Retail-to-Retail Sales

1. Loss of Wholesaler Accountability and Product Custody

• Breakage and spoilage liability unclear
  Wholesalers typically guarantee replacement of broken or damaged goods. Retail liquor stores (RLS) may not have the infrastructure or financial capacity to do so consistently.
• Chain of custody issues
  The regulated three-tier system ensures consistent storage, temperature control, and handling standards. RLS may not meet wholesaler-level standards.
• This could put Beer Distributors in violation of our franchise agreements with our suppliers – and could lead to termination. Compromising the chain of custody, we lose control of the product, where it goes, and freshness standards in our equity agreements.  Retailer are reluctant to replace out of date beer they sell, which will leave the distributors responsible for beer they may not have even sold.

2. Reduced Product Safety and Traceability

RLS would need to maintain detailed records verifying deliveries, copies of invoices, storage conditions.

• Tracking recalls becomes harder
  Wholesalers maintain detailed tracking systems; RLS may lack compatible systems, complicating recall management.
• Inconsistent storage conditions
  Bars could receive products that were stored under less controlled conditions.

3. Increased Administrative and Compliance Burdens

• RLS Extensive record-keeping requirements
  RLS would need to track sales to on-premise licensees, including:

   

  • detailed invoices,
  • tax reporting,
  • verification of buyer license status,
  • transportation documentation
• Greater compliance risk
  More opportunities for accidental unlawful sales (e.g., selling to an expired or suspended license).        

4. Payment & Credit Issues

Wholesalers currently are experiencing declining sales, violitaile market conditions. Many RLS stores are in default moving to a market where the wholesaler is prohibited from extending credit is preferred. This takes away the risk of RLS ordering excessive inventories for resell purposes and expecting the wholesaler to provide the credit.

• Cash-only or limited payment flexibility
  RLS typically operate on consumer-style payment systems, not the credit arrangements wholesalers use with bars (often 10–30 days). Bars could face cash-flow strain, increased security risks, or inability to buy on terms.
• Wholesalers are unlikely to offer credit terms to liquor stores acting as resellers
  If RLS start buying greater volumes for resale to bars, wholesalers would likely refuse to extend credit because:

   

  • this falls outside standard credit-risk practices, it requires wholesalers to finance a competitor’s resale operation, and liquor stores generally operate on cash-up-front purchasing.
  • This would force RLS into cash-only sourcing, increasing their financial burden and complicating inventory planning.

5. Risk of Price Volatility and Reduced Price Transparency

• Frequent, unpredictable pricing changes
  Retailers may adjust prices rapidly, unlike wholesalers that publish structured monthly price books.
• Potential for anti-competitive pricing strategies
  Some RLS might temporarily undercut wholesalers to capture accounts, then later raise prices once dependence is established.

6. Logistics and Delivery Challenges

• Retailers lack wholesale-scale delivery systems
  Most liquor stores do not operate fleets designed for on-premise distribution. Problems could include:

   

  • inconsistent or delayed deliveries,
  • higher per-delivery costs,
  • inexperienced drivers handling alcohol transport,
  • limited capacity for large-volume orders.
• Impacts to distributors work force – potential to impact union contracts.

7. Weakened Enforcement of the Three-Tier System

• More complex regulatory oversight
  Allowing RLS to act as mini-wholesalers would require new enforcement mechanisms.
• Greater monitoring burden on the state
  Regulators would need to police:

   

  • supply chain integrity
  • prohibited inducements,
  • tied-house violations,
  • tax and invoice compliance.

8. Market Fragmentation and Economic Inefficiency

• Wholesalers achieve economies of scale that lower costs industry-wide.
• RLS cannot match wholesale storage, distribution, or buying power, which may lead to higher per-unit costs or fragmented purchasing for bars.
• Bars may need to coordinate orders with multiple retailers, increasing administrative overhead.

9. Competitive Inequity

• Larger retailers may be able to supply bars while smaller stores cannot, creating an uneven competitive landscape.
• Increased pressure for consolidation as bigger RLS gain quasi-wholesale advantages.

10. Increased Risk of Diversion or Tax Irregularities

• More distribution points increase the risk of improperly documented or untaxed product entering the system.
• RLS may not be equipped for detailed excise tax tracking and reporting that wholesalers currently manage.