Sumanta Sarkar’s Post

The alcohol industry is one of the most lucrative and powerful industries in America. Hundreds of billions of dollars move through the system each year, but few understand how it really works. Here's a quick overview👇 The complexity dates back to 1933 when prohibition was repealed. Alcohol was federally banned for ~13 years, during which the mafia ran a profitable, underground booze industry. The three-tier system mandates that manufacturers must sell their products to licensed wholesalers, who then sell to licensed retailers, who sell to you. So, anytime you've ever purchased alcohol, you didn't actually buy it from the company that manufactured it. (there are some exceptions here like breweries, wineries, etc but this is a very small % of sales) This system was originally put in place to prevent "disorderly marketing conditions" from manufacturers and retailers collaborating too closely (i.e. if any one booze company owned all the bars, wouldn't be great for competition). So, when prohibition ended, a gold rush for retail and distribution licenses began. Many states made their own, nuanced adjustments to the law. Some states became "control states," where the government controls part of the distributor and all of the retail tier. Ohio, PA, MI, and 14 others have government-run liquor systems. Other states limit the number of retail licenses one individual can own (no liquor store chains in NY) or have laws like no booze sales on Sundays. Ninety years later, the result is a complex, highly regulated, and fragmented system that takes years to understand. There are over 20,000 licensed alcohol distributors, hundreds of thousands of independent retailers, thousands of manufacturers, and hundreds of billions flowing through the system each year. Every day, distributors visit bars, restaurants, and liquor stores to convince owners to re-buy inventory and try new products. Thousands of new brands launch each year, fighting for consumer awareness and shelf space. It's a difficult game, but the payoff for getting it right can be massive. Big manufacturers like ABinBev, Diageo, Constellation, spend billions on brand loyalty to ensure customers choose their products at the point of purchase. Maintaining "share of wallet" is crucial, and these big companies will pay premiums to acquire startup brands. The alcohol industry is deeply embedded in the American economy and way of life. Navigating it is complex, which deters many investors, but successful navigation can lead to incredible, enduring profits. Jason Sherman and I started Top Shelf Ventures to be the alcohol industry's preeminent fund with an eye towards eventually expanding into other highly regulated industries. Will continue to post here about the intricacies of this unique, exciting, and powerful industry!

Alcoholic ready-to-drink beverages have recently become available for sale in Ontario grocery stores and soon convenience stores will be able to sell beer and wine. While it creates an entirely new channel for alcohol (and with different purchasing behaviors compared to the traditional liquor store model, the LCBO being provincially regulated in Ontario), it also creates an opportunity for alcohol alternatives to find shelf space in these new locations where they might not otherwise. The thought is if you can now grab your beer and wine (and eventually RTDs) in convenience and grocery stores rather than having to make a separate trip to the liquor store or specialty store, it also makes it that much more convenient for you to pick up alcohol alternatives in the same aisle. I see this working harmoniously with speciality retailers selling non-alc and alcohol alternatives. These retailers provide a unique experience that in many cases introduces consumers to new products in the space, after which consumers can then find those products in more readily available locations.

Is the future of alcohol retail happening right under our noses? 🍷 With changing consumer behavior and growing demand for convenience, grocers like Hy-Vee, Publix, and Southeastern Grocers are opening stand-alone liquor stores. While these stores help navigate state regulations around alcohol sales, the bigger story is how they’re responding to shifting customer need-states. Today’s consumers are increasingly seeking one-stop shopping experiences, particularly as at-home drinking trends rise. Stand-alone liquor stores aren’t just a way to comply with liquor laws - they’re about better meeting consumer need-states. Whether it’s more convenient access to alcohol or streamlined product offerings, these stores are designed to make shopping easier and more efficient. In an environment where supply chain challenges and the specialized handling of alcohol create additional complexity, stand-alone liquor stores are emerging as an operationally smart and customer-focused solution. Are these stores a means to sidestep regulations? On some level, of course they are. But more importantly they're about meeting consumers where they are - offering greater accessibility to alcohol products while maintaining brand integrity and regulatory compliance. As states slowly loosen restrictions, this model may be more of a bridge than a workaround, ensuring grocers can better serve customers today and in the future. How do you see this trend evolving as consumer preferences shift and states reconsider their regulations? https://lnkd.in/e5XW6hjx

