Colorado Alcohol Retailers Face Changing Laws and Trends

It’s no secret that Coloradans love to imbibe. More than 10 percent of the nation’s craft breweries are found there, as are well over 100 wineries and about 50 distilleries. And while the state’s 1,600 independent off-premise retailers are happy to enjoy the fruits of this thriving industry, the state is also facing the biggest changes to its liquor laws since the end of Prohibition, leaving these small businesses wondering what’s next.

Last year saw liquor stores face off with grocers that wanted to sell full-strength beer and wine. Senate Bill 197, passed in 2016, allows grocery stores that have one full-strength alcohol-sales license per chain to obtain as many as 19 more over the next 20 years if they buy out all licenses within a 1,500-foot radius.

Over time, the bill could get rid of 3.2 percent beer entirely. The existing mandate that non-liquor stores sell only up to 3.2 percent beer—about half the alcohol content of many of Colorado’s craft beers—should be gone by 2019, the Colorado Department of Revenue says. Grocers with current 3.2 percent beer licenses would eventually be able to sell full strength beer, but no wine or liquor. 

The Colorado Licensed Beverage Association, a board on which Hazel’s Beverage World sits—will have a seat at the table once that discussion begins in earnest. “For the guy who buys Bud or Coors Light, it’s convenient,” says Hazel’s co-owner Jimmy Dean (pictured atop). “I know lots of people who don’t drink, but I don’t know anyone who doesn’t eat. If you’re in the store and you have two screaming kids and you want to get home, you just buy the Bud Light; you don’t make a second stop for Crooked Stave. I sell Bud to pay the heat and lights. If someone goes to the grocery store and then has the intent of coming here but then they don’t, that impacts me.”

The thing people need to remember about the bill, Dean says, is that the only people asked to give up part of their livelihood are retail liquor stores. “What does Wal-Mart give up? King Soopers? The distributors? Nothing,” Dean says. “We didn’t write the laws; we only live by them. For the last 80 years, we played by the rules.” 

Wilbur’s Total Beverage general manager Matt Dinsmore is the president of Coloradans for SAFETY, an allied coalition of independent liquor store owners, and treasurer of the American Beverage Licensees in Washington, D.C. He spent 18 months raising money to prevent “80 years of liquor laws being turned upside down.” 

“We all sat down with the threat of a ballot issue over our heads,” he says. “If we went to a ballot issue, it would be 50/50 coin flip.” He says Wal-Mart’s polling showed 50/50, too: “They said, ‘If we lose and we spend this kind of money, we’re going to lose jobs.’”

SB197 is far from perfect, Dinsmore adds, “and we spent a lot of time cleaning up flaws—but it works.” He says the law protected the local liquor-store owner who happens to be right next to a Safeway from having Safeway quickly put them out of business. It also created value for some businesses, he adds, because a lot of them don’t have a succession plan. The compromise allowed local independent retailers who wanted to stay in business to stay in business; alternatively, it gave an exit strategy for those who wanted out. 

“It saved, truly, about 1,600 small businesses from their head getting cut off overnight,” Dinsmore says. 

The state’s evolving liquor laws have kept these stores on their toes in terms of differentiating themselves among vast competition and creating a shopping experience they say grocers can’t replicate.

Hazel’s has 50 employees—48 full time and two part-time.

Long History of Independent Stores

Chuck Carlson owns Mulberry Max in Fort Collins, Colorado, which opened in May 2015. Carlson had exited a decade-long role he had in another nearby store to start Mulberry Max, which boasts 10,000 square feet and about 5,000 SKUs. 

Carlson had previously worked in the information technology industry and says he simply found the idea of running a liquor store more fun. But he also knew important changes were coming from the state Capitol that could affect Mulberry. 

“I wanted a store that was defensible against grocery stores and convenience stores for beer, wine and spirits,” he says. “We de-emphasized domestic premium products like Coors, and instead are into high-end craft beers, bomber-size bottles and 750-ml. craft brews from all over the country.”

Carlson runs promotions with local brewers New Belgium and Odell. For Mulberry’s second anniversary, Odell took beers out of its library that it had been saving. “Some weren’t even sold here at the moment,” Carlson says. “They also help us with prizes, like a $300 Grizzly cooler with a New Belgium logo.”

Carlson says his demographic area is skewed toward premium products, and while he does get CSU students, faculty and staff in this store, the bulk comes from older people who live nearby.

Wilbur’s Dinsmore grew up in the industry and is a fifth-generation resident of Loveland, which is about 30 minutes south of Fort Collins. His father, Dennis, is celebrating 50 years in the industry this year, having started a couple other liquor stores before purchasing what became Wilbur’s about 15 years ago. The store is 25,000 square feet with 12,000 SKUs. 

Dinsmore credits the nearby university with helping him fill more than 40 employee positions at Wilbur’s. “We have been so blessed because we have Colorado State University,” Dinsmore says. “It’s a talent pool that refills every semester. You’re never rebuilding, you’re reloading.”

“To expand for the sake of expanding doesn’t make sense,” says Wilbur’s Total Beverage general manager Matt Dinsmore. “We need to look at things and base them on their own merit with the change in landscape coming.”

