Why mom-and-pop liquor stores say they're doomed if Total Wine & More comes to Oklahoma
If Total Wine & More, a growing national liquor store chain, comes to Oklahoma, it will have to barge its way in because it's been barred and the state has bouncers at the doors.
State officials are bound by law to limit liquor store ownership to individual people who live in Oklahoma, not companies, whether based here or out of state. The law has protected mom-and-pop bottle shops for decades.
Those moms and pops are not happy. Their trade group says most of them will go belly up without protection.
The $2.4 billion, family-owned Total Wine & More chain, based in North Bethesda, Maryland, has been turned away once. The Oklahoma Alcoholic Beverage Laws Enforcement Commission, commonly called the ABLE Commission, recently denied a chain representative's application for a license to own and operate a liquor store in Moore.
Total Wine can appeal the denial, and if it's upheld, it can take the ABLE Commission to court, said Lori Carter, assistant director and general counsel for the agency.
Tennessee whiskey could help Total Wine & More water down Oklahoma liquor law
Considering the 266-store chain's approach in other states, Tennessee in particular, the denial and presumed appeal are probably the start of what could be a long legal effort.
Total Wine pressed its case in Tennessee until, in 2019, the U.S. Supreme Court sided with it and struck down that state's two-year residency requirement for anyone seeking a liquor store license as a barrier to interstate commerce.
If Total Wine succeeds in getting the law changed here, it could transform Oklahoma liquor sales as profoundly as strong beer and wine sales were reshaped in 2018 by voters' approval, two years earlier, of State Question 792.
That change allowed grocery and convenience stores, pharmacies and others to sell strong beer and wine, and liquor stores to sell cold beverages, for the first time.
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Protectionism for mom-and-pop liquor stores is written into the Oklahoma Constitution, and it has stopped Total Wine & More for now
To be granted a retail spirits license, Total Wine will have to persuade a court to cast out the protectionist spirit of the state alcohol law that has prevailed since Oklahoma's belated repeal of Prohibition in 1959, the letter of liquor laws passed since then, and the state constitution itself.
Total Wine wants to open a location in a former Bed Bath & Beyond store at Shops at Moore, a large shopping center southeast of SW 19 and Interstate 35. The chain reportedly also is looking at other former Bed Bath & Beyond stores in Oklahoma.
Neither Total Wine, nor its local attorney, nor Indianapolis-based Kite Realty, which owns Shops at Moore, nor CBRE Group, which handles leasing for the shopping center, responded to The Oklahoman's requests for information on Total Wine's next steps.
Oklahoma's five-year residency requirement for liquor store operators keeps out-of-state merchants from entering the market
Total Wine's license applicant was not a person, but a business entity, an LLP, a limited liability partnership. That's a problem. Carter, in explaining the denial, pointed to Article 28A, Section 4A of the Oklahoma Constitution, which, since 2018, has spelled out:
"A Retail Spirits License shall only be issued to a sole proprietor who has been a resident of this state for at least five (5) years immediately preceding the date of application for such license, or a partnership in which all the partners have satisfied the same residency requirement. A Retail Spirits License shall not be issued to a corporation, limited liability company or similar business entity, and no person shall have an ownership interest in more than two (2) Retail Spirits Licenses."
"Limited liability" is not what lawmakers and alcohol regulators had in mind, rather, it was full liability on the part of liquor store owners, said Robert Jernigan, president of the Retail Liquor Association of Oklahoma.
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In Oklahoma, liquor store liability is personal, not business
"They wanted to create a situation in this industry that was well regulated and that was fair for any participant," Jernigan said at one of his stores, Smithcot Liquors, 217 S Coltrane Road in Edmond. His other store is Bacchus Wine & Spirits, 17216 N May Ave, in OKC.
"The other thing they wanted to do, and the reason that I couldn't open this liquor store as an LLP or an LLC — I can only own it as a sole proprietorship — is they wanted the people that were involved in the distribution of alcohol to have liability for their product," he said. "And they thought, rightly so, that made a hell of of a lot better actor in the space, and much more responsible, and I would care much more about losing my license.
"Because if I sell it to somebody and they run over here to a frat house and some kid chugs a fifth of vodka and he runs down the street and kills somebody, I'm getting sued."
Edmond liquor store owner on chain store prices: 'We couldn't keep our doors open at those low margins'
Total Wine & More owes much of its success to selling its own store-branded products, a retail innovation that's out of reach for small shops, said Kyla Wilson, who with her husband, Clint, owns Whiskey Cabinet Oklahoma, 2300 W Danforth Road, No. 110, in Edmond.
"Obviously, we don't want that," she said. "They come in and they have a lot of their private labels, things they have extremely low margins on that we can't compete with. We couldn't keep our doors open at those low margins.
"We try to keep competitive prices, but we're a small business and we don't have our own private label, nor do we have the money to fund our own private label."
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Total Wine & More wholesale buying power keeps its retail prices low
Clint Wilson said he wants the market to be competitive "but fair." Total Wine boasts of the competitive advantage enjoyed by its stores, which typically offer more than 8,000 different wines and 2,500 beers.
"We're ... committed to having the lowest prices on wine, spirits and beer every day," Total Wine says. "Our tremendous buying power and special relationships with producers, importers and wholesalers bring us considerable savings, which we pass on to our customers."
Total Wine, with its low margins on private-label products, also could upend Oklahoma's strict regulation of wine and spirit wholesaling, which forbids offering volume discounts to retailers. All retailers pay the same wholesale price for the same products in a given month, Jernigan said, using a made-up label to illustrate.
"That's one of the things that Total Wine does with, 'Oh? You like Jack Daniel's? Then you'll love "Jake Danielson!" They'll get 6% on Jack Daniel's (the state-mandated legal minimum retail markup for alcohol) to hurt people like me, and they'll get 30% on 'Jake Danielson,' which nobody else in the state can have, which also goes against not only the spirit, but the letter of the law. If it's available to one, it's supposed to be available to all."
Trade group president on Total Wine & More if it's allowed into Oklahoma: If you can't beat them, join them to go against Walmart
Total Wine & More, when it's all said and done, ironically, could give Oklahoma home-based liquor stores that can compete with it a reason to propose a toast, Jernigan said.
"If and when they get located here," he said. "they'll be a great partner for us in fighting spirit sales in Walmart," which that retail giant has lobbied for in Oklahoma for years.
"There's always a silver lining, and I'm a silver-lining-opportunity guy. You find the opportunities where they are and take advantage of them," Jernigan said.
If Total Wine succeeds in entering Oklahoma. he said, "We'll probably fight them all the way up to then, and then once they're here we'll have to embrace them because there'd be nothing we could do at that point. But they would be a deep-pocket partner resource."
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Senior Business Writer Richard Mize has covered housing, construction, commercial real estate and related topics for the newspaper and Oklahoman.com since 1999. Contact him at rmize@oklahoman.com. Sign up for his weekly newsletter, Real Estate with Richard Mize. You can support Richard's work, and that of his colleagues, by purchasing a digital subscription to The Oklahoman. Right now, you can get 6 months of subscriber-only access for $1.
This article originally appeared on Oklahoman: Total Wine & More store comes up against strict Oklahoma liquor law
