Bryan Caplan  

The Los Angeles Liquor Puzzle

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Lazy Thinking... An Army of Consumers...

There's a lot less economic freedom in my state of origin, California, than in my state of residence, Virginia. According to the Pacific Research Institute's rankings, the state of California comes in 49 out of 50th. Virginia comes in 3rd. As far as liquor is concerned, however, it looks like you can flip those rankings. In Virginia, you can buy beer and wine from the grocer, but hard liquor is only available at Virginia Alcoholic Beverage Control stores. (For their sickening propaganda, go here). In California, you can buy hard liquor almost everywhere.

If I didn't know anything else about these states, I would predict that California's grocery stores would dominate the liquor market. Why make a special trip to a seedy liquor store when you can buy tequila at CostCo during your weekly shopping?

But this prediction is way off. The blatant fact is that there are seedy liquor stores on virtually every commercial street corner in Los Angeles. People are free to buy their liquor in regular grocery stores, but for reasons I can't grasp, grocery stores only seem to have a modest slice of the market.

Another way to think about this Los Angeles Liquor Puzzle: It seems like the Wal-Mart model should be working, but it's not. The mom-and-pop liquor stores are thriving in the face of big(ger) box competition. This may be even weirder than the multiplicity of framing stores.

Perhaps my my economic introspection is handicapped because I don't drink. Can anyone help me out? Are people who buy lots of hard liquor so myopic that they wait until they get the impulse to drink, then buy one night's supply from the closest seller? Is Los Angeles special? Are California's liquor stores destined for extinction is a few years?

But perhaps my problem just that I misunderstand the nuts and bolts of California liquor regulation. Are license fees and taxes somehow designed to favor all those seedy little corner liquor stores?


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COMMENTS (70 to date)
Jacob writes:

There are many reasons other than taxes (I'm not sure how these differ from other states), but the two biggest are specialization and convenience. The former means that small stores provide better selections, and more knowledgeable staff that a grocery store with limited space and low paid staff don't have. The latter has partly to due with the different times a store is open, as well as location. Such smaller stores also tend to be more discrete, with perhaps less a chance of running into someone you know (who isn't also a drinker). That is not to say a grocery cannot manage selling booze. Wine is becoming quite the hot item in CA grocery stores, with ever expanding selections and it is quite convenient to pick a bottle to go with your dinner. Also, in Colorado, where stores cannot carry hard alcohol there seems to be a liquor store next door to grocery location. I think the biggest link might be that the hard liquor drinker has a different purchase pattern for liquor than groceries.

Daniel writes:

I read the relevant section of Virginia law in preparation for my 21st birthday. It's sickening how puritanical VA is. "Importing" more than a gallon of alcohol into VA can result in the confiscation of your car and drivers license, along with a $2500 fine and up to a year in jail. (http://www.abc.virginia.gov/enforce/shippinginfo.html)

Wish I had some insight on the CA puzzle.

taion writes:

It's not just specialization, though. For example, here in Pasadena, we have a Bevmo (large alcoholic drinks supermarket) located about 100' from a much smaller, seedier liquor store. As far as I can tell, the tiny little liquor store has worse prices and a smaller selection than the Bevmo (which has better selection and price than most supermarkets, except for maybe Two Buck Chuck at Trader Joe's). We get alcohol for parties and stuff from Bevmo, but maybe people just don't like buying alcohol from large, legitimate-looking stores?

Alcibiades writes:

I too often wonder about the multiplicity of mom-and-pop liquor stores, which one would think would be outcompeted by the wal-marts and grocery stores of the world. To add to the paradox, I know that local liquor licensing folks in my town make it very difficult for small liquor stores to get licensed (they're bad for the community, blah blah blah), whereas larger grocery stores have an easier time of it. Consequently, there is a small-ish family-owned grocery store ("village market") near me which earns its greatest profits from the sale of liquor.
(#2 seller: lottery tickets. ...i know, i know.)
Hmm, a hypothesis:
I wonder if there isn't some kind of explicit or implicit quota on the amount of liquor sales a grocery store can have and still be classified as such, with the smaller liquor stores then swooping in to meet the remaining demand.

superdestroyer writes:

It may have to do wit employment laws. Having a full liquor store inside a grocery store may limit who the grocery store can employ. Thus, the grocery store would be discouraged from have liquor.

Also, I believe the "leakage" rate for liquor is quite high (shopping lifting by teenagers). A mom and pop may be better at controlling theft than a large grocery.

Jody writes:

Particularly in the context of meals, I don't think liquor is generally a complimentary good to food. (Mmmm... bourbon and pasta...). Wine and beer are however. This is not to say that I haven't made grasshopper pie, or Bailey's ice cream or jello shooters. But those are for parties and the liquor is effectively a party supply.

So when you ask "Why make a special trip to a seedy liquor store when you can buy tequila at CostCo during your weekly shopping?" You might as well be asking, "Why make a special trip to an electronics store when you can rent a movie during your weekly shopping?"

