afluffypinkcloud 
Member since Mar 25, 2011


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Re: “Be careful what you wish for

The following is written without knowing the exact details of the current distribution chain for microbreweries in Colorado. Mark-ups, shelf space, lead times, transit times, volume deals with consumer outlets.

Let me define the “regional economy” as Colorado; “chain grocery stores” as Wal-Mart, King Soopers/City Market, Albertsons, Safeway; “domestics” as Anheuser-Busch InBev, MillerCoors, Pabst, etc.



I think this would be good for consumers on the points of implied market efficiency and convenience. I think that the microbrewers in Colorado would be excited at the prospect of increased sales due to convenience. I welcome the removal of regulations for increased competition. I disagree with the point of “sends our money out of state”, prices going up, and a loss of selection.


The regional economy

Keep in mind the money multiplier; the more money spent within a regional economy circulates (and compounds) itself. The theory and practice of the money multiplier only achieves its maximum if no money is exported out of the regional economy. The money multiplier would be near the theoretical maximum in a “vertically integrated” industry that gets all inputs and sells all outputs within the regional economy.

The local beer is still made here and employs workers in the state; both the production and the labor are taxed and contribute to the regional economy. The workers and business owners spend their money inside or outside the regional economy, etc.
Are all of your current distributors headquartered in Colorado? Perhaps money is already leaving the regional economy with the current system.

Is King Soopers headquartered in Denver? Perhaps we should help expand their revenue potential to boost state tax revenues by removing alcohol regulations.

One could argue that if you are not sourcing inputs, created within the regional economy – not just from a Colorado distributor, for your brewery, you would already be sending money outside of our regional economy.

The only loss I can off-handedly estimate is you sell to a distributor for 10-20% profit, they sell to the liquor store or chain grocery store for 10% profit, and the grocery store sells for 10-15% profit. (I think each transaction is taxed which makes the real margins lower) – for “sends our money out of state” – how much money are we talking about?


Removal of regulations

Will there be some liquor stores that close? Probably. The stores that will stay open will probably specialize in a way the grocery stores cannot.

As for breweries closing, perhaps the barrier of entry into the market is currently not high enough - perhaps there might be a lack of competition. The same goes for liquor stores; their growth and proliferation is largely due to our alcohol laws. Perhaps the current situation is not economically efficient and optimal for me as a consumer. To me, if a state law exists, and supports a market inefficiency, I think it is a bad reason for me to be stuck on “path dependency”, just because there will be a transition.

I would like to ask if, beer is sold in chain grocery stores, there is any research done that indicates the consumer price of the (microbrewery) beer will fall, remain constant, or rise? Your article mentions that prices will rise, but does not reference a reason why I think prices will fall because liquor stores will have to compete.

So an aspect I like is convenience - not having to go somewhere else might make me inclined to buy more beer. I also like the idea of magnet specialty stores, like Wilbur's in Fort Collins.


Greater selection and convenience

I think due to economies of scale the larger outlets (speciality stores and grocery stores) can also provide a greater selection of beer. Maybe I like microbrews from Utah, not Colorado.

I as well am a Colorado native – I was in Fort Collins until 24. Then I lived in Colorado Springs for three years, and I did not see a wide selection of Northern/Central Colorado breweries (Fort Collins, Boulder, Longmont, Denver) offered in local liquor stores – not much Odell’s, Fort Collins Brewery, Great Divide Brewery, etc. This goes back to regional competition, which I think does not really exist in a lot of Colorado Springs liquor stores.
Microbrewery beer is already a taste and preferences argument - we have already demonstrated our willingness to pay for a "higher quality" product. I go for micros for taste, but I can also go to “domestics” for value.

The assumption that you might not be picked up in a chain store is valid. I think the assumption that a chain store would not adjust their Colorado stores to meet Colorado demand is not completely founded. Look at California – beer, wine, liquor can all be sold in chain grocery stores. If you go to a Ralph’s in California, odds are they have more of a wine selection than the Kroger in Texas. Why would a grocery want to lose revenue to liquor store, if the liquor store is the only one carrying a popular local product?

As an anecdote, I have seen Kroger (parent of King Soopers/Ralph’s/City Market) in Houston with the only sizable local brewery, “Saint Arnold’s” occupying at least 5 spaces on a rack. If you argue about shelf space and being squeezed out by larger national breweries, I believe you. I think a large amount of national consumption is still the domestics and imports. I also assume that the chain grocery stores will also use the same local distributors?

This comes back to competition and sales; the market. I think Colorado is lucky to have Coors and Budweiser – it probably helped create and sustain our regional specialty – beer. What is good for the beer industry in general is good for you – you are ultimately competing with wine and spirits as well as any other drugs.

0 likes, 2 dislikes
Posted by afluffypinkcloud on 03/25/2011 at 7:00 PM

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