By Sarah Nassauer
Wal-Mart Stores Inc. was slow to get into alcohol, but now it is
fighting for the right to sell more of it.
A prime target is Texas, where the world's largest retailer has
sued the Texas Alcoholic Beverage Commission, saying legal limits
on sales of hard liquor are unconstitutional.
One restriction prevents public companies--those with more than
35 shareholders--from selling spirits. The state beverage code also
says no company can own more than five liquor stores unless permits
for the others are bought from a blood relative.
In addition to filing a lawsuit, Wal-Mart has joined Kroger Co.,
Costco Wholesale Corp. and other groups in backing legislation that
would override the laws, which date back decades.
"Texas is the only state in the nation that allows private
companies to own liquor stores while prohibiting public companies
from doing so," said Travis Thomas, a principal at the Monument
Group, an Austin, Texas, communications consulting firm hired by
the retailers.
The showdown--and others like it around the country--pit big
retailers desperate to draw more traffic into their stores against
smaller incumbents in the lucrative liquor trade that often are
protected by idiosyncratic laws.
Wal-Mart, based in Bentonville, Ark., is supporting legislative
efforts to make it easier to sell alcohol in several states. Texas
is a linchpin of the effort. The state is home to around 560
Walmart and Sam's Club stores--more than any other state in the
country--and Wal-Mart is hoping to open stand-alone liquor stores
adjacent to its locations as well. Another Texas law states that
spirits can't be sold in the same store as groceries.
Several retailers are focused on boosting their alcohol sales.
Alcohol is generally more profitable than other consumer goods.
And, at a time when chains are facing tough competition from the
Web, alcohol draws shoppers into stores. In industry parlance,
liquor is a "trip driver."
Alcohol is also something shoppers will splurge on. "Not
everyone is trying to spend as little as possible," said Matt
Tullman, co-founder and chief executive of Merchant Mechanics, a
West Lebanon, N.H., consumer-research consulting firm.
The move to sell more alcohol, including in stand-alone liquor
stores, is a significant shift for Wal-Mart. It is part of a broad
effort to boost U.S. sales that rose a slim 0.5% last year,
excluding newly opened stores. Wal-Mart is also pouring money into
its e-commerce business and is focused on building smaller format
Neighborhood Markets. The company is trying to boost its grocery
business generally, working to improve the quality of the produce
and meat it sells.
Wal-Mart spokesman Lorenzo Lopez said the company is pursing the
legislative changes and the lawsuit now in hopes of opening
stand-alone liquor stores adjacent to Walmart and Sam's Club
locations.
Private companies already can do that, Mr. Lopez said. "We want
to be able to have the same opportunity," he said.
Wal-Mart's founder Sam Walton didn't approve of drinking to
excess, according to his 1992 autobiography. Until 2008 the company
didn't advertise alcohol in its circulars. In 2012 two of Mr.
Walton's grandsons funded an effort to reverse a ban on selling
alcohol in Benton County, the northwest Arkansas home of Wal-Mart's
headquarters. In the past two years the company has increased the
space devoted to promoting liquor in its circulars, Mr. Lopez
said.
Wal-Mart has redesigned some of its stores to make more room for
beer, wine and spirits. It built six stand-alone liquor stores last
year in Florida and plans to add around 15 more in the state, Mr.
Lopez said. The company hopes to significantly increase U.S.
alcohol sales by 2016, he said.
Texas lets public companies sell wine and beer in a grocery
store, but not hard alcohol. Spirits can be sold only in
stand-alone stores by private companies holding "package store
permits," the state's term for liquor-store licenses. One person
can't hold more than five permits, but a clause in that law that
dates back to 1977 states that a person can buy package-store
permits from someone else "if they are related to that person by
blood in the first degree," said Chris Porter, spokesman for the
Texas Alcoholic Beverage Commission. There is no limit to how many
permits a business can buy from family members, he said.
The clause has given rise to several, large family-run liquor
store chains in the state, including Spec's Wines, Spirits and
Finer Foods and Twin Liquors Fine Wine and Spirits. Spec's declined
to comment. Twin referred questions to the Texas Package Stores
Association, which declined to comment because the issue is the
subject of a lawsuit.
According to the lawsuit, filed in February, Wal-Mart currently
sells wine, beer or both in 546 Walmart and Sam's Club stores in
Texas. Wal-Mart has licenses to sell distilled spirits in 25 other
states, the company said in the lawsuit. The company is the largest
private employer in Texas and U.S., according to the suit.
It became illegal for public companies to sell hard alcohol in
Texas in 1995. At the time, it was seen as an alternative to a
prior law that banned out-of-state residents from owning liquor
stores, the company stated in the lawsuit. The bills supported by
Wal-Mart and other large retailers would change both the law that
bans public companies from selling spirits and those that make it
illegal to buy more than five liquor-store permits.
Last week, a bill passed the Texas state senate that aims to end
the five-permit law. The bill is moving to the Texas House. The
current session of the Texas legislature, which meets every two
years, will end June 1.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
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