Little Rock Costco store OK'd for liquor permit after state reverses denial

Construction continues Wednesday on the Costco Wholesale on Chenal Parkway in Little Rock. State regulators have approved a retail liquor permit for the membership retailer to sell liquor in an adjacent store. The Costco is set to open July 21.
(Arkansas Democrat-Gazette/Staci Vandagriff)
Construction continues Wednesday on the Costco Wholesale on Chenal Parkway in Little Rock. State regulators have approved a retail liquor permit for the membership retailer to sell liquor in an adjacent store. The Costco is set to open July 21. (Arkansas Democrat-Gazette/Staci Vandagriff)

State regulators on Wednesday granted a liquor permit transfer to Costco Wholesale, meaning the membership retailer is on track to sell spirits from a store attached to its under-construction Little Rock site.

Doralee Chandler, the director of the Alcoholic Beverage Control Division, denied the transfer after Sen. Kim Hammer, R-Benton, objected. Hammer's district includes the 16901 Chenal Parkway site, and the division's director is required by statute to either deny an application or take it to a hearing if any member of a governing body representing the area in which the permit will move expresses opposition.

The Alcoholic Beverage Control Board reversed the denial after more than two hours of cross-examination by attorneys for Costco and the United Beverage Retailers of Arkansas. Attorneys for Costco had appealed the denial, leading to Wednesday's hearing.

Representatives from Costco and the Little Rock Regional Chamber of Commerce testified to the benefits of allowing the plans for the liquor store to proceed and the company's compliance with the law, while business owners in the beverage sector argued that allowing the big-box retailer into the market would be damaging to their stores.

The store would share a wall with the larger retailer but have a separate entrance and be a separate operation, a setup referred to as a "pod," and a Costco membership wouldn't be required to shop there.

Hammer, who didn't attend the meeting, said in an interview afterward that his objection was about ensuring that Costco "followed the letter of the law," and about concerns on the store's proximity to a day care center on Kirk Road and whether the number of liquor stores in the city was out of compliance with state law.

"I think the whole intent was to make sure it could get before this board, so it could get vetted out," he said. "Some constituents that own small businesses felt like they were being picked on by big box stores, being overlooked."

Under state law, there can be only one retail liquor store for every 7,500 people per county. Costco had applied for an existing liquor permit that was most recently held by Stagecoach Wine & Spirits.

Jimmy Simpson, an attorney representing the United Beverage Retailers of Arkansas, argued that Costco would be using the permit in a different way than did the store that previously held it, citing a recent article from a Costco executive who stated that the company's business model includes customers who visit the store to buy liquor. He also said there are two liquor stores in the immediate vicinity of the site, as well as a Kroger that sells beer and wine, and 20 liquor stores within 5 or 6 miles of the Costco.

Tom Zeien, who will be the general manager at the Little Rock store, said Costco's liquor business wouldn't be directly competing with nearby liquor stores such as Legacy Wine and Spirits across the street. The store wouldn't carry every flavor and size, only top items based on what's popular in the area.

Zeien added that Costco could ramp up traffic in the area, which could be good for the other stores, and the convenience of being able to stop by the liquor store when leaving the bigger retail store.

"People are very excited about us coming," Zeien said.

Based on numbers from other stores, he estimated that the Little Rock site would have between 20,000 and 30,000 members in its first year.

David Bevans, the owner of Legacy Wine and Spirits, argued that Costco would push their private label products on customers, drawing them away from stores like his and creating unfair competition.

Board member Jamie Anderson indicated that he thought liquor buyers would go to the stores that had what they wanted specifically, and that the other stores have the advantage of a larger selection.

Phil Brandon, president of Rock Town Distillery, also voiced opposition. He said he was there "in support of the local liquor stores that are mom and pop operations who supported my brand over the years," and that he was concerned that "this large corporation's coming in and going to be competing" with them.

The board also heard from Buckley O'Mell with the Little Rock Regional Chamber of Commerce. O'Mell said the permit transfer denial drew the chamber's attention because they felt it would set a bad precedent for the state to step in and deny a permit transfer for competitive reasons, when there had been no opposition up to that point.

In response to a question from Simpson, O'Mell said the chamber wants Costco in Little Rock whether the store sells liquor or not, but had said before that it seemed to be an advantage in meeting with community members.

Little Rock Mayor Frank Scott Jr. and Vice Mayor Lance Hines, whose area, Ward 5, includes the site, also voiced support for the liquor pod in letters to Alcoholic Beverage Control.

Alcoholic Beverage Control Board Chairman Freddie Black asked for a motion to overturn the denial, which board member Steven Smith made. Smith cited the letters of support and the site plan, which shows the day care center is more than 1,300 feet away from the store.

Board member Alex Bass seconded Smith's motion, adding an amendment that the agency conclude parts of inspection that it has not been able to do because of the site being under construction.

Costco's Little Rock store is set to open July 21.

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