Kevin McKenzie

USA TODAY NETWORK – Tennessee

Six months after Costco Wholesale warehouses in Tennessee have been able sell wine, the members-only retailer is evicting two wine and liquor stores in Memphis that have leased space at the stores for years.

Southwind Wine & Spirits, at the southeast Memphis Costco warehouse on Hacks Cross and Winchester, and Wolfchase Wine & Spirits, at the Cordova warehouse on North Germantown Parkway near Interstate 40, must move out by the end of January, store managers said.

Costco, an Issaquah, Washington-based retailer with $116 billion sales for its 2016 fiscal year, began selling wine in five warehouses in the state in July after Tennessee lawmakers in 2014 approved allowing grocery store wine sales.

After repeated requests for comment, a Costco spokeswoman said by email on Wednesday that the company isn't able to provide a response at this time.

“They don’t want us here, so we’ve found a good location and we’re going to pack up and move,” said John Anderson, general manager at Wolfchase Wine & Spirits. “It’s just another case of lawmakers here took away from the little people and gave to the big people.”

Wolfchase, neighboring the Costco entrance for 16 years, plans to sell there through Jan. 19 and reopen on Jan. 25 in a commercial strip center at 465 North Germantown Parkway near Trinity, in front of Super Target and next to Moe’s Southwest Grill. The store will retain its name, Anderson said.

Southwind Wine & Spirits saw the handwriting on the wall in 2014, when Costco emailed a notice to vacate the store shortly after the wine-in-grocery stores legislation passed, said Ryan Gill, general manager.

A Costco corporate executive ultimately said that notice was an error, but Southwind’s owners opened a second store, Doc’s Wine, Spirits & More at 6645 Poplar in Germantown’s Carrefour at Kirby Woods shopping center.

Doc’s was designed to compete with a market changed by grocery store wine sales, said Gill, also general manager of Doc’s.

Southwind’s last day is Jan. 21, he said. With 10 employees, including five full-time workers, about half may get jobs at Doc’s. “We’ll do our best to keep as many as we can,” he said.

The Southwind store space leased from Costco is only 3,000 square feet, but as recently as three years ago was among the top three outlets in Memphis in total sales, Gill said.

“That’s another thing that’s kind of sending some shock waves across the industry in the state, is if a store that big can just get upended by the whole wine-in-grocery-stores thing, then who’s safe?”

As their landlord, Costco didn’t ignore that fact that their tenants are competitors for wine sales, although not liquor sales.

“Once they started selling wine, they were telling us what we can and can’t carry, all that kind of stuff,” said Chris Smith, a manager at Wolfchase Wine & Spirits. “It’s just a big hassle being next door to them.”

With Costco as landlord, Memphis wine & spirits retailers adjust to competition next door

Grocery store wine sales have siphoned business from traditional liquor and wine outlets, the managers said. Their locations steps away from Costco’s doors clearly show the impact of losing wine sales, their most profitable product.

“We lost 40 percent in business, but I lost 50 percent in profit and you know that’s hard to get over,” Anderson said at Wolfchase.

Anderson predicted that the new year will see more traditional liquor and wine stores closing, not to move, but because they can’t make it.

At Southwind, which added more liquor to its shelves, “we were down because they took a huge chunk of the wine, but liquor sales were actually 10 percent up since July,” Gill said.

While Anderson and Gill said they understood that all five liquor and wine stores in Tennessee leasing from Costco weren’t getting new leases, employees or managers contacted at the two stores in the Nashville area and one in Knoxville said Costco has not moved to boot them out.

“Nashville and Knoxville got leases,” said Tom Miller, manager of Knoxville Wine and Spirits, which leases from Costco.

“We just carry wines that Costco doesn’t carry, wines that people are used to buying from us,” Miller said. “It’s hurt, but we’re not going out of business or anything.”

Gill said he thought things were moving in the right direction with his landlord, with discussions of a new two-year lease. But in October “kind of out of the blue again we get this notice saying that you have to be out at the end of the year,” he said.

The store negotiated to stay open for Christmas and New Year’s Eve sales, moving the date to vacate to Jan. 31, he said.

“It’s been pulling teeth trying to find out why they’re doing this,” Gill said. “It’s been six months after wine starts being sold in grocery stores and we’ve known for two years that it was going to happen, so it’s why now and why not give us more advance notice?”