Should States Permanently Legalize the Carryout Sales of Alcohol for Restaurants?

It’s been just three months, but the effects of the novel coronavirus have changed the future of the restaurant industry forever. Those that didn’t entirely shutdown operations scrambled to create new streams of income. One such stream is the ability to sell alcoholic beverages for off-premise consumption. Traditionally, this was not permitted, but varying emergency legislations passed in all but a handful of states allowed restaurants to offer beer, wine and, in some cases, batched cocktails to go. Some states have already begun discussions to make this legislation permanent, but whether restaurants will be permitted to sell carryout alcohol post-pandemic remains to be seen.

“This could be an interesting game changer for restaurants to be able to capture some of that lost revenue to competing forces [and] to consumers nervous about dining out,” says Alpana Singh, host of Check, Please and co-owner of Terra & Vine in Evanston, IL, which recently began offering wines and batched cocktails to go.

“One of the greatest shifts I’ve seen in the last three months is the role of the restaurant,” Singh continues. “It’s not just limited to within the four walls of the business space itself. We’re moving beyond that. We’re extending our brand into the homes of the consumer…extending the experience beyond just the food component [completes] the package.”

To remain competitive in this area, Singh is selling wines at retail prices. While this is a dramatic loss in beverage revenue (restaurants normally markup the price three to five times more than what they paid for their inventory), she hopes to make up for it by way of volume.

Lauren Hayes, general manager and wine director of Pammy’s in Cambridge, MA, feels lucky that she already had a sizable inventory of fine wines ready for sale. “It was really valuable for us not to invest money but just to have cash flow,” she says.

Hayes is also selling most of her wine inventory at retail price. “We can’t really function off of retail percentages because our business models aren’t designed with them in mind, but for takeout wine to be successful, you have to match the market value for the product.”

For Thunderbolt, a cocktail bar in Los Angeles, approximately 75% of pre-pandemic sales were beverage based. They wouldn’t have survived the shutdowns without the ability to sell alcohol for off-premise consumption. Still, these sales are not bringing in any significant profits.

“We’re not trying to hit bar margins on this stuff,” says Mike Capoferri, who owns Thunderbolt. “We have very much leaned into retail pricing. Margins have completely gone out the door, we’re just interested in cash flow.”

Despite the fact that alcohol to-go is not a sizable stream of revenue, most members of the restaurant industry are very keen on states making this legislation a permanent one.

“I’ve always thought liquor rulings and licenses benefit distributors and large liquor stores and didn’t really care about small businesses,” says Hayes. “We’re at major risk of losing so many small businesses right now, so why limit them with legislature? Why not give someone the option to fend for themselves…and survive?”

Washington D.C.-based sommelier Felicia Colbert believes that restaurants deserve this additional form of income because the industry is so vulnerable. “I think people have this misconception that restaurants make a lot of money, which is not true,” she says. “Restaurant margins are quite slim and the largest way that restaurants can really see profit is in alcohol.”

Restaurateurs aren’t the only ones advocating for the legislation to become permanent. Steve Gross, vice president of state legislature at Wine Institute, thinks it would only augment and improve the current three-tier system, which has been evolving for some time. From new rules on direct-to-consumer shipping of wine, as well as tastings set up in big box retailers, the marketplace as already changed.

“It’s just another means by which consumers could have access to the product,” says Gross.

Michael Kaiser, vice president of government affairs at Wine America, considers this a bonus for wineries and distributors as well. “Wineries support restaurants being able to deliver alcohol because restaurant accounts are a good part of the winery business,” he says. “This allows them to keep that revenue stream open too.”

Kaiser notes the only pushback that has occurred so far is coming from wholesalers. “I think any time there’s a drastic change to [the three-tier system], they have concerns,” he says. “But, at the same time, people are still going to wine shops and retailers so that system is still in place in a lot of ways.”

In fact, retailers have seen marked sales growth during the pandemic. Total Wine & More reported a 19.2% increase in sales from the same period as last year and the company is openly moving forward with new locations. Representatives from Total Wine declined to comment on whether they support this new path forward for restaurants but have reportedly already employed lobbyists to fight against making the legislation permanent.

“For those who choose to oppose something like this, to me, it seems shortsighted,” says Gross. “We think there’s plenty of room for multiple chains of business.”