Viewpoints

Gov. Paterson Could Bring Wine to N.Y. Grocers

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Almost exactly two years after former New York Gov. Elliot Spitzer resigned amid a sex scandal, there are calls for his successor, Gov. David Paterson, to do the same. First after accusations he tried to coerce a domestic violence victim to drop charges against his top aide, David Johnson, and then after allegedly falsely testifying under oath during an ethics investigation about his acceptance of free World Series tickets. But these aren't the only examples of failure to think things through.

Another is the $300 million revenue projection he's tied to his recently amended wine-at-grocery proposal.

Initially, Paterson estimated that the measure would bring in $147 million over two years from a one-time franchise fee that retailers interested in selling wine would pay, per store. But in order to help plug a $750 million budget gap, he increased the fee that would be required of stores with gross sales of over $1 million. And not just by a little.

Given the higher revenue projections, proponents are hopeful wine at grocery will pass. But it remains to be seen whether the franchise fee will be too high for widespread participation. Without adequate retailer buy-in, there is a chance that more revenue would have been produced under the old plan.

Let's take a look at some numbers. Under the initial proposal, a store with $5 million in annual sales would have had to pay $21,000 (in addition to a licensing fee) in order to sell wine. But that's nearly doubled to $40,000 under the new plan. Not exactly chump change.

The difference is even more pronounced for locations with higher annual sales since they would pay an even greater percentage. Under the first plan, a store with $40 million in annual sales would pay a franchise fee equal to 0.48 of 1% of annual gross sales, or $192,000. But should the amended plan go through, they'd have to pay 1.7 of 1% of gross sales, or more than a half-million dollars. That's $680,000, just for one store.

Paterson may have failed to do his homework.

He didn't, for instance, consult the Food Industry Alliance of New York State, which has 850 food retailer members, before changing the fee structure to find out how it might affect supermarket participation. Despite the fee increase, the FIANY supports the amended measure, President and Chief Executive Officer Jim Rogers told me recently.

Meanwhile, groups representing the interests of liquor stores are scratching their heads about where the $300 million number came from.

Some contend that the figure doesn't hold water, but fear the huge number will get the measure passed in the budget.

“We've seen no evidence to say that that's a viable number,” Michael McKeon, spokesman for the Last Store on Main Street Coalition, a group of business advocates, wine store owners and wholesalers, told SN.

After years of lobbying for the right to sell wine, this could work in supermarkets' favor. In a perfect world, the measure would pass, retailers would take a wait-and-see approach to selling wine, and the state would lower the fees to plug the budget gap.

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Contributors

David Orgel

David Orgel is executive director, content & user engagement, of Supermarket News (SN) and its website, SupermarketNews.com. Orgel delivers his opinions on industry trends through a bi-weekly...

Jon Springer

Jon Springer has been writing about food, food retailers and food retailing for more than 10 years, and is in his second tour of duty with Supermarket News. His prior experience includes covering the...
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