What grocery wine did to Colorado liquor stores

Colorado let grocery and convenience stores sell wine starting March 1, 2023, and the trade press wrote the obituary that same week. The forecast was extinction: an industry estimate reported by the Colorado Springs Gazette had as many as 400 more liquor stores closing by the end of 2026.1 Three years in, the actual body count is much smaller. Between 100 and 150 of Colorado’s independent liquor stores have closed since the law took effect, against roughly 1,603 licensed retail liquor stores operating when it did, per state records the Gazette cited in December 2024.1 That is under 10% of the field. The category did not collapse. It sorted.

That distinction is the whole story for a buyer, because the stores that died and the stores that adapted were not running the same business, even though they looked identical from the parking lot.

Start with what actually changed on March 1, 2023. Proposition 125 passed 50.6% to 49.4% out of about 2.4 million ballots, per Ballotpedia, and on the effective date it automatically converted the state’s fermented-malt-beverage licenses, the 3.2 beer permits held by grocery and convenience stores, into beer-and-wine licenses.2 The Gazette, citing state figures, counted 1,934 outlets converted overnight.1 The number of storefronts allowed to sell wine went from about 1,603 to roughly 3,500 in a day. No liquor store lost a customer to better wine. They lost customers to a shorter drive.

Here is the part the obituaries skipped. Proposition 125 was a wine measure, not a spirits measure. Grocery and convenience stores got beer and wine. They did not get whiskey, tequila, or vodka. Full spirits still require a retail liquor store license or one of the rare liquor-licensed drugstore permits, and in April 2025 the legislature froze the latter. Governor Jared Polis signed Senate Bill 25-033 prohibiting any new liquor-licensed drugstore license, leaving the 36 already issued as the entire grocery-spirits universe in the state, per Colorado Public Radio.3 Polis signed it saying he had “serious concerns” the bill moved Colorado “backward, not forward,” yet it cleared the House 55 to 8 and the Senate 28 to 5, and Amazon, Albertsons Safeway, King Soopers, Target, and Walmart all opposed it.3 They understood the stake. Spirits are the one high-margin category the independent store still owns outright.

So a liquor store’s exposure to grocery depended entirely on its own sales mix. That is where the sorting happened.

The stores that died were selling wine as traffic

Wine was never the margin. It was the traffic. A customer came in for a familiar cabernet and left with a fifth of bourbon and a six-pack, and the wine trip paid for the rest of the cart. Prop 125 severed that trip. Colorado Independent Liquor Stores United told the Gazette that most member shops saw business fall 20% to 50% after the conversion, with the damage concentrated in wine and, less expectedly, in beer.1 The concrete cases show the mechanism. Locals Liquors in Silverthorne reported wine sales down $222,184 year over year, per Summit Daily.4 Lukas Liquors in Highlands Ranch closed in the summer of 2024 after 27 years, its owner telling Supermarket News that competitors with “bigger pockets” had boxed him out.5 The most exposed were the convenience-format shops: small footprint, wine-and-beer heavy, sited to catch a quick stop that a King Soopers now catches first.

The money that moved is worth sitting with. In 2022, the year before the change, IRI-tracked Colorado stores sold about 7 million cases of wine, close to $1 billion in trackable retail sales, per the Colorado Sun.6 Prop 125 put that revenue in front of a channel where King Soopers alone held about 28% of the state’s grocery market, per Axios.7 A store built on a slice of that billion dollars was structurally short. A store built on spirits and service was not.

The survivors kept the category grocery cannot carry

The stores still standing leaned into the two things a grocery aisle cannot replicate: spirits and curation. Owners interviewed by Colorado Public Radio a year in described the same moves, deepening the spirits and craft selection, training staff to actually recommend a bottle, adding delivery, and competing on parking and expertise rather than on a wine wall. One owner told CPR he had lost roughly 40% of revenue and half his wine sales and was diversifying into everything a supermarket could not stock or explain.8 The through-line is that the durable business was never the wine. It was the depth of a spirits selection no grocer carries and the person behind the counter who knows it.

This is the same shape I found in Denver’s disappearing delicatessens: a business whose signature draw runs on thin economics survives only when it is bolted to a second product that carries the margin. For the deli it was bagels and wholesale cured meat under a money-losing pastrami. For the liquor store it is spirits and expertise under a wine case that grocery just commoditized. Strip the protected layer away and what is left is a convenience stop competing with King Soopers on price, which is not a competition.

Where I land

When a business is exposed to a category a larger competitor can legally commoditize, underwrite the protected category, not the traffic driver.

The wine on the shelf was the reason customers walked in, so it is the reason a buyer would fall in love with the store. It was also the one thing the state could hand to every grocery chain in a single vote, and did. The value that survived the vote sits in the parts a supermarket cannot legally or practically take: the spirits license, the craft and allocated bottles no chain will shelf, the counter staff who turn a purchase into advice. That is the layer I would pay for and the layer I would test in diligence, by asking what share of gross profit comes from spirits versus wine and beer. A Colorado liquor store that answers “mostly spirits” is a real business. One that answers “mostly wine” already lost the argument in November 2022; it just has not finished losing it yet. This is the kind of structural question our acquisition criteria are built to force early, before the romance of a category sets the price.