In 2004, Dinsmore’s father started jockeying for space next to a new Whole Foods and ended up doubling the store’s square footage. In 2015, Dinsmore’s father retired—but  it only lasted six months before he opened a Wyatt’s next to the new Whole Foods in Longmont. Dinsmore says he’s not looking to expand Wilbur’s at the moment, mainly due to the uncertainty surrounding the new laws. 

“To expand for the sake of expanding doesn’t make sense,” he says. “We need to look at things and base them on their own merit with the change in landscape coming.”

Hazel’s Beverage World in Boulder has been open five years, but owner Jimmy Dean has been in the liquor and grocery business for 50 years. He’s been exclusively in liquor for the last 19, he says, but he and his son still own a grocery store. Hazel’s has 50 employees—48 full time and two part-time. Despite the proximity of the University of Colorado–Boulder, which had almost 33,000 students in 2015, Dean doesn’t hire many students because he says they want to go home for the holidays—his busiest times.

Dean’s employees get a 401(K) and two-thirds of their health insurance paid, and there’s a bonus program for every employee in the store. “We’re not GM or Toyota,” he says, “but we want to compensate them fairly for the job they do.” Boulder has more than 400 active nonprofit organizations, one of the densest in the nation, which gives Hazel’s plenty of opportunity to donate product or gift certificates to area events; the University of Colorado is one of its main recipients (founder Bruce Dierking is a CU alum).

“We meet every Friday and review all requests,” Dean says, adding that he prefers to donate product rather than cash. The donation has the highest likelihood of creating a customer, Dean says, if someone has to enter his store to redeem the prize, such as a wine of the month for a year.

It’s All About Customer Service

When it comes to running his business, Carlson says he has a shopping environment people look forward to coming to. “Anybody can buy these products for what I pay, and sell them for what I sell them for,” he says. “The differentiation is having a store people like to come to and that’s easy for them to shop in. Our team builds a relationship with those customers.”

Carlson deals with turnover like anyone else in retail and says he too tends not to hire students, favoring people who want to work four or five shifts a week. He has 10 full-time employees and advertises everywhere from newspaper ads to boosted posts on Facebook. “I also hired a guy to put door hangers in a nearby neighborhood,” he says, “but I’d say what works best is word-of-mouth and targeted marketing.”

While Hazel’s offers a mobile-optimized app, free delivery and a popular Super Sunday Sale, Dean says retail liquor is “a challenge every day.” His competitors are numerous: thirty-two liquor stores within Boulder city limits alone. “Our suppliers tell us we are the third-highest volume store in the state behind Applejack and Argonaut,” he says. “We take a sense of pride in that.”

“A lot of people won’t even buy Goose Island anymore because it’s owned by Anheuser Busch,” says Chuck Carlson, owner of Mulberry Max in Fort Collins.

Carlson says Mulberry tries to curate the best wines it can find within the coveted $10 to $20 price point. Wine is still the driving force at Hazel’s too. Craft beer and beer sales in general in Colorado and nationally are slowing down, the Denver Post reported last year, a trend Dean says also impacts his store, where many shoppers are wary of so-called big beer. “The big brands—Bud, Coors and Miller—they’ve just been buying them up,” he says. “A lot of people won’t even buy Goose Island anymore because it’s owned by Anheuser Busch.” 

Dinsmore says he is seeing domestic sales sink, while craft has plateaued because consumers are scoffing at $20 and $30 bombers. “Odell and New Belgium sell great because they’re both in our backyard, and there is literally a new craft brewery opening on every corner,” he says. “I don’t think the sky is falling, but a lot of people are going out more.” He has also done well with Dry Town gin and vodka from Old Elk Distilling, which just opened in Fort Collins and is backed by the owner of OtterBox phone cases.

While Dean says local spirits like Leopold Bros., Breckenridge, Fiesty Spirits and Spirit Hound are really growing, “the high end spirits are still the big thing: Scotch, Bourbon, Yamazaki.” Dean says these are highly allocated. “I might have 2,000 people who want Pappy Van Winkle, and I might get 60 bottles. Our distributor only gets so much.”

Because of the new laws, up to 20 percent of a liquor store’s revenue can come from non-alcohol products. Carlson says Mulberry is seizing on this and has started to expand outside of standard beverage alcohol sales, recently opening a full-service home brewing supply shop. “Everybody in Fort Collins brews beer,” he says. “There are some rock star brewers in this town, and CSU has a very solid fermentation science program.” While he is still climbing the marketing hill and getting the word out, he already has 68 kinds of yeast “and all the grains you can possibly need.”

As of now, Carlson is the only liquor store in the Fort Collins/Loveland area that sells homebrew supplies, and he is thinking about more stores in Fort Collins, which already has 48 retail liquor licenses within its city limits. “We’re looking at targets of opportunity more than anything else,” he says. “But after the big legislation passed last year, everybody is in wait-and-see mode.” bd

Sarah Protzman Howlett is a freelance writer and editor based in Boulder, Colorado. A veteran of Condé Nast Publications in New York City, her work has appeared in O, The Oprah Magazine; Prevention; Denver’s 5280; and trade magazines across various industries.

Leave a Reply

Your email address will not be published. Required fields are marked *