Vincent Clement writes:

There are any number reasons why someone would got to a mom and pop liquor store than Costco or their local grocery store.

The first that comes to mind is crowds. At a busy Costco or grocery store you may have to find a parking spot, you may have to walk some distance to the front of the store, you may have to walk through the busy store, you may have to wait in line to pay for your booze, then you may have to walk back to you vehicle, and then you may have to wait to get back onto the street. At the seedy store, you drive right up to the front of the store, quickly find what you are looking for, pay with little or no wait time and your back in your car. Never underestimate the value of true convenience: the ability to get in and out of store is as little time as possible.

Wradical writes:

Are people who buy lots of hard liquor so myopic that they wait until they get the impulse to drink, then buy one night's supply from the closest seller?

"Myopic" is one possibility. "Thirsty" and "addicted" also come to mind.

And in locations where a lot of people don't drive, they might buy a bottle or a 6-pack, but wouldn't buy a case at a time. They want something they can carry.

Is Los Angeles special?

Definitely not.

Are California's liquor stores destined for extinction is a few years?

I doubt it, highly. For all the above reasons.

Chris writes:

There may be a number of reasons, but the one that comes to mind is cost. Grocery stores (at least where I live) charge more for alcohol. And as odd as it sounds, a signifigant number of sales in liquor stores come from selling small bottles of liquor.

A friend of mine that worked in a liquor store said that they had a substantial number of people that came in two, three or even four times a day to buy very small bottles of booze.

Mr. Econotarian writes:

At least you can get beer and "malternatives" in convenience stores in Virginia. In Montgomery Country, MD, you can't!

Damascus, MD, in Montgomery Country is actually "dry"...

http://www.gazette.net/stories/071206/gaitnew212450_31953.shtml

As a new Virginian, I am all in favor of ending socialist monopoly liquor stores!

BT writes:

I worked in a liquor store while in grad school. Most sales were not based on value but rather price. Buying tiny bottles of alcohol is expensive when compared to the liter sizes, but the tiny bottle only costs 75 cents. I suspect that grocers offer better value, but the initial price is too high for many people.

In addition, social class plays a part. Most retailers cater to a different segment or class of the population. People like to go to stores where they feel comfortable. Wal-Mart, Target and Costco do not have the same clientele even thought they are all discount stores. Each of these stores spends considerable amounts of money to appeal to a different segment of the population. I believe that people visit different retailers based on subtle cues not just price.

Marc A Cohen writes:

I think that liquor stores and supermarkets are catering to different EVENTS. For example, if I'm throwing a BIG get together (inviting 25 relatives over for a major holiday), I have to buy beer/wine, liquor for mixed drinks, plus a turkey or roast, vegetables, potatoes, fresh bread, appetizers, etc. I'm going to do my shopping at a wholsale club like BJ's or Sam's, where I can get everything in one place and get the best price. The time it takes to get there and the time it takes to check out are costs that are weighed against both time I save by only having to make one trip to one store AND the cash savings in price.

But if I'm having three friends over to watch a football game, I don't want to take a 30 minute drive each way and spend 20 minutes in line for a bottle of gin, a bottle of tonic, a lime, and a bag of chips.

So, the local liquor store is actually a specialty convenience store that sells supplies for small events. In this area, it has a strong comparative advantage.

I don't know what California's laws are, but I suspect that there is something that controls prices somewhat.

In Washington state hard liquor is a state run monopoly. But, you can buy wine in a wine shop or a grocery store. Up until a recent Federal Court decision the state required that wine be distributed by a wholesaler and sold by a retailer.

There were minimum percentage markups required, which had the effect of keeping small wine shops from being outcompeted by large supermarkets. Another factor is that wine is a fairly complicated consumer product, and knowledge of the products is difficult for a lot of people to come by.

Another factor may be the diverse liquor laws. Large grocery retailers have an organizational cost to adapt their stores to different sets of laws. Many grocery stores have good selections of food and wine, and then good prices on a poor selection of hard liquor in some states and no hard liquor section at all in other states. The mom-and-pop stores have a good selection of liquor with average prices, and take customers who want specific items not found in the grocery store (small bottles, really cheap malted drinks, exotic liquors).

mb writes:

I'd suspect the continued existence of small, seedy liquor stores is to do with a combination of restrictive alcohol laws/taxes and simply a lack of a large or profitable enough market for big firms to get involved. In Britain, where alcohol is a 'BIG' business, pubs/clubs/bars/liquor stores are all dominated by large chains and the amount of tax money these groups generate through alcohol sales is so enormous government is more than willing to accommodate them.

Mario B writes:

Impulse and convenience, as already said, are definitely two of the more important reasons.

A third reason that people do not buy liquor in bulk or well in advance of when they might need it might be that having significant amounts of hard alcohol in one's house makes one feel like an alcoholic.

An extension of this might be the fear that having it readily available might create temptation to drink more frequently than one would like.