Westword: Can Colorado’s Latest Proposed Liquor Law Changes Save Independent Liquor Stores?: Colorado’s liquor laws may be changing once again. House Bill 1373 aims to help independent liquor stores, which have struggled since the sale of wine in grocery stores went into effect on March 1, 2023. The state’s liquor laws used to tip the scales in favor of independent liquor stores and craft breweries. Prior to 2016, liquor license holders were only allowed to operate one store in the entire state; grocery and convenience stores were limited to selling 3.2 percent ABV beer; and brewpubs were allowed to operate similarly to restaurants, with self-distribution rights and permissive on-premises and off-premises sales. … Some also belive that HB-1373 sidesteps the work done by the Liquor Advisory Groupformed by Governor Jared Polis in July 2022. “HB-1373 creates a distraction and unnecessary war among the differing interests of the alcohol industry and disregards the time and resources invested in the extensive stakeholder process that occurred over the course of last year,” says Colorado Chamber of Commerce President and CEO Loren Furman. “This work resulted in a comprehensive report, with the intent of finding consensus among the many interests in the alcohol industry, which involved small and large liquor stores, beer and liquor manufacturers, retailers, distributors, business organizations and local entities, among others. Any legislation addressing these issues should take this work into consideration.” Read more here. | timnathchamber.com #Timnath #Colorado #TimnathChamber

I’m inclined to agree with the complexity of the alcohol industry, but I’d also add that its dynamics change in fascinating ways albeit quite slow. Take tequila and mezcal, for instance. 10 or 15 years ago, no one would have dreamed of launching their own tequila or mezcal brand to compete against the giants. Now, we see multiple contenders, both celebrity-backed and non-celebrity-backed. That’s the most interesting dynamic at the moment. Brands need to consider whether to go the celebrity route or not. On one hand, giving equity to celebrities can be a shortcut to massive exposure. On the other hand, marketing is something you can buy, and a strong campaign can create success without a famous name attached (and without the drawbacks of one person also potentially ruining the brand with being cancelled or some other faux-pas). Despite these exciting trends, the industry remains technologically backward. The three-tier system and slow adoption of e-commerce and digital marketing hold back innovation. Altho I've seen some movements to help on this side too such as Conor Robbins at Sphere supporting brands with top quality D2C and Ajay Rai with Meeva. Nevertheless, I'm most excited to see what happens with the future of the industry.

Effective Sept. 16, 2024, Act 86 of 2024 will expand the network of retailers allowed to sell ready-to-drink cocktails (RTDC) to go to include restaurants, hotels, supermarkets, convenience stores, beer distributors and others. The new RTDC permit will authorize permittees to sell spirits-based RTDCs ranging from 0.5% alcohol beverage by volume (ABV) to 12.5% ABV in original containers up to 16 ounces for off-premises consumption (to go). RTDC permits will be available to retail liquor licensees eligible for wine expanded permits (restaurants, hotels, supermarkets, convenience stores etc.) and to distributors and importing distributors of brewed and malt beverages, all of which must be certified in the Responsible Alcohol Management Program. Highlights of the new law include the following: Retail RTDC permit holders (not distributors/importing distributors) will be able to sell RTDC to go in quantities up to 192 fluid ounces per transaction, and that allowance is in addition to up to 192 fluid ounces of brewed or malt beverages and up to 3 liters of wine per transaction – all three can be maxed out in a single sale, but only to retail customers (not licensees). Distributors and importing distributors will be able to offer samples of RTDC and sell RTDC in any quantities to retail customers, but not to licensees. They will also remain prohibited from selling wine or other forms of spirits. The PLCB currently has a catalog of more than 100 RTDC, but RTDC permit holders are not allowed to procure RTDC through Special Order for sales for on-premises or off-premises consumption. The PLCB will also entertain permittees’ requests to bring new RTDCs into the market, if suppliers are willing to make them available through regular product listing processes. Pennsylvania licensed manufacturers producing RTDC may sell them directly to retail customers and permit holders, in any quantities, at prices equivalent to or more than what the PLCB charges, if the PLCB carries the same or substantially similar products.

