Gas & Beer
Why it's easier than ever to buy alcohol.
by Jeff Mortimer
From the January, 2020 issue
Eight years ago, the owner of a gas station on Washtenaw boasted that his was the only one in Ann Arbor selling beer and wine. In December the state liquor license database showed nineteen in the city and nearby townships, including all four Speedways and all three Meijers. Meanwhile, both Plum Markets, which already sold beer and wine, had added hard liquor in the fall of 2018.
That's what beer and wine wholesalers and the Michigan Liquor Control Commission and Meijer wanted, and that's what the MLCC and state legislators delivered--both through action and timely inaction.
Licenses to sell alcohol come in many flavors, but retailers selling for off-premises consumption need a "Specially Designated Merchant" (SDM ) license for beer and wine and a "Specially Designated Distributor" (SDD) for hard liquor. In the last few years, the state has made both much easier to get.
Before 2016, the state made it extremely difficult for a gas station to get a beer-and-wine license. Requirements included maintaining a non-alcohol inventory valued at a minimum of $250,000 and a distance of at least fifty feet between fuel pumps and where the alcohol was sold. Liquor sellers couldn't be located within a half-mile of one another.
Then, in 2016, two laws reshaped the beer and wine landscapes. In 2017, a controversial MLCC rule change did the same for liquor.
Michigan is one of seventeen states where the government monopolizes the sales of hard liquor. It resells it to to wholesalers, who resell it to retailers, who sell to the public. To limit competition, the state also decrees minimum retail markups. Beer and wine sales follow a slightly simpler "three-tier" system, where producers sell to wholesalers, who are de facto agents of the state.
One of the 2016 laws effectively eliminated the restrictions on gas station sales: it cut the distance required between fuel pumps and where alcohol could be sold from fifty feet to five feet, and the minimum value of non-alcohol
merchandise from $250,000 to just $10,000.
Under certain conditions, gas stations located on or adjacent to premises also licensed by the MLCC could also get permits to sell beer and wine under the primary location's license. Some in the industry have dubbed this the "Meijer law," since it seems to have been tailored to fit the big box chain's gas stations. The three Washtenaw County Meijers hold the only such permits in the county.
The other 2016 statute established a cap of one beer and wine license per 1,000 people in a city, village, or township. But at the beginning of 2017, before the cap took effect, there was a sixty-day window when the MLCC accepted applications without regard to that quota. The commission received about 1,200 applications, twenty-six of them from Washtenaw County.
The dust still hadn't settled. Late in 2016, the chair of the MLCC, Andy Deloney, proposed rescinding the half-mile rule for liquor sales. The reaction from retailers and neighborhood associations across the state was swift and fierce. The retailers, like the gas station owners who had put a pile of money into inventory, could see their investment in a liquor sales license (reportedly in the $70,00-$80,000 range in Washtenaw County) being devalued. Residents worried that liquor stores would cluster in poor neighborhoods, breeding crime and underage drinking.
But Deloney--who has since taken a job with an alcohol distributor--had an agenda. Shortly after his appointment, Deloney told reporters that he hoped to create a system with "as little government restriction and regulation as possible. We're going to overturn every rock and see why are we doing things this way. Why do we have this law? Why do we have this requirement?"
The commission rescinded the half-mile rule. Deloney called it "protectionist and anticompetitive" and "an administrative burden," claiming that the majority of denied applicants from this rule were small, independent businesses.
"Some of these guys that talk about competition and a free market for spirits purposely forget that the state is the monopoly," says Auday Arabo, president of the Midwest Independent Retailers Association. The trade group sued, arguing that the MLCC had eliminated the half-mile rule without holding a required public hearing.
The commission temporarily restored the rule and held a hearing. In September 2017, more than 100 witnesses spoke against rescinding the rule while three--from CVS, Kroger, and 7-Eleven--were in favor. Twenty days later, the MLCC rescinded the rule again, although legal maneuvering kept it from taking effect until the following April.
"They were never going to change their mind," says Arabo. "They heard testimony, went through their dog-and-pony show, and decided to rescind the rule. In an area where you have four liquor licenses based on population, there could be one on every corner of the busiest intersection in the area. We call it geographic saturation."
The retailers sued again, claiming rescission would cause them "irreparable harm," but that was tossed out. Friendly legislators then introduced a bill to reinstitute the half-mile rule.
It passed the state senate by a 27-9 vote, and it appeared to have enough votes to pass the state house, too. But Rep. Brandt Iden, the chair of the House Regulatory Reform Committee, refused to let his committee vote on bringing the measure to the floor. Iden, a major recipient of campaign contributions from the Michigan Beer & Wine Wholesalers Association did not respond to the Observer's request for comment.
With the bill dead, Plum Market and the Maple Rd. Kroger started selling liquor in the fall of 2018. Both Kroger and the Maple Village Plum are within half a mile of A&L Wine Castle, a longtime package store specializing in high-end liquor and spirits. According to the MLCC, A&L was the county's fourth-biggest seller of liquor in 2017, after the three Meijers and Costco.
"With my numbers, I can deal with it," says Maher Jaboro, A&L's owner. "I do see some things that we don't sell much anymore, half-gallons, mostly. That's the Kroger people. The high-end market, I still sell what I sell."
A Kroger spokesperson says their liquor sales have "far exceeded expectations," and Plum doubled its liquor offerings last June. But the managers at two other nearby liquor stores, the Ann Arbor Party Center at the Jackson-Dexter fork and Wolverine Party Shoppe, around the corner from Plum on Dexter Rd., say their sales have decreased only slightly.
The Party Center manager, who identified himself only as Mike, credited "a lot of neighborhood support" for minimizing the damage: "We appreciate their understanding that a small guy's gotta stay in business as well."
Before the law changed, Abraham Ajrouch was one of the few gas station owners who'd managed to jump though the hoops to get a license. To meet the state's requirements, he demolished the car wash at his Ann Arbor Gateway Shell station at Ann Arbor-Saline Rd. and Eisenhower, tripled the size of his store, and added a Tim Hortons drive-thru.
After the law changed, the Meijer station across I-94 got a license without doing any of those things. But even though "I got screwed" by the change, Ajrouch says, "I'm glad they changed it. I think it's better for small business people with the new law than the old law."
Not better for him, of course, but he's not standing still. Ajrouch plans to break ground this month on another expansion--4,000 square feet of retail space that he'll rent out.
As the landlord, he won't have to worry about a competitor going in next door. But there are plenty of other opportunities for businesses catering to adult thirsts. Currently, forty-six beer and wine licenses are available in Ann Arbor.
[Originally published in January, 2020.]
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