Think about it along the same lines as why married men don't carry condoms.

Mark Seecof writes:

Well, my brother-in-law owns a small liquor store, so I've learned a bit from him.

Small stores sell a lot of small bottles for small sums to seedy customers. Many such customers come in regularly, others as soon as they accumulate the price of a small bottle. The liquor costs more (by volume) in small bottles, but small-bottle buyers are often rationing themselves--they know they will drink all of the liquor from any bottle in one sitting; they are incapable of putting away a portion for the next day. By purchasing only so much, they restrict themselves to drinking only so much before the next shopping trip. Most small-bottle buyers also purchase cigarettes.

The clerk in a small store can watch closely to discourage shoplifters. By contrast, grocery stores can't afford staff to watch the liquor, so they lock up any small bottles they stock (e.g., Benedectine). With the cost of labor to fetch bottles from the locker so high, grocers stock only high-priced liquors. Low-end customers don't want to buy those. Many supermarkets also force cigarette buyers to wait in two lines.

Grocery stores would rather not attract seedy patrons who frighten away grocery customers--so they stock mainly wines and large bottles of liquor that grocery shoppers will buy along with food and sundries.

Curiously enough, small-bottle buyers often feel a kind of reciprocal embarassment about visiting airy, brightly-lit grocery stores. They prefer the narrow confines of the corner liquor store, where kids don't gawk at them, managers don't frown at them, clerks sell them cigarettes without any special trips to "the cage"...

Lord writes:

Grocery stores focus on narrow selections and higher volume, but usually don't offer better prices. I think due to higher inventory/lower turnover costs liquor is actually less profitable for them than food. Small stores frequently offer wider selections and lower volumes at similar prices, and their profit areas are frequently fast food and convenience items.

carl marks writes:

I would make the assumption that it is all about image for the grocery stores. Women and mothers are their typical clients, who (a) don't drink as much as men (b) don't enjoy or refuse to buy alcohol for their drunk husband (c) don't want to bring thier children into stores which sell hard alcohol.

I would say a and c would have the biggest effect with c being the one that limits the size and thus selection of the alcohol section and a leading to mom and pop stores where men will feel more comfortable.

Ben Tillman writes:

Vincent Clement is right -- even in "seedier" neighborhoods, people value their time, and it takes a long time to negotiate the parking lot, aisles, and checkout lanes of a large store. Mark Seecof also made a couple good points. But there is one thing that has not been mentioned. Especially in "seedier" neighborhoods, a lot of people don't have cars, and even those who have access to a car may prefer to walk to the store if they've already had a few. Quite simply, many consumers want a liquor store that is within walking distance.

alcibiades writes:

So far I like Mark Seecof's hypothesis...

Robert Cote writes:

There's a missing assumption; that the adult beverage retail sector is a "market." It is not. You cannot understand nonmarket transactions through the eyes of a market believer.

James writes:

I might also add to this discussion (not through personal experience of course) that it is much easier to buy alcohol under age at liquor stores in California. Unlike grocery stores they don't swipe you license, if they even check it at all. So if you have a fake ID, they will check it once (if they check), and usually from then on they will just let you in because they recognize you.

Obviously, this isn't enough to keep them in business, but might play some small role.

Federico A. Martinez writes:

Could it be that my wife edict is more extended than I assume? She does not shop for alcohol; I do not shop for groceries, unless instructed otherwise.

another bob writes:

for a complete explanation of the local liquor store watch "Do The Right Thing", a Spike Lee movie.

Poor drunks buy one bottle of beer at a time, because if they bought two bottles, one of their 'friends' would 'talk' them out of it.

blink writes:

Mark Seecof brings up two important factors; I think there is a third as well. Although many wish to consume hard liquor, few want to publicize that fact – particularly to their neighbors and minor acquaintances. The problem is that grocery shopping inherently involves signaling. So, put another way, the “seedy” liquor stores have a comparative advantage in (semi-)anonymous liquor sales. That these stores thrive in California despite lax regulation indicates a deep social opprobrium against purchasing hard liquor. The same analysis applies to pornography.

Steve Sailer writes:

A little history: Up through the Watts riots in 1965, most liquor stores in central Los Angeles were owned by Jews. After the black violence, they typically sold out to black owners. But, liquor prices in California were deregulated in the late 1970s, making it a more competitive business, so most of the black liquor store owners sold out, typically to Korean immigrants. The 1992 riot had much to do with animus between Korean store owners and local blacks.

JKB writes:

Here's a little test for the next time your in LA. Go to the grocery store and fill you cart with a few large bottles of vodka, whiskey, rum, etc. Pile them in right next to the bananas and lettuce. Then grab some Cheerios, maybe a few cans of beans. Also, toss in a package of diapers and some baby food.

Now head up to the cashier during a moderately busy time. Pile all our groceries on the belt. Do you feel at ease? Is this a nice comfortable experience having your liquor riding down the belt with the baby food? Do you feel people are judging you as a bad parent? As an alcoholic?