New sales channels for NA brands & accessible purchasing locations for consumers is a plus for retailers, consumers and brands. Even with the existence of supermarkets & the concern that stores will eat into each other's sales, a lot of folks in NYC will keep their local stores they find enjoyable or convenient alive. There's CVS all over the place, bodegas still thrive. There's an abundance of both mass chain and small business restaurants. There are more than enough consumers in this city for multiple formats to survive. https://lnkd.in/g6ZYvSmx

📊 3-Tier is very excited to share the news that NIQ is launching the new Liquor Open State view, an expanded and enhanced Liquor Channel measurement. 📈 It expands the base of stores, enhances universe statistical projections, and broadens the measurement of the Liquor Channel to include an aggregate of 31 states + DC (non-control markets). 🔍 This new read will provide significantly more visibility into this critical and sizeable channel to the Beverage Alcohol industry. It will replace the current, much smaller Liquor channel view (Liquor Plus) that you may receive today. 🍻 Category size increases will be in the range below, the new measurement will provide a better read of the broad assortment of products carried in stores largely dedicated to Beverage Alcohol – including Liquor chains and equally important independents: 🍺 · Beer: 2.8x increase in the size of the new Liquor Channel vs the existing channel 🍷 · Wine: 1.8x increase in the size of the new Liquor channel vs the existing channel 🍸 · Spirits: 2.2x increase in the size of the new Liquor Channel vs the existing channel 📅 This change from Liquor Plus to this broader Liquor Channel market will take place as of July 22, 2024. If you do not have a 'separate' view of the Liquor channel today and would like a 'separate' view of the new Liquor Open State channel, please let us know and we can provide pricing. 💲 NIQ is also offering 8 Liquor channel total state reads - California, Colorado, Florida, Maryland, Massachusetts, New Jersey, NY State, and Texas. If you are interested in any of these state level Liquor channel breakouts, please let us know and we will provide pricing.

Connect with me if you want to learn more about our New Liquor Channel Enhancement!

Andhra Pradesh has a new liquor policy! And here is what it could mean for you 👇 Liquor is a tricky business in India. There’s no one-size-fits-all approach to regulating it. Each state makes its own rules, which means taxes, distribution, and pricing can vary wildly across the country. For instance, Karnataka slaps about 80% tax on the MRP of alcohol, while in Goa it’s around 50%. This creates a bizarre scenario where the same bottle of whiskey could cost ₹130 in Goa but soar to ₹513 in Karnataka. And unsurprisingly, this leads to widespread liquor smuggling and a thriving black market. Yet, liquor is a huge source of revenue for states. An analysis from Moneycontrol shows liquor accounting for about 13% of total state tax revenues in the financial year 2024. And that brings us to Andhra Pradesh, which is banking on a brand-new liquor policy that's aimed at selling low priced liquor to reduce illegal sales and collect over ₹5,500 crores in state revenues. It's no small sum. But is this policy as beneficial and straightforward as it promises? Well, to answer that, we need to rewind a bit. See, a few years back, Andhra Pradesh embarked on a phased liquor prohibition strategy, even if it meant sacrificing ₹20,000 crores in annual revenues. The government took over the liquor retail liquor business and cut down the number of shops from 4,380 to 3,500.3 And it even hiked the prices of liquor. The goal was simple - curb alcohol consumption, bring in fair trade, and it sounded great on paper. But what actually happened was that smuggling and illegal liquor sales shot through the roof. People weren’t drinking less but instead turning to cheaper, lesser taxed alcohol from neighboring states. The black market thrived, and the state’s control over liquor sales backfired. So, fast forward to today, and the state has decided to shake things up with its new policy, which is set to roll out from October 16th. So what's next? Get the full scoop in today's newsletter. And don't forget to follow Finshots for more!