Beer, Wine & Liquor Stores
Description
Companies in this industry sell beer, wine, and liquor products from physical retail establishments. No major companies dominate; in the US, individual states have different laws regulating liquor stores, complicating the ability to form national chains.
Europe has the highest alcohol consumption by liters of pure alcohol per capita. Off-premise alcohol consumption is increasing at the expense of on-premise drinking there. Prices on off-premise alcohol are considerable lower than on-premise prices with retailers, especially supermarkets, able to purchase large quantities of alcohol at lower prices through volume discounts.
The US beer, wine, and liquor store industry includes about 34,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $50 billion.
COMPETITIVE LANDSCAPE
Personal income, consumer tastes, and entertainment trends drive demand. The profitability of individual companies depends on effective marketing and competitive pricing. Large companies offer wide selections and deep discounts, but small companies compete by offering specialized merchandise, providing superior customer service, or serving a local market. The US industry is highly fragmented: the top 50 companies account for less than 25% of sales.
Liquor stores compete directly with grocery stores, warehouse clubs, convenience stores, and some drugstores, and indirectly with restaurants, bars, and other establishments that serve alcohol. In addition, direct-to-consumer sales are growing as restrictions are eased.
The growing list of online players in the alcohol sales and delivery business include Blue Apron, which ships exclusive wines; alcohol delivery startups such as Drizly and Postmates; and Amazon. Amazon's 2017 purchase of Whole Foods Market increased the number of cities served by its Prime Now membership service, which delivers alcohol as well as groceries. Amazon's voice-activated assistant Alexa can even be used to order alcohol in some areas.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products are alcoholic beverages, accounting for about 90% of the industry's revenues. Tobacco products and smoking accessories, account for nearly 5% of sales and soft drinks and nonalcoholic beverages (less than 5%). Other products (nearly 5%) include automotive fuels and candy, prepackaged cookies, and snack foods. State laws dictate the type of alcohol sold in a particular venue. In some states, only liquor stores can sell hard liquor.
Liquor stores may also be known as “package stores,” referring to the post-Prohibition law requiring stores to cover or “package” alcoholic beverages in public. Each state has an alcohol control agency, and state laws regulate the sale of alcohol, including specifying what types of retailers may sell alcohol, and limiting days and hours of operation. Most states are open or license states, and allow private ownership of retailers. In control states, the state government controls liquor distribution and may operate retail liquor outlets. State-run liquor stores may be referred to as ABC (alcoholic beverage control) stores.
Liquor stores sell alcohol for off-premise consumption, and require a state-issued license to operate. In some areas, stores may require additional licenses from municipal or county authorities. Liquor licenses are generally more expensive and difficult to obtain than beer and wine licenses. Some states use quota licenses, which limit the number of liquor licenses based on the population. In quota states, new liquor stores must either buy an existing license or enter a lottery for a new quota license.
Liquor stores include independent stores (“mom-and-pop”); local and regional chains; and state-operated outlets. Independent stores may be small and typically serve local markets. An independent store or chain may also act as a sales agency for a state and work on commission. Large liquor stores or superstores offer huge selections, and typically sell other products like groceries and tobacco. Companies locate superstores close to grocery stores, mass merchandisers, and other high-traffic retailers.
Independent liquor stores can be as small as a few thousand square feet, and typically generate less than $1 million annually. Superstores generally exceed 10,000 square feet, and can generate between $1 and $5 million annually. Extremely large superstores like US-based Spec's and Canada's Alcanna (formerly Liquor Stores N.A., and dba Liquor Depot, Wine and Beyond, and Brown Jug) can exceed 40,000 square feet.
State laws may limit inventory selection by dictating the types of alcohol sold. In a few states, liquor stores can't sell beer, while grocery stores can't sell liquor. In control states, inventory is limited to brands that state-run distributors carry. For popular, high-end products, demand may exceed supply, and stores receive limited allocations. Liquor stores may specialize by beverage type. A store specializing in wine may carry 4,000 brands, while a liquor superstore may offer between 20,000 and 70,000 different alcoholic beverages.
The three-tier distribution system for alcohol includes producers or importers, distributors, and retailers. States regulate the distribution system to restrict direct sales from producers to retailers or consumers, and to collect excise taxes through distributors. Most liquor stores buy inventory from licensed local distributors, some of which have exclusive rights to sell certain beverages. Distributors collect excise taxes based on a beverage’s alcoholic content, essentially increasing the wholesale price to the retailer.