How about this? Would you buy sex toys from Wal-mart if they were decide it was good business to get into? They certainly would be able to offer you volume discount prices.

Robert Speirs writes:

Interesting. The Sam's Club here in Tallahassee just opened a liquor store. It's in the same building but has an outside entrance. There's a big sign outside saying "Do not take liquor purchases into the store." Apparently there's a law in Florida that says liquor stores cannot require a membership card or fee such as Sam's Club requires for everything else. They do ask you if you have a Sam's Club card, though. But if you say "no" they still sell to you. It really feels like they're very nervous about the whole thing. The prices are very good but the bottles are very large - nothing under a liter. And it's mostly upscale stuff. There's no service at all and they don't take credit cards. I think the commenters who say that people don't want to be seen buying liquor are right. And stores that cater to a wide segment of the population don't want to sell single beers or bottles of Thunderbird to hoboes, either.

Michael writes:

A couple of thoughts:

Grocery stores tend to put small containers behind glass or counters to discourage shoplifting. This further increases the "embarrassment cost" of buying liquor at the grocery store. Not only are you seeing your neighbors, but you have to ask for help from a store employee.

It is much easier to meet and congregate with fellow drinkers (if not truly loiter) at a "seedy" liquor store than at the grocery store.

Grocery stores may not carry or specialize in the truly cheap liquors popular among habitual drinkers.

Brad Hutchings writes:

It's faster to buy cigarettes at a liquor store in CA. There is better selection (for picky smokers), and since they are behind the counter, they don't have to be locked up or in another room. Also,
the liquor store guy usually knows his cigarettes. Most grocery store checkers don't. Smokes and booze go together too.

(Don't worry, I'm not a smoker. I just have a few friends who are.)

aaron writes:

Liquor stores aren't all seedy, some are very nice. Selection is greater, they are easier to navigate, and check out is more efficient. Cashiers are also much more likely to be experience with ID'ing customers. At a grocery, you might get some kid who has to call his manager.

Patrick writes:

This is very clearly a cultural thing. Many of your comments about being embarrased to have people see you buy alcohol, or shamed to have alcohol next to your cabbages on the conveyor belt, can only make sense in a puritan country like the USA or Saudi Arabia.

In Australia large supermarkets have a liquor section and you go and stack your beer and scotch with your cabbages and the person behind you thinks nothing of it.

Other countries are even more easy-going.

Australia and the USA are pretty similar culture wise, but none of these comments made sense to me at all.

Jane Galt writes:

They don't make any sense to me, either, and I was raised by actual descendants of puritans who have retained some of their attitude towards fun. My mother just helped me arrange a prominent display of liquor bottles in my front room, and would gasp in surprise if anyone suggested that she should furtively sneak into a liquor store where no one knows her to buy her beefeaters. Maybe if I were buying five bottles of non-name vodka at a time . . . but otherwise, I find comments about being ashamed to have your neighbours see you buy liquor as surprising as any Australian. Perhaps in the Bible Belt . . . but LA?

Anthony writes:

The question can be restated somewhat by broadening it: Why does 7-11 sell groceries? Why do people buy from 7-11 when so many cheaper options are available?

Convenience is a huge factor. A trip to a Safeway is a minimum of 30 minutes, if you include travel to the store, parking, finding the stuff you want, waiting in line, and getting rung up.

Frank IBC writes:

Mr. Econotarian -

The reason why you can't get beer and wine in convenience stores in Montgomery county is that businesses are only allowed to have one (or at most two) liquor licenses each. That's not a problem for independent stores (including independent grocery stores). But for chains such as 7-11 or Giant or Safeway, that means that they would be limited to one or two locations in the entire county in which they could sell beer and wine, and that wouldn't be worth the trouble. I believe that there are the same restrictions on chain restaurants. And I think several other counties in Maryland (if not the entire state) have the same restrictions.

Montgomery County has several other dry towns, in addition to Damascus - eg, Kensington, which was totally dry until a few years ago, and currently allows on-premises consumption at a single restaurant. This is a legacy of the Methodists and Presbyterians who were the county's earliest (European) residents.

Maryland's laws vary wildly from county to county. In Baltimore, you can buy liquor in independent drug stores, but not on Sundays. In Baltimore and PG county bars have liquor stores attached to them, with the same hours as bars rather than liquor stores (though PG recently required such stores to close at midnight). Baltimore requires liquor stores to close at 9, other counties allow later closing. Charles and St. Mary's Counties allow liquor sales on Sundays.

Aaron writes:

Do liquor stores still put your puchase in a brown paper bag (or other opaque bag?) Why?

I also think liquor stores have a better ambience - you enter one knowing you can get what you want in an adult setting. It's fun.

I bet they also do good business in rare smokes, drinks, snuff, condoms, and porn.

Dean Wermer writes:

Simple.

