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Wal-Mart's liquor sales just a fifth of target
This is an archived article that was published on sltrib.com in 2005, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Two years ago, Wal-Mart Stores Inc. held a series of meetings with the world's top liquor makers at its alcohol-free headquarters in the middle of a dry county. The subject, say several people who were there: What did Wal-Mart need to do to sell more vodka, whiskey and rum?

The results of those meetings are now starting to hit store shelves. In a move partially meant to spur flagging growth at stores open more than a year, Wal-Mart is pushing into hard liquor, one of the rare product categories where the world's largest retailer is very small.

Using its classic strategy that has transformed how Americans buy everything from bread to diapers, Wal-Mart is likely to shake up the booze business with its low prices, carefully chosen products, big displays and fast deliveries. The push is changing how Wal-Mart lays out some stores and influencing where it builds some new ones. Meanwhile, liquor stores and distributors are anxiously watching to see how the giant's moves will affect them.

Wal-Mart has picked a prime partner. The Bentonville, Ark., company has teamed up with Diageo PLC, the world's biggest liquor company, much as it works with Procter & Gamble Co. and Kellogg Co. Together, Wal-Mart and Diageo are developing new merchandising and products. They have come up with a plan for a select number of Wal-Marts that triples the shelf space dedicated to spirits.

''We're putting hard liquor in our stores where we can,'' says John Westling, Wal-Mart's senior vice president for nonperishable food. ''This is an area where we are focused on growing sales.''

But selling more alcohol raises complicated issues for a company that presents itself as a folksy all-American enterprise and an arbiter of social mores. In addition to banning risque magazines from its stores and selling sanitized versions of CDs with controversial song lyrics, Wal-Mart forbids alcohol consumption on company property and at company events. When Wal-Mart executives put business meals on expense accounts, they must personally pay for any alcoholic drinks. Some store managers have balked at the effort to promote liquor sales, citing local sensitivities.

Groups such as Mothers Against Drunk Driving question whether busy supermarkets can police liquor sales as adequately as stores that sell alcohol only. Wal-Mart says it requires its salespeople to request ID of anyone who appears to be under 27 and that its training is adequate.

Wal-Mart is also finding that selling booze is a lot harder than selling toilet paper. Twenty-four states allow supermarkets to sell hard liquor, but restrictive rules make it practical for large chains to get into the business in only about 17 of them, liquor-industry experts say. Even among those 17, Byzantine laws regulate selling hours, and tough rules for getting a liquor license are common. In some cases, stores must close off aisles or sections during hours when alcohol sales aren't permitted.

The campaign is forcing Wal-Mart to bend some of its most firmly held business tenets. Everywhere it sells alcohol, state laws require Wal-Mart to buy through distributors, a layer it typically eliminates to squeeze costs. And because Wal-Mart forbids alcohol consumption at its home office, sometimes its buyers must jump through extra hoops to test the merchandise they bring into the store.

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