Wal-Mart Sues Texas Over Liquor Sales

August 28, 2016 by Paul Ausick

In Texas, water and oil are not the only things worth fighting over. So is whiskey.

In February of 2015, Wal-Mart Stores Inc. (NYSE: WMT) sued the state of Texas which had refused to grant a liquor sales license to the retail giant. According to a report at abc13.com, Wal-Mart sells beer and wine in its 574 Texas stores, but it wants a piece of the state’s $14 billion hard sales.

The suit was scheduled to go to trial next month, following a judge’s ruling that the Texas Package Stores Association could not intervene in the case on the side of the state’s Alcoholic Beverage Commission. That ruling was overturned last week and the judge will have to set a new trial date, most likely early next year.

Texas law forbids a publicly traded company from owning package liquor stores. That bit of the state’s regulations was added in 1995 to a law first enacted in 1935 following the repeal of prohibition. The law also forbids liquor sales in grocery stores, a restriction Wal-Mart has said it would meet by “dedicating a distinct piece of property at stores to the liquor operation.”

State law also prohibits a single owner from holding both a beer and wine license and a package store license. Liquor license holders are limited to owning no more than five package stores, but there are ways around that limitation. A website called Wine Curmudgeon summed up the effect nicely:

For the first 60 years after repeal, the biggest liquor stores had a gentleman’s agreement not to compete outside of their markets. So Spec’s was in Houston, Sigel’s (no relation) was in Dallas, Pinkie’s was in west Texas, and Majestic was in Fort Worth. Everyone made money, and everyone was happy.

Alcoholic beverages were the fourth-most popular U.S. beverage in 2014, with consumption totaling 7.7 billion gallons. Soft drinks led the 51.3 billion-gallon beverage market with consumption of 12.8 billion gallons, followed by bottled water (10 billion gallons), and coffee (9 billion gallons). Hard liquor also posted the highest year-over-year growth in 2014, up 1.6% compared with an increase in wine sales of 0.7% and a drop of 0.5% in beer sales.