Los Angeles is geographically large. And real estate, including leaseholds for large lots sufficient for a full service grocery store, is not cheap.

As a result, large segments of the city are underserved by grocery stores. E.g., I live downtown and the nearest nationally recognized chain grocery store is some distance away. Even smaller grocery chains, as well as specialty chains (e.g., the hispanic discount chains), are fairly geographically dispersed.

Small liquor stores are able to acquire reasonable leases in most areas. That includes economically disadvantaged areas that the national chains have historically been unwilling to enter in great number. My understanding is that there has been geographic clustering of liquor stores in certain areas of the city, i.e., the density of liquor stores is not evenly dispersed throughout the city and county.

sammler writes:

Jody et al: the focus on cost to the supplier (through shoplifting, etc) is clearly not germane to the solution. If it were, then large grocery stores would find it unattractive to offer liquor at low prices; however, Mr. Caplan has clearly stipulated that this is not the case.

celebrim writes:

"This is very clearly a cultural thing. Many of your comments about being embarrased to have people see you buy alcohol, or shamed to have alcohol next to your cabbages on the conveyor belt, can only make sense in a puritan country like the USA or Saudi Arabia.

"In Australia large supermarkets have a liquor section and you go and stack your beer and scotch with your cabbages and the person behind you thinks nothing of it.

Other countries are even more easy-going.

Australia and the USA are pretty similar culture wise, but none of these comments made sense to me at all."

I wasn't going to comment because I don't know the solution to the puzzle, but this comment forced me into the discussion.

I'm absolutely convinced that no one has yet hit on the correct explanation. There is a very simple reason for this. It would seem to be something unique to California, or at least not ubiquitous to the USA. In the South, were I'm native, either like Virginia alcohol is regulated by law (and that regulation explains why it isn't sold out of grocery stores) or else most of the achohol would appear to be sold out of grocery stores where it is legal to do so. And that's a puzzle, since because California is about the least puritanical state in the union, an explanation invoking Puritanism makes no sense if it doesn't apply to California's even more puritanical neighbors.

Anywhere in the south were you can actually buy liquor in a supermarket, I would imagine the same thing.

I concur with Jane Galt when she says,

"I find comments about being ashamed to have your neighbours see you buy liquor as surprising as any Australian. Perhaps in the Bible Belt . . . but LA?"

I think that the most convincing explanation offered thus far is the one based on conveinance. LA is a notoriously difficult city to drive in, and its residents are generally forced for economic reasons to spend much more time in a automobile than they wish to. Perhaps the explanation is that under these circumstances, they are willing to pay an economic premium in order to have a liquor store on every corner.

The other explanation that sounded convincing was price controls. If CA law regulates the price of liquor, its entirely possible that large retail firms have no real economic advantage over the smaller ones. Knowing what I know about the distribution business, the small corner firms are probably little more than independently owned fronts for 2-3 very large liquor distributers in the city/region who probably can exert as much or more economic leverage as the grocery stores. Combine that with something like price controls and the grocery stores have no real means of pushing the 'mom and pops' out of business. And that's probably not coincidental. If in fact price controls exist, I'd bet if you went to the root of it, the 2-3 large liquor distributers are behind the price control legislation.

ArtGal writes:

I am a California resident in one of those dodgy areas with a seedy little liquor store on every other street corner. I can tell you from experience that it is largely a class issue. I only visit the closest dive liquor store for one of two reasons, A) I'm making margaritas, have run out of tequila and don't feel like fighting my way through the parking lot of my big mainstream grocer and waiting in line. B) I want just one small item (soda, ice cream, candy bar, etc...) and again don't feel like driving farther to the closest 7-11 or grocery store. I can count 8 seedy little liquor stores within a one-mile radius of my house. All of them closer than the 7-11 or Vons.

The clientel at my Korean-owned corner store is almost exclusively minority and buying either cigarettes, beer or small bottles of hard liquor.
The times I've lived in nicer neighborhoods, I've noticed there are fewer of these seedy little stores, which need the support of a lower-income community to thrive.

CRogers writes:

Is the situation in Los Angles unique? I am no expert on liquor stores but in my state (Michigan) where you can get alchol from the grocery store liquor stores seem to be rare. While the arguments about conveince and time are covincing, they only hold true if it is a standard (nationwide) and not unique situation (local).

Adam Villani writes:

The distribution is definitely not even across Southern California. I grew up in an area of Long Beach where, depending on which way I walked home from school, I could probably pass by 5 different liquor stores over the course of a half-mile. The one grocery store in our neighborhood was woefully inadequate and my mom would routinely drive more than five miles across town to do her shopping. I've since lived in other neighborhoods and most do not have very many liquor stores, although there are a few.

So reason #1 is convenience. Another commenter hit the nail on the head when he said that he doesn't do the grocery shopping and his wife doesn't do the liquor shopping. That applies just to casual drinkers, the guy stocking up on a few bottles for when his friends come over, or also for the serious drunk.

