Sam’s Club Pops Cork on Liquor Competition

(For a look at liquor store receipts and locations in Fayetteville, click here.)

He’s represented strip club owners and Baptists alike.

He’s advocated for grocery stores and Moose Lodgers.

During 20 years of private practice, he’s won far more than he’s lost.

For or against, when people want a decision from the Arkansas Alcoholic Beverage Control to go their way, Charles Singleton gets the call.

The Little Rock attorney and former ABC Director has lobbied the state legislature for wholesalers and now he’s ready to take an appeal to the Supreme Court for retailers in the $50 million Washington County retail liquor and beer market.

The three-year effort by Wal-Mart Stores Inc. to transfer an existing retail liquor permit to its new Sam’s Club and the fight to stop it brought out heavy artillery on both sides.

Signatures were gathered, legislation was passed and politicians former and current from counties both wet and dry ironically dueled before the ABC board for positions opposite the legal status of their districts.

But in the end, Singleton finally met his match. On Sept. 10, Sam’s Club opened its liquor store to the public near the intersection of Arkansas Highway 112 and Interstate 540.

On Oct. 26, the 16th Circuit Court in Little Rock upheld the ABC’s May 2005 decision to allow Sam’s Club to operate a liquor store open to the public adjacent to its new members only warehouse in Fayetteville. Singleton represented the Arkansas Beverage Retailers Association against Sam’s and said the membership – 44 in the state and 12 in Washington County – have voted to appeal to the Supreme Court.

“The position is they believe the law prohibits these big chain operations like Sam’s from being in the liquor business,” Singleton said. “They are contending the ABC misinterpreted the statute that applies.”

The key words in the law are “permitted premises.” Because the Sam’s liquor store does not sell general merchandise and is separated by a wall with its own entrance and address, the ABC considers it distinct from the members’ only warehouse.

Even with the defeat in circuit court, the fight against Sam’s Club wasn’t a total loss for one member of the ABRA, which was formed in August 2003 three months after the first convenience store in Washington County was grated a retail beer permit.

Sam’s Club initially wanted to move its Springdale store to a new location on 56th Street, but opposition from a range of politicians, merchants and citizens represented by Singleton scuttled the application and the decision would lead Sam’s Club into Fayetteville’s open arms – and tax coffers.

A founding member of ABRA is Jim Phillips, president of Springdale Liquor Association Inc., a for-profit business that owns all eight liquor stores in Springdale thanks to a “grandfather clause” in the 1971 permit law. Although the organization failed to keep Sam’s from getting a permit, it did keep the club out of Springdale.

Phillips declined to comment for this story.

“Selling alcohol is a very lucrative business,” said Rogers attorney Tim Hutchinson, who helped the owners of a Tontitown gas station get the landmark beer permit in May 2003. “A license is worth a great deal and there are only a limited number of those licenses.

“There are a lot of people interested in making sure they keep their license and make sure others don’t get them.”

After the Bowen Arrow Express got its permit, Hutchinson lost to Singleton – who was director of the ABC from 1981-87 – in December of 2003 when he took another retail beer application to the ABC board on behalf of the Fastrip c-store in Springdale.

Hutchinson and others said the Express application and subsequent approval slipped by unnoticed. Opponents didn’t let that happen again and the Fastrip permit was denied 5-0.

As a state representative for Lowell in 2005, Hutchinson struck back with legislation to make “diversity in ownership” a criterion for the ABC to consider on permit applications.

With some behind-the-scenes wrangling, the law that became known as the “Sam’s Bill” was passed, but Hutchinson said it wasn’t just about Sam’s Club.

“My concern as an attorney that’s been before the ABC Board was there was a lack of competition in Washington County,” Hutchinson said. “That’s bad for consumers in the prices they pay. But more importantly, competition is probably the best check on ensuring compliance.

“It’s just good public policy that liquor stores should not be owned by one group or company. I hope competition will be good, not only for Washington County, but for the state.”

Beer Run

State liquor tax records show $28.6 million worth of hard liquor was sold at the 31 permitted retail package stores in Washington County during 2006, an increase from $25.3 million in 2005.

Fayetteville retail permit renewal records reveal just more than $13 million worth of beer and wine was sold in the 17 liquor stores within city limits in 2006.

Given the similarity in size for Fayetteville and Springdale, and counting the four retailers operating in Elkins and Prairie Grove, a conservative estimate for the total market is around $55 million.

Not many liquor store owners or managers wanted to go on the record about the impact of the Sam’s Club store, but there certainly is a correlation between proximity to the new store and its effect on other merchants’ business.

