- Published: Saturday, 21 January 2012 18:26
- Written by David DeCiero
The recent signing of Massachusetts S.2033, which was signed into law by Governor Deval Patrick on November 22, 2011 will bring about changes to the retail alcohol industry in Massachusetts. These changes will be focused on increased competition and consolidation. Competition will come from not only grocery chains, but also other liquor stores with successful business models that seek to expand. These competitors will seek to consolidate smaller, less successful retail locations.
A lot of attention has been paid to the increased competition from grocery chains, as they have been the main adversary of retail liquor locations over the years. The ability for grocery stores to take lower margins on alcohol due to their grocery business, as well as one-stop shopping make them a cause for concern. The new bill will allow them to accumulate even more liquor licenses and realize more economies of scale. Grocery stores are becoming more and more sophisticated in retail liquor experience and will continue to take market share from smaller stand-alone liquor outlets.
Another area for concern is the anticipated emergence of “mini-chains” of liquor stores. These would expand in size as the restrictions on the number of licenses per holder are eased. Owners of well established retail liquor locations will seek to expand their operations. A well run business that previously was limited to only three operations by law can now become larger and take advantage of the increase in scale. In addition, they will be making plans for expansion through 2020, when the number of licenses increases to nine. This will inevitably lead to consolidation in the number of owners of retail locations. The question that arises here is whether they will be new locations or existing stores. New locations carry risk in terms of drawing customers, whereas existing stores will have a customer base built in. It will ultimately depend on the price that the existing owner will charge for the location and access to their customers. The “mini-chains” will be as formidable a competitor as the grocery chains in the future.
All competitors, whether grocery stores or the new breed of chains, will squeeze profits on all outlets. The revenue side will be compressed by market share loss, and the cost side will increase by additional marketing. Therefore, it is imperative that retail liquor outlets take action to understand their business and seek to minimize their costs and maximize their revenue. D1R consulting is here, ready to assist you in this endeavor. We offer the flexibility to work with you to address these challenges on your terms to ensure your business is the most successful it can be.