Grocery stores here do carry beer, wine, and hard alcohol, but not generally anything smaller than about a 500mL bottle. I'm not much of a drinker myself and really can't comment much on the differences in selection or prices, except that a big liquor warehouse like BevMo has a much bigger selection and usually some good deals. I buy most of my alcohol either there or at grocery stores, and nobody gives you a funny look for buying alcohol with your groceries. Maybe in the bible belt, but not here in CA.

So I don't think it's a "shame" thing so much as being a matter of convenience and the liquor stores being a "guy" place whereas the grocery stores are "woman" places.

FogCity writes:


The two most interesting comments (IMO) are the 7-11 comparison and (my paraphrase) "alcoholics don't shop at Safeway". But I think we are still missing point that relates to the pure economics of the model:

Distribution in the US was set up as a three tier model after the repeal of prohibition; (the three tiers are producer-distributor-retailer). The "distributor franchise as middleman" model inhibits the "Walmarting" of the distribution of alcohol and gives the distributor incentives to move smaller higher margin units.

I also think our perceptions are wrong. While the local liquor store still exists, particularly in dense urban areas, I would be willing to bet that the largest volume of booze is actually retailed through big box stores, not small corner markets.

The local store will continue to survive by offering "value" to the locals, whether they are drinking Ripple or Opus One.

RockNTheFreeWorld writes:

I think it has more to do with feeling that if you need help the liquor store employee would be more likely to have some knowledge, or even suggest something new. That is the main reason I buy alcohol I can get at the local grocery store at the local liquor store. Many liquor stores in this area (west-central GA) now carry more expensive cigars and other items like that. This makes it much more attractive to go to the liquor store for your items since you can get your brandy, a nice snifter, and some imported cigars all at once. And from a guy who knows a lot about it.

The same question could be asked of the local TV or computer store. They do good business even with Best Buy etc around, even though their selection may not be as good, mostly because I know when I leave the store that everything I bought will work together with minimal problems.

Mrs. Davis writes:

Former California smoker.

Convenience is a big factor.

So are cigarettes, this is also related to convneience.

Seedy stores are about the only places in California, aside from Adult Book Stores that still carry porno.

Seedy stores are also a cash business, good from laundering cash from other less public enterprises.

There's a reason they look seedy.

Adam Villani writes:

I think the "small liquor stores are specialty shops with a more knowledgeable staff" argument describes the sort of store that is not the majority here. Certainly in some neighborhoods there are specialty wine stores and the like that cater to the high end, but overall I think the vast majority of small liquor stores in California are catering to the low end of the market. Essentially they are the local place where one can get a six-pack of Bud, a cheap bottle of rum, a pack of cigarettes, a copy of Hustler, a candy bar, a bag of tortilla chips, and maybe a gallon of milk. I know the stores in my neighborhood in Long Beach weren't making their money off of brandy snifters.

lawn6n0me writes:

This is not that hard to explain. Illegal aliens don't have Costco membership cards. They conduct most of their business in cash and it is much easier to go to the corner liquor store/mini-mart especially if you don't have your own SUV or mini-van to drive.

Kirk Finley writes:

My family owned a building in Orange County that was leased to a small liquor store chain for more than 30 years. They gave up their lease last year explaining that it was no longer profitable. The owner explained that most independent stores are owned or controlled by recent immigrants, usually Asian, who use them either (i) as an investment means by which to obtain a green card or (ii) to launder offshore money coming in to the country. He explained that his volume had been trailing down for several years and he had been trying to sell the store but ended selling just the off-sale license. Accordingly, most of the independent liquor stores are just seedy fronts.

RR Ryan writes:

One explanation I've not yet seen: delivery. My neighborhood choices for shopping are Gelson's, the local small store(Carmel,on Santa Monica- may as well plug them) and Liquor Locker a block north on Sunset. For all I know, they all deliver but only the real liquor store promotes it. And being a regular customer makes for faster service. We do have one of those Bevmo things, but I've never been in it. I'd have to drive and the parking in the center in which it's located is a nightmare. Bottom line: convenience wins.

Mark Finley writes:

Mark Seecof pretty much nails it but Steve Sailer brings up some interesting history. When liquor was deregulated in the 70's it was assumed that many of these stores would just disappear. Instead they just merged in with the small mom & pop market to service people who don't keep a bottle of anything (booze or milk) around the house very long and lottery sales certainly haven't hurt them either.

Bucky Katt writes:

Heck, in St. Mary's county Maryland you can get your liquor via a drive-thru! Just head on down to La Plata or Bel Alton.

lostingotham writes:

Interesting discussion. In my experience, people buy a significant portion of their liquor after they've already started drinking ("Oh hell, bubba, we're out of Thunderbird, run down to the liquor store and get some more"). The legal risks associated with drunk driving make the transportation costs for such consumers very high, indeed. A quick drive (or better still, a walk) to a small, expensive, non-judgmental supplier for someone who is already three sheets to the wind may be vastly preferable to a longer drive to a large, well-lit venue full of families, children and (potentially) police.

