Should Wine Be Sold in Supermarkets?

— -- State governments struggling to find new ways to raise revenue are running into stiff opposition to one idea — the expansion of wine sales into grocery stores.

Officials in New York, Tennessee and Kentucky have proposed plans to join the 35 states that allow supermarket wine sales. Resistance from liquor store owners and some elected officials killed the idea this year in Kentucky. The New York and Tennessee proposals face similar opposition.

Democratic New York Gov. David Paterson's proposed 2009-10 fiscal budget includes a provision to allow such sales. If approved, the state, which currently faces a $14 billion budget gap, expects to earn $105 million in licensing and franchise fees from stores during the new fiscal year, which starts April 1, said Matt Anderson, a spokesman for the state Budget Division.

"This legislation would provide greater choice and convenience for New Yorkers and provide an even greater market for New York wines," Anderson said.

New York small-business owners and independent wine sellers have formed the Last Store on Main Street coalition to lobby against losing their exclusive franchise to sell wine. They rallied last week in Albany to protest the plan.

"This misguided plan would benefit big-box stores like Wal-Mart without creating even one new job, while imperiling Main Street businesses across the state and the thousands of jobs they provide," said Jeff Saunders of the Retailers Alliance Foundation, a New York state retailers' lobbying group that helped form the Last Store coalition.

If the legislation passes, Saunders predicts roughly 1,000 liquor stores will close, costing 4,000 to 5,000 jobs.

"We feel that if one bottle of wine is sold in a supermarket, that's one bottle that comes from our stores," Saunders said. "At a time when the unemployment is at the highest rate ever in the history, why would anyone want to do anything to add to those numbers?"

In Kentucky, Democratic state Rep. Larry Clark, who offered a bill for the past two years to allow supermarkets to carry wine, said he became so frustrated with the process he did not try again this year.

Republican Tennessee state Sen. Bill Ketron, who introduced a bill last year to allow grocery sales of wines, said the Legislature's fiscal review indicated the move could generate $17 million in tax revenue a year.

Ketron said he has received positive feedback on the proposal, but he acknowledged that doesn't mean it will have a better fate than his last attempt, which stalled in committee during the 2008 legislative session.

"From a free market economy and consumer rights point of view, wine should be available in grocery stores," Republican Tennessee state Sen. Mark Norris said, but such a sweeping change to Tennessee's decades-old regulatory structure "could put a lot of people out of work. Timing is everything, and right now, we're focused on how folks will put bread on the table, not wine."

Grocery stores in 35 states have varying degrees of permission to sell wine, according to Steve Gross, state relations manager for the Wine Institute, a San Francisco-based group that tracks wine retail issues nationwide.

The last state to open its supermarkets to wine sales was Iowa, Gross said. That move in 1983 — along with a sales tax increase on wine — came as grocers were looking to add to their offerings and the tax-strapped state sought extra revenue amid a farming crisis, said Jerry Fleagle, president of the Iowa Grocery Industry Association.

Fourteen states don't allow any wine sales in food stores, the Wine Institute reports. Rhode Island allows wine sales in grocery stores only in towns with 10,000 or fewer residents and in Newport, the institute says.

Daneman reports for the Rochester (N.Y.) Democrat and Chronicle.