs because foot traffic to those small independent liquor stores would be reduced. In testimony to the Maryland General Assembly, it also noted that after Tennessee made a similar change in 2016, sales for independent stores went down roughly 9% and the state lost $3.6 million in tax revenue.

In addition, some opponents dispute that the expansion of licenses would benefit Maryland given that most chain grocery stores are out-of-state entities, whereas independent liquor stores in the State are locally owned. (For example, states can sometimes miss out on taxes from businesses that benefit from tax shelters in other states.) Opponents also question that the expansion would increase jobs in the State, doubting that the grocers would need to hire additional staff to handle the product. The expansion could also impact other industries in addition to liquor stores. For instance, liquor stores may end up selling less spirits and local craft beer and wine due to less foot traffic if consumers choose to purchase their beer and wine from bigger chain stores. Since those stores could not offer liquor and may not offer as varied a selection of local beer and wine, distilleries and local craft breweries and wineries could experience fewer sales of their product.

MBBWL disputes these opponents’ arguments that the expansion of licenses would hurt small liquor stores or negatively impact State revenue. For instance, MBBWL points out that only one small liquor store went out of business in Oklahoma in 2018 while the alcohol regulatory authority issued thousands more licenses. They also point to Massachusetts, which saw an increase of $16.9 million in economic activity and an additional 150 jobs after expanding beer and wine licenses to grocery stores.

While both sides present persuasive arguments and data, those arguments should be analyzed critically as each side is promoting its own interests and is not entirely neutral. For instance, some have criticized Maryland’s prohibition against grocery stores selling alcohol as an intrusion into consumers’ “freedom to purchase beverage alcohol.” However, a state has the power to regulate alcohol in a way that serves the interests of its citizens, without overtly contradicting the federal government’s commercial interests. That power is often delegated to local jurisdictions to best serve the localized needs of their constituents. So, while the regulation might be inconvenient to consumers, it is something the State may maintain for the health and benefit of the State.

With conflicting arguments and data, the General Assembly will have to weigh the proposals and consider any resulting benefit and harm to the State. The interests the General Assembly has to balance are important. On one hand, the data clearly indicates that consumers support the availability of beer and wine in retail grocery stores. On the other hand, small businesses, including independent liquor stores, support Maryland’s economy and could be hurt by the alcohol license expansion. To address this latter concern, the General Assembly could consider geographic protective measures to protect current liquor stores from stifling chain store competition. Aside from consumer convenience, both sides dispute the economic impact for the State, with both presenting conflicting case studies. If Maryland chooses to expand these licenses, it needs to ensure it can effectively capture economic revenue, especially from out-of-state chain corporations, through licensing and taxes.

In short, the General Assembly must weigh the interests of constituent consumers, local business owners, the State budget, and the likelihood that the bill will improve food deserts when deciding whether to allow retail grocers to sell beer and wine in the State.

The General Assembly session will end on April 12, 2021. You can follow the legislation on mgaleg.maryland.gov by searching for HB 996 and SB 763.