Petronius writes:

Speaking as a reformed drinker, I think Mark's theory has some legs. Per capita consumption of hard spirits in the US is around 2.4 gals. a year. For serious drinkers its more like a gallon a week. The small percentage of hard-core drinkers consume a large percentage of the booze, and their habits (hiding their purchases from the neighbors, for instance) tend to drive the industry.

Other points: The middleman issue is important. In Illinois all retail outlets, of any size, must buy from distributors who have exclusive contracts with the distillers. A few years ago some distillers began to deal directly with large retailers. The biggest distributor in the state basically bribed the state legislature to make all contracts pretty much permanent, like Indian treaties. ("This agreement shall last as long as the rivers run and the mountains stand")

I don't know the situation in CA, but in Chicago there are fewer of the seedy package stores left. They are going the way of corner taverns, part to public mores and part to public policy. Family men don't drop down to the local for a fast beer any more; they buy a six-pack and sit in their air-conditioned den and watch TV alone. This change alone has reduced the number of saloons drastically.; The public policy issue is that the city fathers and community organizations tend to see either bars or retail liquor stores as troublemakers. When saloons change hands they must jump thru many, many hoops to get a new license, and it is very easy to vote your preceinct dry. One preacher orchestrated dry votes in several precetncts simultaneously and closed a dozen liquor stores at one stroke.

Kevin Murphy writes:

Taking Petronius's numbers, if alcoholics consume 20 times as much booze as the average drinker, and more than 5% of drinkers are alcoholic, the the majority of booze is sold to a small group. And the skid-row Thunderbird drinker is the wrong model: think more the employed person who just drinks every night.

Anyway, heavy drinkers, like smokers or other (ab)users of disreputable products, are a bit ashamed of their habits and tend towrds places where they won't be subjected to scorn. Buying a half-gallon of Cutty Sark every 3 days at the grocery store will get the neighbors noticing. The seedy corner liquor store is a safer bet -- especially if you can "walk" there.

Kevin Murphy writes:

By the by, I suspect the division of sales is much different for quality wines than it is for hard liqour. Those seedy liqour stores pretty much give up on the corked wine market.

Michael Levy writes:

At least in San Francisco, many of the Liquor stores are also small groceries. If you just need a few staples, the corner liquor store is much more convenient than going to out to a box store (especially if you are limited in terms of vehicles).

Another thing to look at would be price differences. I assume things would cost more at the liquor stores, but that's an assumption. And of course, some types of items might cost more while others cost less, I would definitely include grocery prices in this analysis.

Another thing to consider is that Albertson's recently closed some urban grocery stores in the San Francisco Bay Area, claiming they were not so profitable. Are mom-and-pop stores better able to profit? If so, how? Better prevention of shoplifting (as suggested above)? Are urban consumers less interested in the variety offered by bigger grocery stores?

Larry writes:

In answer to your question, I believe I can help you. I advise you to begin drinking as soon as practicable.

Paul N writes:

Pennsylvania is an absolute joke, you have to go to a State-owned-and-operated liquor store to buy WINE! Prices are roughly 2x Costco. Typically these stores are staffed by about 6 or 7 (unionized!) employees and you're the only customer in there when you walk in.

Wacky Hermit writes:

If you think Virginia's alcohol laws are puritanical and Maryland's are byzantine, you should see Utah! Up until a few years ago, I couldn't get dealcoholized wine in Utah. The grocery store wouldn't carry it because it's wine, the state liquor store wouldn't carry it because it wasn't an alcoholic beverage, and no mail-order retailer would ship it to Utah because it's illegal to ship wine to Utah. Thankfully, this was resolved and now dealcoholized wine is carried in grocery stores.

Quincy writes:

You know, I've heard a lot of people talk about how non-puritan California is, but as a Marinite, let me tell you, if you've got hard liquor with your groceries, some Prius-driving yuppie is likely to look at you like you're a total scumbag who doesn't deserve to be living here. Then the same yuppie will proceed to cut off several people on the way out of the parking lot while nearly killing a poodle or other small animal.

In all seriousness, though, in the nicer areas of California, there's a big class stigma associated with hard liquor, especially American hard liquor like Whiskey or Bourbon. It's not puritanism, but it's there.

Mr Giggles writes:

I think your first problem, Wacky Hermit, is wanting to buy dealcoholised wine in the first place. Isn't that just grape juice?

(Thank you, thank you, I'll be here all week)

nmg@nmg.com writes:

Most corner liquor stores are very flexible about food stamps. Big box stores and chains cannot be so cavalier. It's nearly a certainty that this is the reason for the prevalence of corner liquor stores in LA.

nmg

epobirs writes:

I think the mystery here is illusory. The market allows for multiple scales of liquor selling venues to prosper.

