2019 regulatory changes to allow Colorado to sell full-strength beer in grocery stores had minimal effect on craft brewers but the potential for positive future impacts, a new research study shows.


  • In 2019, a new state law introduced full-strength beer into grocery stores and convenience stores in Colorado, expanding how craft brewers could sell their products.
  • Two studies were utilized: a statewide survey was used to determine how the change impacted breweries, while an analysis of mobile phone geolocation allowed researchers to determine changes in consumer foot traffic patterns.
  • Nano and micro-breweries did not substantially enter the new market channels, while regional breweries gained a foothold in grocery stores that was counterbalanced by a decline in sales at liquor stores.
  • One of the biggest findings of this study was the number of barriers to entry currently facing smaller craft brewers before they can sell their products through these new market channels.

With over 400 established craft breweries and brewpubs in the state, Colorado has long since been a popular location for those looking to enter the industry.

The global beer market size is expected to increase from 690 billion to 996 billion in the next decade. As further efforts to liberalize alcohol sales in Colorado are made, such as expanding wine sales starting in March 2023, one might wonder how an increase in available market channels impacts smaller-scale, independently-owned craft brewers and sellers.

Research conducted by Dr. Nathan Palardy, assistant professor of Food and Resource Economics at the University of Florida, while he was a Ph.D. student at Colorado State University, has recently been published exploring the overall economic impact of new state regulations for beer sales in Colorado.

The regulations, classified under SB16-197 & SB18-243, have allowed the sale of full-strength beer in grocery and convenience stores since 2019 and mark the biggest change in Colorado alcohol laws since the end of Prohibition. Prior to SB16-197 & SB18-243, grocery and convenience stores could only sell fermented malt beverages below 3.2%.

“Before the policy change took effect, the general expectation was that the new retail channels would benefit the entire brewing sector,” Palardy said. “However, some craft breweries were concerned about access to grocery store shelves and the impact on sales at liquor stores.”

To understand the impact fully, two studies were conducted, one using first-hand accounts from breweries and the other accessing cellphone tracking data.

For the first study, a survey was sent to all craft breweries in the state, asking them to estimate the overall volume sold in 2017 and 2019 and the percentage sold through different marketing channels.

41% of the breweries contacted completed the survey, and it was shown that in nano and microbreweries, the impact was minimal as they did not enter the new market channels or have a decline in sales for the most part. However, regional breweries that entered these new channels saw an increase in grocery store purchases but a decline in liquor store purchases for their products, indicating the sales were simply transferred from one avenue to another.

“The minimal impact on nano-breweries was expected,” Palardy said. “As the smallest-sized breweries, these businesses typically have a taproom-focused business model that would be unaffected by the policy change. The inability of mid-sized craft breweries to enter the new market channels was more surprising, and the study identified a number of barriers to entry that smaller producers are ill-equipped to handle, including requirements for self-distributing breweries to stock and rotate their own products, supply all stores in a region, and purchase expensive insurance.”

Looking forward, Palardy said smaller breweries wishing to expand beyond the taproom may have a harder time reaching consumers as more beer is purchased at grocery stores. However, as some liquor stores responded by expanding their own craft beer selection, this may, in turn, create additional new opportunities for small breweries.

The second study looked at how the changes impacted consumers and their shopping patterns by analyzing mobile phone geolocation data. This allowed the researchers to see where these consumers were making their purchases, and it was shown that foot traffic to liquor stores did decline in the period following the policy change, suggesting consumers may instead be making their purchases of alcohol at the grocery store now that it is allowed to be sold there.

“The key takeaway is that the introduction of full-strength beer into grocery and convenience stores did not harm the regional competitiveness of Colorado’s craft beer industry, but, contrary to expectations, it did not help the sector either. Moreover, the study indicates that the recent ballot initiative to expand wine sales may further decrease foot traffic at liquor stores. Whether this poses an obstacle to expanding brewery operations will depend on how well liquor stores can adapt to the new policy environment.”

While the focus of this study was on the craft beer industry, the authors note that the new policy benefits consumers by offering greater convenience, and the increase in competition may lower prices.

Future research will compare how consumer shopping patterns changed following different levels of alcohol retail expansion (e.g.  beer vs beer+wine) undertaken in multiple states and the implications for liquor stores.

The full research article was published in Regional Studies journal and is now available to download here.



Alena Poulin
Posted: March 16, 2023

Category: Agribusiness
Tags: Food And Resource Economics

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