An Amazon Fresh employee stocks a JWO store. Image Credit: Getty Images.
A confidential Amazon document obtained by Motherboard shows how the company wanted to make an aggressive push into the alcohol delivery market by launching a multi-state lobbying campaign to change alcohol licensing laws and regulations, in concert with a “limited government” think tank.The document, titled 2021 Alcohol Public Policy Strategy, states that Amazon needed to defeat “Amazon-specific legislative threats” related to self-checkout in California “as it will be a highly-politicized union issue,” and that it thought the R Street Institute (RSI) could “shield us” by “providing cover when involvement by large retail brands is detrimental to progress.” Essentially, Amazon wanted to push its public policy agenda via a third party without the public understanding it was behind this effort.
Even when ignoring the actual consequences of more lenient alcohol delivery laws entirely, the document lays bare the political power Amazon wields, and the matter-of-fact way it internally discusses exerting pressure and changing laws across the country in order to establish dominance in a market where it seeks greater profits. Amazon planned to change state alcohol laws to its benefit in order to “unlock” the alcohol market in 2021, according to the document. The company wanted to take a “more aggressive strategy” to modernize alcohol distribution by eliminating state licensing caps, fully legalizing alcohol delivery, and competing directly with package stores and wholesalers.“Our state-by-state approach has proved successful the past three years in securing key victories and opening new geos for expansion,” the document reads. “Unfortunately, it grows more difficult each year to achieve business wins as Amazon’s profile increases, and we are forced to spend more time and political capital defending our current geos and policies rather than proactively changing alcohol laws.” Amazon, the document reads, wanted all of its outlets to have as many alcohol licenses as possible. It planned to license facilities and open alcohol-carrying stores in seven new states, five of which would require a “high degree of effort” to authorize, the document reads. It continues to say that Amazon would be doing “positive regulatory and political outreach” in its target neighborhoods up to a year in advance to garner community support.
One challenge for Amazon is that its physical stores, Fresh and Go, often use its infamous Just Walk Out (JWO) technology, and it’s difficult to verify a customer’s age to purchase alcohol if they simply leave the store before an employee can get to them. The document states that Amazon was expecting that it would “need to defend against Amazon-specific legislative threats” regarding JWO, because in California—one of its target alcohol licensing states—you can’t self-checkout with alcohol. “The Calif. ABC has indicated that neither Just Walk Out nor the Dash Cart qualify as self-checkout,” the document reads, referring to the state’s Department of Alcoholic Beverage Control, which regulates alcohol laws and distribution. “We expect the UFCW to file a new bill in 2021 that would redefine self-checkout to include both the Dash and JWO. We will need to employ [the public policy team’s] existing resources in the state to defeat this measure, as it will be a highly-politicized union issue.” The UFCW, or United Food and Commercial Workers, represents 1.3 million grocery and retail workers, among others, across North America. Indeed, after Amazon launched its cashierless technology in Fresh stores, the union issued a statement saying the move was potentially detrimental to the livelihoods of over 100,000 workers.
“With this growing job threat, those who will pay the price for Amazon’s greed are America’s essential workers and their families,” the union’s president Marc Perrone said at the time. “Make no mistake, Amazon has declared war on essential workers.” But the company intended to be proactive about that, the document shows. In order to “defeat” the impending move by the UFCW, it had “started working with [the] CA team to preview the Fresh stores with key CA legislators, highlighting our community engagement, and job creation.” A UFCW spokesperson did not immediately respond to a request for comment. Amazon also said it could create jobs by changing state laws to allow alcohol delivery, the document states. It identified six priority states—Colorado, Massachusetts, Nevada, Pennsylvania, South Carolina, and Wisconsin—in which to “unblock delivery and other alcohol-related blockers,” but only those six because of projected alcohol sales from physical stores and the “weight of effort to change laws.” The reform effort would be seen as a “win/win” for both the states and the company. “Messaging will include increased state revenue, assistance to small businesses (restaurants, smaller grocery, and liquor stores), and adding employment opportunities all while promoting consumer safety during Covid-19,” the document states. The revenue in question would come from delivery fees.
An Amazon spokesperson told Motherboard in an email, “It’s common for people at Amazon to put ideas in documents that never make it past the draft stage and are never used to make decisions. The document referenced was drafted in 2020—more than two years ago—and not only was it never approved or implemented, the items discussed in the document are no longer relevant.” The spokesperson also said that the company advocates for alcohol delivery across the U.S.Delivery is one proposed step in the company’s effort toward “Three-Tier Modernization,” described in detail in the document. The three-tier system is how the U.S. government regulates alcohol brewing and distribution, and it has been in place since the end of Prohibition in 1933. Breweries have to send their product to an independent distributor, which then sells it wholesale to retailers. The system was designed to regulate quality checks and prevent one brewer from dominating the market by disallowing any direct ties between brewers and retailers. Amazon’s other proposed modernization step is a “coalition effort with like-minded retailers” to get rid of licensing caps in certain states and “unblock” central warehousing. Some states, like Maryland, have set numbers on how many alcohol licenses can be given out. Getting rid of those caps would allow the company to get as many licenses as possible.
Central warehousing, on the other hand, is a bolder move, the document suggests. The company would share its Amazon Fresh warehouse space with other business lines to increase efficiency and “negotiate quantity discounts with wholesalers.” “We will ally with other large retailers (e.g. Walmart and Kroger) to develop an engagement strategy, as the likelihood of success is much lower if we pursue changes alone. In this debate, we will set ourselves against package stores and wholesalers, as well as reluctant regulators, and expect to face media scrutiny. This approach chips away at the three-tier system, without introducing new risk to our existing and future alcohol licenses.” The document also suggests that the Amazon public policy team has worked with the R Street Institute (RSI), a think tank with a mission to promote “support of free markets and limited, effective government.” RSI is listed as a provider of evidentiary support for convincing governments that alcohol delivery is good. It has long advocated for a revision to the three-tier system and, generally, freer alcohol policy—a particular focus of resident senior fellow C. Jarrett Dieterle—and the document states that Amazon supported it in 2019 for the 2020 legislative session. “As we engage in these higher-profile, higher-risk activities, we will rely on RSI to shape the discourse in each state with a series of strategic media engagements, timely research to inform our advocacy tactics, and be the public face of overall reform efforts,” the document states. “Through RSI, we will facilitate allied activities with Walmart, Kroger, and other retailers to drive our three-tier modernization plan. They can shield us from sensitive issues through their established Free the Drinks initiative, providing cover when involvement by large retail brands is detrimental to progress.”An RSI spokesperson wrote to Motherboard in an email, “The R Street Institute maintains a wide range of supporters, which includes both foundations and corporations. All of our research and programming are independent from our donors, which is the key to our work and enables us to build broad coalitions across the political spectrum and develop real solutions through the policy process. As a general policy, R Street does not disclose or discuss its donors, like other organizations on the left and right.” An Amazon spokesperson told Motherboard that, although it provides general support to RSI because the two are aligned on a variety of issues, it is not currently working with RSI on alcohol policy.