Europe has the highest alcohol consumption by liters of pure alcohol per capita. Off-premise alcohol consumption is increasing at the expense of on-premise drinking there. Prices on off-premise alcohol are considerable lower than on-premise prices with retailers, especially supermarkets, able to purchase large quantities of alcohol at lower prices through volume discounts.
The US beer, wine, and liquor store industry includes about 34,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $50 billion.
COMPETITIVE LANDSCAPE
Personal income, consumer tastes, and entertainment trends drive demand. The profitability of individual companies depends on effective marketing and competitive pricing. Large companies offer wide selections and deep discounts, but small companies compete by offering specialized merchandise, providing superior customer service, or serving a local market. The US industry is highly fragmented: the top 50 companies account for less than 25% of sales.
Liquor stores compete directly with grocery stores, warehouse clubs, convenience stores, and some drugstores, and indirectly with restaurants, bars, and other establishments that serve alcohol. In addition, direct-to-consumer sales are growing as restrictions are eased.
The growing list of online players in the alcohol sales and delivery business include Blue Apron, which ships exclusive wines; alcohol delivery startups such as Drizly and Postmates; and Amazon. Amazon's 2017 purchase of Whole Foods Market increased the number of cities served by its Prime Now membership service, which delivers alcohol as well as groceries. Amazon's voice-activated assistant Alexa can even be used to order alcohol in some areas.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products are alcoholic beverages, accounting for about 90% of the industry's revenues. Tobacco products and smoking accessories, account for nearly 5% of sales and soft drinks and nonalcoholic beverages (less than 5%). Other products (nearly 5%) include automotive fuels and candy, prepackaged cookies, and snack foods. State laws dictate the type of alcohol sold in a particular venue. In some states, only liquor stores can sell hard liquor.
Liquor stores may also be known as “package stores,” referring to the post-Prohibition law requiring stores to cover or “package” alcoholic beverages in public. Each state has an alcohol control agency, and state laws regulate the sale of alcohol, including specifying what types of retailers may sell alcohol, and limiting days and hours of operation. Most states are open or license states, and allow private ownership of retailers. In control states, the state government controls liquor distribution and may operate retail liquor outlets. State-run liquor stores may be referred to as ABC (alcoholic beverage control) stores.
Liquor stores sell alcohol for off-premise consumption, and require a state-issued license to operate. In some areas, stores may require additional licenses from municipal or county authorities. Liquor licenses are generally more expensive and difficult to obtain than beer and wine licenses. Some states use quota licenses, which limit the number of liquor licenses based on the population. In quota states, new liquor stores must either buy an existing license or enter a lottery for a new quota license.
Liquor stores include independent stores (“mom-and-pop”); local and regional chains; and state-operated outlets. Independent stores may be small and typically serve local markets. An independent store or chain may also act as a sales agency for a state and work on commission. Large liquor stores or superstores offer huge selections, and typically sell other products like groceries and tobacco. Companies locate superstores close to grocery stores, mass merchandisers, and other high-traffic retailers.
Independent liquor stores can be as small as a few thousand square feet, and typically generate less than $1 million annually. Superstores generally exceed 10,000 square feet, and can generate between $1 and $5 million annually. Extremely large superstores like US-based Spec's and Canada's Alcanna (formerly Liquor Stores N.A., and dba Liquor Depot, Wine and Beyond, and Brown Jug) can exceed 40,000 square feet.
State laws may limit inventory selection by dictating the types of alcohol sold. In a few states, liquor stores can't sell beer, while grocery stores can't sell liquor. In control states, inventory is limited to brands that state-run distributors carry. For popular, high-end products, demand may exceed supply, and stores receive limited allocations. Liquor stores may specialize by beverage type. A store specializing in wine may carry 4,000 brands, while a liquor superstore may offer between 20,000 and 70,000 different alcoholic beverages.
The three-tier distribution system for alcohol includes producers or importers, distributors, and retailers. States regulate the distribution system to restrict direct sales from producers to retailers or consumers, and to collect excise taxes through distributors. Most liquor stores buy inventory from licensed local distributors, some of which have exclusive rights to sell certain beverages. Distributors collect excise taxes based on a beverage’s alcoholic content, essentially increasing the wholesale price to the retailer.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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