New liquor store construction does not mean more liquor stores

Large, expansive liquor stores being built along Interstate 540 on Grand and Phoenix Avenues in Fort Smith may make it appear as though more liquor stores are coming to the city, but that is not the case according to the state official who oversees the alcohol permitting agency in Arkansas.

According to Michael Langley, director of the Alcohol Beverage Control Division, the city of Fort Smith has had and continues to have permits for only 20 retail liquor stores.

Langley said when new stores come up like the ones at I-540 and Grand and I-540 and Phoenix, the permits are either sold with an existing business or an owner may give up a permit making it available to others who could make an application to the ABC for the permit.

"But most of the time, you're finding an existing business that you're purchasing has a permit and you may wish to move it or stay with it. But that's generally the way it works is someone is buying an existing business."

As an example, Doug Pinkerton is moving his Point Liquor store from Grand Avenue and 11th Street closer to I-540. The new store on Phoenix near I-540 is a transfer of the Sodie’s Discount Liquor license from its location at 5518 Midland Blvd. in Fort Smith.

The laws and rules, Langley said, date back to the end of Prohibition in the 1930s and dictate the number of permits in each county based on population which essentially limits the number of permits available in a city.

"We raised the population limit during the last (legislative) session. It used to be one (permit) per 4,000 (residents) in wet areas of the county and we only count in each census. The problem is it was so hard to determine dry areas (for counting populations). What was voted dry in the 1940s wasn't the same as it was then. So now we just made it (one permit per) 5,000 (people) for the entire county because it was basically a wash."

Lance Beaty, a partner in Fort Smith-based FSM Redevelopment Partners and the owner of 71 South Liquor in Fort Smith until he sold the business in 2011, said while the number of permits is not increasing with the addition of the two new stores along the interstate, it would be still be good for customers in the Fort Smith region.

He said it could be a benefit for customers as the two retailers open the new locations and the retailers bring "margin compression" to the Fort Smith liquor market.

"You have three or four large retailers – the stores coming to Phoenix and Grand, 71 South and In Good Spirits – and there will be margin compressions as a result of (the two new stores coming in)," Beaty explained. "The winner in that market will be the store location that drives the greatest volume. That volume will allow that operator to negotiate substantial or as aggressive discounts from their distributor as possible. The difference between 50 cases or 300 cases is a big number," he said.

The margin compression, Beaty, said, would be nearly immediate in the market as the "new stores have grand openings and compete for that volume."

And even though the new stores could start a price war among the city's largest liquor retailers, he said in time much of the city's competition and pricing with alcohol and hard spirits will likely return to normal.

"Just like a restaurant around the holidays and grand openings, (these stores) will be new and different. And then after a few months people have to decide if they will drive across town to save 50 cents or $1 for a bottle of liquor. People settle back in over time."

The big difference, of course, between many Fort Smith stores and the two stores coming to Phoenix (owned by Leigh Ridge LLC) and Grand Avenue (owned by Jeff Frost) is each store's proximity to the interstate.

"There will be some difference based on the interstate and the shootout that will take place between those two stores, in my view," Beaty said, adding that the advantage could go to the Grand Avenue location which sits closer to the dry Crawford County and has easier access to I-540.

Langley added that for the time being, the reallocation or sale of permits is all that is likely to occur within the Fort Smith liquor market, adding that new permits could only come about based on population.

"You're at a number (in Fort Smith) close to where you should be. But if the population grows and demand grows, we'll issue more permits. … Economy and demand sets the market."