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On Brewing: Colorado grocery changes spell peril for small liquor stores

By Eric Peterson March 13, 2019, 03:30 pm MDT

The better part of two months and two weeks into full-strength beer sales at Colorado grocery stores, the doom that some predicted for the state's craft breweries has yet to come to pass.

"The big caveat: It's still a bit early," says Andres Gil Zandana, executive director of the Colorado Brewers Guild.  But early signs are good.

"One of our big questions for grocery stores in particular was what percentage of shelf space we would get?" asks Gil Zandana. At one chain that has been canvas statewide, Colorado craft beer takes up 20 to 25 percent of all beer shelf space.

That's a solid number in Gil Zandana's eyes. "That's pretty close to some liquor stores," he says, and it tracks favorably with out-of-state craft, macro, and imported beers. "It's a really good commitment to our product and to Colorado in general."

And it demonstrates a fairly elastic commitment: Chains are willing to work with local brewers on a location-by-location basis, notes Gil Zandana. "I'm aware of breweries who are in one grocery store, because they only wanted to be in one store, versus New Belgium, which is in every store."

Gil Zandana says about 30 to 35 members of the Colorado Brewers Guild are selling through grocery stores in the state now. That's a good chunk of the roughly 90 breweries in Colorado that are packaging and could be on grocery store shelves.

Since alcohol is handled differently than other groceries, rules were established around stocking that agreed that distributors and self-distributors would split duties with store employees, but not every chain is playing by the rules. "That's illegal and unfair to our members," warns Gil Zandana.

"With every transition, there are always hiccups," he adds. "In January, I don't think anybody was really ready." But two months of education on what cold storage and other wrinkles on how to handle craft beer has eased these "growing pains," says Gil Zandana. "Some of our breweries are reporting their best Januaries to date. It's a new outlet and a new consumer."

Liquor stores have a different perspective, with hundreds of new competitors statewide -- or around the corner. It's a one-minute walk from Molly's Spirits in Lakeside to a Walmart Supercenter that now sells full-strength beer, including a selection of Colorado craft brands.

"We are slightly down, numbers-wise, when looking at the beer department," says Grant Kleinwachter, director of special projects and, until recently, the beer manager at Molly's. "It's not as down as we expected it to be."

Kleinwachter says it took a bit of time for grocery stores to get their pricing right. "Pricing is pretty much in line with us, especially craft-wise. They are undercutting with premium." That means Molly's craft sales are steady, while every other beer category takes a hit.

"What we've seen is basically the convenience factor, with our location especially," says Kleinwachter. Super Bowl weekend "was the most substantial hit," he says. "They wanted an all-in-one when they're going to get their food and party supplies at the grocery store."

Kleinwachter says Molly's is planning a 10 to 15 percent discount for mix-and-match cases to help the store stay competitive, but its true calling cards lie in unique partnerships with breweries. "We have a lot of in-house beers," he says, highlighting Molly's Sip of Colorado, an amber-lager hybrid made in collaboration with Aspen Brewing Company and available exclusively at Molly's. "That's going very strong. That's something we can do that the grocery stores can't offer."

Kleinwachter also points to a Collaboration Fest tie-in with New Image Brewing and New Terrain Brewing. "We have joined with New Image and New Terrain to brew beers that will only be available at the festival and here at Molly's."

Of 68 cooler doors at Molly's, 16 are dedicated to Colorado craft beer and 12 feature non-Colorado craft. Another six have singles for build-your-own six-packs. "Some of the grocery stores are doing that but they have one or two doors of singles you can use," says Kleinwachter, noting that Molly’ also has a 256-square-foot walk-in full of bombers. "There's no grocery store that would be even close to what we offer."

"It's all sort of a wait and see. What I think's going to happen here in the next few years is seeing a lot of smaller and mid-sized stores going out of business."

It's all about volume for both pricing and storage. "These small stores can't warehouse that or afford that," he notes.

Owners of small liquor stores don't seem ready to talk; multiple shopkeepers in the Denver area declined to comment on the subject, as one indicated sales were down in 2019.

And that has Kleinwachter looking ahead to the next wave of fallout by positioning Molly's to compete with grocers for the customers of any stores that might shutter.

Eric Peterson is editor of CompanyWeek and BreweryWeek. Contact him at rambleusa@gmail.com.

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