When wine walked into grocery stores: Examining the (un)intended economic consequences of wine sale reform in Tennessee

Abstract

Alcohol policy liberalization is a contentious issue in the United States, including debates over whether grocery stores should be allowed to sell wine. This issue reflects a dilemma between accommodating consumer convenience, promoting wine industry growth, and generating tax revenue, versus concerns about potential harm to liquor stores. However, there is a lack of empirical studies evaluating the dual impacts of wine sales liberalization following policy reforms. This study uses synthetic control methods and synthetic difference-in-differences to provide robust evidence on the impact that wine sale liberalization has on liquor store closures, employment outcomes, and wine excise tax revenue. Drawing on proprietary NielsenIQ data and official government statistics, the study provides a multidimensional assessment of how a 2016 Tennessee policy reform affected wine sales and supply chain dynamics. The results suggest that allowing grocery stores to sell wine had a statistically insignificant impact on the number of liquor stores, while also increasing wine excise tax revenue. However, there is mixed evidence of a potential short-term decline in liquor store employment, where the statistical significance of the point estimate depends on the statistical approach. Recognizing that policy reform can have unintended economic consequences, these results provide valuable, policy-relevant insights for stakeholders navigating the evolving landscape of alcohol distribution.