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Groceries seeking ways around wine sales ban

Efforts draw pushback from liquor lobby, package stores

May 05, 2012|By Lorraine Mirabella and Jean Marbella, The Baltimore Sun

But others say this is the only way that chains can deal with the often-conflicting patchwork of local and state laws they encounter when trying to expand into Maryland.

Smith says the Wegmans chain would have no control, management or ownership at all in the venture. O'Donnell "has a dozen or so other start-up ventures he does on his own," Smith said. "Nobody in Wegmans owns anything in those. I guess (people) aren't used to couples having two high-powered careers."

In the Locust Point neighborhood of South Baltimore, the 5-month-old Harris Teeter ran into a fight of its own over an adjacent beer and wine shop, The Cellars.

Mark Sapperstein, the developer of McHenry Row who sought out Harris Teeter to anchor the development and leases the space to the retailer, owns and holds the liquor license of The Cellars. The store is separated from Harris Teeter by a sliding glass door, and each has its own check-out.

In March, the Maryland State Licensed Beverage Association filed a protest against the renewal of The Cellars' license. The association, which represents stores and restaurants that hold liquor licenses, gathered signatures from 33 people who own businesses or real estate in the area and who said they believe the license violates the law prohibiting chain stores from holding or using alcoholic beverage licenses.

"The license is being used in conjunction with the Harris Teeter grocery chain store which it adjoins," the letters sent by the 33 objectors said. "And Harris Teeter is managing and operating the store. I believe this to be in violation of the law."

The opponents were backed by the Maryland comptroller's office, according to an October letter to the Board of License Commissioners of Baltimore City. "It is the comptroller's position that management by Harris Teeter of a retail license violates" state law because it is being used in conjunction with a chain store, Jeffrey A. Kelley, director of field enforcement division said in the letter.

After a hearing in April, the city liquor board granted the license renewal on April 26. Steve Fogleman, who heads the board, said the grocery and liquor store are separate entities. This is a common and legal way to sell beer and wine next to a grocery, he said, much like the Whole Foods and Bin 604 set-up in Harbor East, where the separately owned businesses share an entranceway.

"There is a firewall between the ownership of The Cellars and Harris Teeter," he said. "The name on the [liquor] license is not Mr. Harris or Mr. Teeter. There are separate management structures."

Business owners who are active in the state licensed beverage group say they've launched the recent protests to ensure potential license holders comply with laws designed to prevent unfair competition.

Jack Milani, owner of Monaghan's Pub in Woodlawn since 1989 and the legislative co-chair of the beverage association's Baltimore County chapter, said association members are now closely watching the outcome of the Howard County Wegmans case.

"Our concern is that if people are going to circumvent the law, then other folks will try to circumvent the law," Milani said.

The Food & Wine Institute, a trade association for retailers and wholesalers, estimates that about a third of grocery sales have come at the expense of package stores. But, the FWI said in a recent study, liquor stores have been able to compete, especially if laws include, for example, limits on the number of licenses within a geographic zone.

The group also found that in most of the jurisdictions where groceries are allowed to sell wine — 33 states and the District of Columbia — the number of package stores increased or stayed constant.

For Shri Desai, who owns two small liquor stores within about five miles of the new Wegmans, the issue remains a David-and-Goliath one. The Laurel resident said he can imagine a situation where not just Wegmans but all the grocery chains are licensed to sell alcohol, and a small businessman such as himself wouldn't be able to compete on prices, selection or influence with lawmakers.

"They have all the power, the lawyers. As a small retailer, I can't afford to keep a lawyer," Desai said. "They don't have to look at the profit margin like I do."

Borden, of the beer and wine laws advocacy group, acknowledges that small businesses have reason to fear the competition from chain stores, which can leverage their buying power to get better deals on the wholesale level. But, he said, the opposition to grocery alcohol sales is also fueled by liquor distributors that would rather deal with smaller stores than larger, more powerful chains.

Borden argues that liquor laws should protect the interests of consumers rather than businesses.

"Why do package good stores have any greater right to have their business protected than a five and dime? We have a capitalist marketplace. In every other industry, they have to deal with the competition," he said. "The booksellers have to deal with Amazon, Blockbusters has to deal with Netflix. Why do customers have to lose out?"

lorraine.mirabella@baltsun

jean.marbella@baltsun.com

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