For Total Wine, it’s total war against alcohol regulations
Total Wine & More is waging total war on the nation’s alcohol laws — and Massachusetts is the new front line.
The largest retailer of beer, wine, and liquor in the country, Total Wine has successfully challenged longstanding alcohol laws in numerous states, tilting the marketplace to its advantage through a mix of litigation, lobbying, and rallying support from customers.
Alcohol sales on Sundays in Minnesota? Allowed as of February, thanks to a years-long campaign by Total Wine. Later closing time for liquor stores in Connecticut? That was also Total Wine. Ditto for overturning a ban on volume discounts in Maryland, and lifting the cap on the number of store licenses in South Carolina.
In Massachusetts, Total Wine has sued to invalidate a state regulation that prevents retailers from selling alcohol below cost, a common practice in other industries. The company is also about to launch a public relations campaign here challenging a state rule prohibiting alcohol retailers from issuing discount coupons and loyalty cards. It has submitted the proposed changes to a task force convened by Treasurer Deborah Goldberg to streamline the state’s alcohol laws.
“It’s not unusual for a large company to use its legal and government affairs resources to change the status quo so its business model gets accommodated,” said Marc Sorini, a national alcohol attorney. “But Total Wine has been far more aggressive than most retailers, and they’ve won a number of important cases.”
Total Wine spokesman Ed Cooper said the company’s advocacy is always intended to help consumers, a mantra handed down from brothers David and Robert Trone, who cofounded the chain in 1991.
The pair “are fanatical about what’s best for the customer,” Cooper said. “In all of our company meetings, there’s an empty chair in the room, and that’s the consumer.”
Based in Bethesda, Md., Total Wine began with a few shops in Delaware and Pennsylvania, and now has more than $2 billion a year in sales and 157 locations in 20 states, including four in Massachusetts. Many of its outlets approach 50,000 square feet, or more than the average supermarket.
As with other big-box retailers such as Walmart, Total Wine’s arrival in town can squeeze smaller competitors. And like Uber and other market disruptors, it is willing to push the regulatory envelope.
In 2016, Total Wine was slapped with a license suspension by the Massachusetts Alcoholic Beverages Control Commission for selling liquor below its costs. The company wants to use a practice common in other industries: bring consumers into stores with irresistible bargains, and then sell them other, higher-margin products.
Grocery stores often do that with staples, and electronics retailers with components such as printers.
The practice is not allowed in the liquor industry, in order to discourage excessive drinking. But Total Wine has sued Massachusetts regulators to get its sanction overturned, arguing the pricing requirement is a relic that’s bad for shoppers and violates federal antitrust laws.
The ban on loss leaders and other regulations also have the practical effect of protecting smaller package stores from large competitors like Total Wine that could otherwise undercut them. Other such measures include local ownership requirements and prohibitions on wholesalers giving retailers discounts on large orders.
“In a number of states, [Total Wine has] made it much more accommodating for very large retailers by changing the laws,” Sorini, the attorney, said. “It allows them to take advantage of their scale.”
Achieving greater scale was the motivation behind the company’s most recent success, in South Carolina, where the state’s highest court in April abolished a cap on the number of retail alcohol licenses one owner could hold after Total Wine challenged it.
And in its home state of Maryland, the company fought for 10 years to overturn a ban on retailers getting volume discounts, a battle that ended in 2009 with a court striking down the ban and other aspects of the state’s pricing rules.
Besides litigation, Total Wine has successfully changed laws by whipping up consumers with political-style campaigns like the one about to debut in Massachusetts over coupons and loyalty programs.
To legalize alcohol sales on Sundays in Minnesota, for example, Total Wine created the “Minnesota Consumers First Alliance.” Armed with the slogan “Why Not Sundays?,” the group advertised heavily on social media, backed pro-Sunday-sales candidates for office, and encouraged citizen groups to deluge state legislators with phone calls. After years of effort, a bill legalizing Sunday sales became law in February. Total Wine has also helped pass Sunday sales laws in Delaware, Georgia, and South Carolina.
The company has even intentionally flouted rules to make its point. Last August in Connecticut, Total Wine bought full-page newspaper ads proclaiming it would sell liquor for less than state-mandated minimums, to publicize a federal lawsuit challenging the state’s complex pricing law.
The chain later paid $37,500 to regulators to settle the violations and restored the higher prices. But it also placed signs outside its Connecticut stores that read, “the state has demanded we take our prices back up to their mandated minimums,” and urged customers to call their legislators. The lawsuit is still pending.
Cooper, in an interview with the New Haven Register in September, compared the pricing gimmick to “civil disobedience,” saying it was “something we felt we needed to do for our customers.”
That narrative is a consistent feature of Total Wine’s war: The company casts itself as a stand-in for consumers, bearing the wrath of greedy package store owners who can’t be bothered to compete and of trigger-happy regulators.
Local package stores see things differently. To them, the seemingly innocuous customer-friendly changes pushed by Total Wine add up to a sinister whole, rigging the marketplace against smaller operations and accelerating the homogenization of American retail.
Total Wine often opens its 20,000- to 50,000-square-foot megastores close to a competitor. Its store in Everett is located just down the road from another package store, and a 10-minute drive from the family-owned Atlas Liquors.
“We’re absolutely feeling it,” said Natalie Fernsebner, a third-generation executive at Atlas. “Our customer counts are down. But we’re fighting for our lives here. I feel an awesome responsibility to not only my family but the families that work for me.”
She acknowledged Total Wine’s stores are attractive to shoppers — they’re clean, have low prices, and room for tastings and events that draw crowds — and said Atlas and other competitors have begun renovating their stores to keep up. But she also complained the company engages in predatory pricing on some products, while reaping high margins on private-label booze.
“There’s just something so diabolical about the way they operate,” Fernsebner said. “It’s not the way I’d do business.”
Sorini, however, said warnings of doom for package stores are somewhat overblown.
“Walmart doesn’t put every small retailer out of business when it comes to town,” the attorney said, “but it sure makes them sharpen their competitive edge.”
Adding to the angst of small package stores is the sharp tongue of David Trone, who’s infamous for dishing out his contemptuous criticism to regulators and competitors alike.
“They’re buddies and they all charge the same high prices, they meet at the same clubs, and they all make lots of money,” Trone told the Minneapolis/St. Paul Business Journal in 2014, referring to liquor store owners in Minnesota who were lobbying to keep Total Wine out of their state. “They’ve chosen to compete by trying to stop our entry into the market by using government as a foil to stop competition, which enables them to keep their high prices and maintain, in many cases, their dirty stores.”
Trone declined to be interviewed.
Among his earliest brushes with the alcohol powers was a three-year stretch from 1989 when Pennsylvania authorities arrested him three times following complaints from mom-and-pop beer stores.
In 1991, Trone, his wife, and his brother were indicted after prosecutors said he had illegally side-stepped a Pennsylvania ban on owning more than a single beer retailer by installing friends and family members as straw owners of other stores.
A judge eventually threw out most of the charges, and prosecutors dropped the remainder in exchange for $40,000 to cover the cost of the investigation. Years later, while running an unsuccessful campaign for a congressional seat in Maryland in 2016, Trone recalled in an interview with Bethesda magazine how he had rejected a plea offer from the Pennsylvania prosecutors.
“We talked about it and told them they could drop dead,” Trone said, “because when you’re right, you’re right, and we weren’t going to bend for anyone.”