I do most of the grocery shopping for my family and I haven't noticed any reluctance by other shoppers to have a few bottles of wine and harder stuff among their items. The only time I've ever seen the locked cabinet holding the items like $100 Glenlivet be opened was when I did it myself to hang price tag changes. (Graveyard temp job during the strike a couple years ago.) For the majority of items I'd be willing to bet the big retailers do the majority of the business.

But that doesn't mean a tiny liquor store in a low rent location cannot prosper on the dregs. If a corner liquor store does just 5% of the beer and wine business of the Ralph's a half-mile down the road, that may be quite good. The liquor store likely is manned by the owner for a major portion of the week and rarely if ever has more than two employees on the clock.

Not only do the seedy liquor stores serve an audience that doesn't care for the supermarkets (and frequently isn't welcome there) they can be profitable on business the supermarkets do not pursue.

Plus, those liquor stores are in location where a supermarket cannot be found. Ever since the Rodney King riots there has been much handwringing over the lack of supermarkets in some LA neighborhoods. (The reasons for this were obvious but some activists liked to pretend that the appearance of these stores would magically rehabilitate these DMZs.) The liquor store also keep late hours. If I wanted to go grocery shopping at 3:00 AM I'd have to drive a minimum of twenty miles to the nearest supermarket that stays open 24/7. If I don't mind paying a premium I can get a lot of those items much closer to home from small stores.

Gary 46 writes:

In western Colorado, small liquor stores are growing in numbers and receipts while traditional bars are suffering (resort and business traveler establishments still do well.) As a former bar owner, I can tell you that stringent enforcement of DUI laws are strangling the bars and encouraging the stay-at-home imbibing and the liquor stores that make that possible.

Jadagul writes:

No comment on the prevalence of liquor stores, but a few of my college classmates and I went to the grocery a couple weeks ago, and one of them had absolutely no problem with going to check out with a basket containing nothing except liquor (although she pointed out that actually one bottle was tonic water and thus non-alcoholic). It never would have occurred to me to be embarassed by this.

Milhouse writes:

Patrick writes:
In Australia large supermarkets have a liquor section and you go and stack your beer and scotch with your cabbages and the person behind you thinks nothing of it.

Not in Victoria, or at least not when I lived there (1970-1994). The local Coles New World (major supermarket chain) could not sell any alcohol, not even beer; instead, it had a bottle shop (== US liquor store) right next door, clearly part of the same business, but different premises, different entrance, and different cash register. I've been back several times since then, most recently in 2003, and have not noticed any change in this - the local Coles still has no alcohol, and still runs the next door bottle shop.


Kevin Murphy writes:
Those seedy liqour stores pretty much give up on the corked wine market.

There's a market for corked wine? Who knew? Next time I find some I won't pour it down the drain.

mike writes:

Maybe the seedy liquor stores are, shall we say, a little less demanding of verifiable ID for their younger looking customers. (Not that I ever bought or drank alcohol before the age of 21.)

Ron Beheler writes:

I just got done reading a Cato article about the Federal Assistance Award Data System, the database that tracks federal government transfers to the states. Once I heard of this I thought I should look up California, because I remembered reading Bryan's article about the quirky situation with the liquor stores. I found that of the 34,000 entries for the 4th Quarter of 2004, 4,000 entries were transfers through the Small Business Administration. Of the 4,000 entries, about 1200 were to entities in Los Angeles County. Forty of these 1200 have names that include the word "Liquor".

I then checked to see about the congressional districts in that area. There a few districst that are in Los Angeles County. One district is the 37th, and Juanita Millender-McDonald is the incumbent representative. She sits on the committee for Small Business, and she's apart of the sub-committee for Tax, Finance and Exports. This is interesting because each transfer is for a loan (physical disaster, bond guarantees for surety companies, certified development loans, and small business loans).

From seeing all of this it seems that the liquor stores stay in business because they're rent seeking through their congressperson and small business associations. If they weren't getting hand outs, then maybe we'd see the larger food chains dominating the alcohol market in southern California.

Brody writes:

I live in Venice, and we have our fair share of liqour stores around here. Unfortunately I live near the hotels and hostels, so the liqour stores that are open late have insane prices, and also double as the markets, with the exception of a few nice organic or plant-based markets, such as windward farms near Venice Circle.

For those who seem to have concern about the quality or presentation of liqour stores, do not think that because a liqour store operates in a poor area that it is somehow contributing to that.

I feel it is independant. I know the guy who owns/runs the store near me, he is there nearly every day. Once in a blue moon he has someone in for him, but more often than not he is there from 10A.M.-Midnight, everyday.

Like many people living in our community, myself included, he cannot afford a car, despite owning this establishment. I cross paths with him often around the neighborhood. He prices refridgerated gallons of water at 99c and sells me liqour, though I'm just a boy of 19.

I'm just a chemistry student, but there are a number of young men who work hard and I believe--if they are able to have the money to pay for it-- they should be able to relax with a brew after an honest day's work.

Try explaining that to 7/11.

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