Chain to End Sales of Lottery Tickets-- Calls It Moral Move

Saying that too many poor people are buying lottery tickets instead of groceries, officials of a major Northern California market chain have decided to pull out of the California Lottery.

“It was a moral decision, not a financial decision,” said Jerry Nielsen, general manager of Holiday Quality Foods, a chain with 19 stores scattered from Woodland to Redding. The chain, the second largest in the Sacramento Valley, is the first in the state to discontinue lottery ticket sales. Only tickets already on hand at the stores will be sold.

Nielsen said Wednesday that the chain’s profits have dropped 10% since its outlets began selling the $1 tickets last October “and the only change made during that period was we participated in the state lottery.” In all, $1.8 million in tickets were sold throughout the chain, with the highest proportion of sales at outlets serving middle- to lower-income customers, Nielsen said.

The president of the California Growers Assn. said in an interview Wednesday that a recent survey of members showed most reporting sales losses averaging 7% since the lottery began.

A spokesman for the California Lottery, however, disputed Nielson’s account, saying that the Holiday Quality chain discontinued lottery ticket sales by “mutual agreement” with the state after resolution of a financial dispute over ticket sales.

Nielson said the decision by Holiday Quality Foods to discontinue the ticket sales was made last Wednesday after store accountants discovered that some of the largest lottery sales in recent weeks occurred in the flood-ravaged areas of Yuba County where an estimated 21,000 people were temporarily forced out of their homes when a levee broke.

Nielsen said sales at the chain’s Olivehurst store, located in one of the areas hardest hit, were back to pre-flood levels within a week after the store reopened when the floodwaters receded.

“We think it was a situation of people buying lottery tickets instead of food,” he said. “Our profit went down. . . . We had to make a decision, either raising grocery prices or discontinuing selling lottery tickets.”

Nielsen said store officials realized at the outset that ticket sales would not be a huge moneymaker but they hoped it would bring in additional business. “The opposite happened,” he said. The state pays retailers 5 cents for each $1 ticket they sell.

Since the chain announced its decision to stop selling the lottery tickets in grocery ads published in this week’s Sacramento area newspapers, its stores and business offices have been flooded with calls, Nielsen said. “All the calls to this point have been favorable,” he added.

California Grocers Assn. President Don Beaver said that while Holiday Quality Foods is the first chain to stop selling lottery tickets, “we’ve heard some other retailers say they’re thinking about it.”

He said his organization’s recent survey of 1,200 “multiple store operators” found that 65% had experienced sales decreases averaging 7% since the lottery began.

Some Tell of Increase

Another 34% said their sales had increased by an average of 5%, Beaver said.

The survey, which asked for sales figures through January, is still being tabulated to include responses of 500 single-store operators, he said.

“We haven’t had the study long enough to determine whether it’s various areas of the state,” he said.

Beaver acknowledged that the change in sales gains and losses was “significant” for a short period of time, but said the grocery business is susceptible to numerous variables and “we can’t say all of this is due to the lottery.”

For example, a store that found its sales had increased since the lottery could have benefited from factors like increased population, better merchandising or the fact that nearby competitors were not selling tickets, he said.

Lottery Officials Disagree

Lottery officials took issue with Nielsen’s claim that grocery sales have dropped because of ticket sales. “I’m not sure he can actually attribute that to the lottery,” lottery spokesman Bob Taylor said.

Instead, Taylor said the Holiday markets were dropped by the lottery because the chain had failed to pay for all of the tickets it was selling. Until a $100,000 payment made last week, Taylor said, the markets owed the lottery $185,000.

“By mutual agreement, they are no longer selling the tickets,” Taylor said.

Of the 21,000 retailers selling the tickets, about 1,800, most of them small businesses, have dropped out, Taylor said.