Wal-Mart, other retailers push to broaden liquor sales in Texas

Wal-Mart Stores has licenses to sell beer and wine at 546 locations across Texas, but the retail giant wants more and recently filed suit against the Texas Alcoholic Beverage Commission Liquor challenging Texas’ liquor law.

Present law forbids public companies from obtaining a “package store permit” that allows the sale of liquor. This law is protective toward family businesses, giving them an unfair advantage, the critics argue. Wal-Mart Stores is seeking to remove the public company block with injunctions against the Texas Alcoholic Beverage Commission in hopes of overturning what it deems “unconstitutional.”

“This is counter to Texas’ belief in free enterprise and fair competition, limits our customer’s choice and keeps the price of spirits artificially high, all of which harm Texas consumers,” Wal-Mart spokesman Lorenzo Lopez told the media.

The Bentonville-based retailer has also joined Kroger Co., and Costco Wholesale Corp. lobbying for legislation that would override the law. No other state prohibits liquor store ownership by publicly owned companies, which is at the heart of the Wal-Mart injunction. Another part of the law would require Wal-Mart to abandon its 534 beer and wine permits before it could apply for liquor store permits in Texas.

According to the lawsuit filed in February, Wal-Mart 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. 

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 the law that bans public companies from selling spirits and those that make it illegal to buy more than five liquor-store permits.

Moving in Wal-Mart’s favor a new bill recently passed the Texas Senate that aims to end the five-permit law. The bill is moving to the Texas House in this session which is slated to end June 1. Like Arkansas, the Texas Legislature convenes every two years.

Critics of the Texas law said the state uses a wide net to define “public companies.” For instance the law pertains to any company that has more than 35 shareholders such as Tyler, Texas-based Brookshires Grocery Company. This east Texas chain sells beer and wine in wet counties of its 100 stores, but is not allowed to sell liquor because it has more than 35 shareholders, although it’s privately held. 

Brookshires spokesman Jason Cooper told The Dallas Morning News that “Texas shouldn’t be the only one in the business of picking winners and losers,” he said. “The current law restricts consumers and choices that they deserve.”

Liquor is big business for Wal-Mart and Sam’s Clubs in states that it operates package stores and that is money the retailer doesn’t want to leave on the table, given its large store presence across Texas. Analyst Matt Tullman, of Merchant Mechants said alcohol is also something shoppers will splurge on and retailers looking to grow top line sales can boost performance with alcohol sales.

Wal-Mart CEO Doug McMillon said growing top line sales head a short laundry list of key agendas on which his management team is focused. Analysts recently told The City Wire they expect a lackluster 2% rise in overall sales this year, which would be an improvement over the anemic pace of 0.5% last year. 

Wal-Mart also knows that alcohol sales track particularly well with the Millennial generation, an important demographic it’s been wooing. The Wal-Mart founding family has been somewhat mixed on alcohol sales over the years. The Wall Street Journal reports that Wal-Mart didn’t begin advertising alcohol in its circulars until 2008 in part because founder Sam Walton didn’t approve of drinking to the excess.

That said, Walton’s grandsons were instrumental in bringing liquor sales to the retailer’s home county in the 2012 when they backed a signature resolution to bring the decision to county voters in the state’s general election. With broad voter approval, Benton County became “wet” in 2013 and the first liquor stores opened around nine months later.

Wal-Mart could not apply for a liquor store permit in its home state because it already owns and operates a liquor store in its Fayetteville Sam’s Club. Arkansas State law only allows one permit per business across the entire state. Rather than fight Arkansas law, Wal-Mart has focused on bigger fish expanding in markets where there are less barriers such as Florida. 

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. The company hopes to significantly increase U.S. alcohol sales by 2016, he said.