Stores such as Liquor to Go, also on Arkansas Highway 112, and Wedington Liquor, two exits south on I-540, put up banners advertising beer case prices similar to Sam’s – less than $15 – on the day it opened.

But farther away at Dave’s Economy Liquor on Sixth Street or at Crossover Liquor in east Fayetteville, prices haven’t changed much, if at all.

Bill Lazenby, who owns a Fayetteville real estate company, also owns the permit at Town & Country Liquor on Sixth Street. His daughter, Rhaelene Lazenby, holds the permit at Bill & Tony’s Liquor and his granddaughter, Ashlee Lazenby, acquired the permit at Friendly Liquor this year.

All had to sign affidavits disavowing any financial interest in the other stores to secure retail liquor permits.

Lazenby’s company also owns Westside Liquor, 265 Liquor and Tontitown Liquor but does not hold the permits at those stores.

He said his managers have told him there has been some effect since Sam’s opened, but he doesn’t see a reason why the club shouldn’t hold a permit.

“I personally think they ought to let whoever buys a license, sell [alcohol],” he said. “You shouldn’t limit to just so many people. I thought it was a free country. It doesn’t make that much difference that I can see in different parts of the country.”

Price War

Some merchants have complained they won’t be able to compete with Sam’s on pricing, however, the retailer is not able to get deals others can’t under state law.

State law requires distributors to make the same discounts available to every retailer, and stores like Liquor World, Liquor Mart & Wine Shoppe or monopolies like the SLA are just as capable of receiving the same deals as Sam’s.

“After this much time, volume and our wonderful customers, we’re in a position to take advantage of most deals that are offered,” said Liquor World owner Kent Starr, who has the largest store in Washington County (it’s more than 62,000 SF and houses 2,000 wines and 300 beers).

Liquor and beer distribution is a pay-on-delivery business under state law, which means stores must have the cash flow and the space to make large orders.

“Bigger is better,” Lazenby said.

Dave’s Economy Liquor owner David Kelsey said he would have to see an impact on his sales before he would adjust prices.

“I don’t see any real change,” he said. “Liquor stores are neighborhood stores for the most part. I’m sure a lot of people are going to go check it out.

“[The effect] is small enough, I doubt if I could measure it.”

Shirley Yeager is the president of ABRA and owns Shamrock Liquor Warehouse in Fort Smith. She said the merchants she’s talked to in Washington County have said they are feeling the effect of Sam’s and are particularly worried about the upcoming holiday season when people stock up on spirits.

But even while offering the usual anti-Wal-Mart platitudes, Yeager said the Sam’s model has given some stores an edge based on better selection and service.

“Because of Sam’s only having their large cases of beer hot, some of the stores will benefit from that,” Yeager said. “[Other retailers] are relying on their expertise in their wine departments and relying on service they give their customers.”

Times Changing

Northwest Arkansas has tried to become more cosmopolitan as the non-native population grows, but its conservative roots offer a study in contradictions regarding its antiquated liquor laws.

Until 2003, Washington County was the only “wet” county in Arkansas that didn’t have convenience stores or grocery stores with beer or wine sales.

Fort Smith, just 45 minutes south of Fayetteville, has 22 liquor stores and 62 retail beer/wine permits for grocery stores and convenience stores.

By law, only one retail liquor permit is allowed per 4,000 in population and there are 32 permits in Washington County. That figures out to 128,000 people, which is less than the combined population of Fayetteville and Springdale alone. The 2000 Census recorded a population of 157,715 in Washington county, so theoretically, more permits are available.

Contrast that with Rogers in “dry” Benton County, where there are no liquor stores but roughly one private club permit for every 1,000 residents and more than 100 in the county overall.

Michael Zulpo, who owns the Tontitown Z-Mart, has been issued a retail beer permit after his first attempt to follow the Bowen Arrow Express lead was denied in September 2003.

State senator Jim Holt, former state legislator Jim Bob Duggar and perennial alcohol opponent Washington County Sheriff Steve Whitmill spoke against him in 2003.

“I didn’t have a fighting chance,” Zulpo said.

Whitmill resigned before the end of his term in 2004 to work for Tyson Foods Inc., and former ABC director Robert Moore retired in January after 20 years.

In February, Zulpo was given his permit without even having to appear before the ABC board.

Times are changing in Washington County, but Yeager said the retailers will continue efforts to protect their interests.

“We’re going to fight,” she said, “to the bitter end.”