AMERICAN ASSOCIATION OF WINE ECONOMISTS AAWE WORKING PAPER No. 48 Economics INTRODUCING WINE INTO GROCERY STORES: ECONOMIC IMPLICATIONS AND TRANSITIONAL ISSUES Bradley J. Rickard October 2009 www.wine-economics.org Introducing wine into grocery stores: Economic implications and transitional issues Bradley J. Rickard Assistant Professor Department of Applied Economics and Management Cornell University Ithaca, NY 14853 Tel: +1.607.255.7417 E-mail:
[email protected] October, 2009 Abstract There has been a long history of government regulation related to wine marketing activities in the United States, and many regulations have been state-specific. For example, fifteen states currently have laws that restrict wine sales in grocery stores. Several of these states have recently proposed changes that would expand the distribution of wine; however, the economic implications of such changes are not well understood and the proposals have met significant resistance from key stakeholders. A simulation model is developed here to assess the likely effects of introducing wine into grocery stores in New York State. Results suggest that benefits would be generated for out-of- state wineries, government revenues, and in most cases the in-state wineries; wine sales at liquor stores would fall by 17% to 32% with this policy change. Simulation results are subsequently used to develop a framework for evaluating various proposals that would provide compensation to liquor store owners. Keywords: Grocery stores; New York State; Rent-seeking; Simulation model; Wine sales. JEL Classification: Q18 Introducing wine into grocery stores: Economic implications and transitional issues 1. Introduction Thirty-five states have laws that allow wine to be available in liquor stores and grocery stores (including both food stores and drug stores).