Open Harvest believes it is falling behind in the increasingly competitive Lincoln grocery market.
Amy Tabor, general manager of the natural foods co-op, told the Lincoln-Lancaster County Planning Commission on Wednesday that sales have fallen more than 16 percent since Whole Foods opened in Lincoln in 2013.
One thing Tabor said the store believes would help it better compete is the ability to sell local craft beer and wine.
The only problem: Open Harvest's location near 16th and South streets is within 100 feet of a residential neighborhood to the north, which means it can't get a special permit to sell alcohol.
Its solution: Change the zoning code to provide a narrow exemption for grocery stores.
"The current zoning ordinance is preventing us from being able to compete," Tabor said, noting that customers want to be able to make all their purchases in one place.
Tabor said she is only aware of two grocery stores in the city that do not currently sell alcohol, and both of those -- A Street Market at 33rd and A streets and Save-Best at 27th and Y streets -- have the same zoning issue.
While she said a liquor license would not be a "silver bullet" to solve all the store's problems, it would level the playing field for the store with its competitors.
The proposal has a fair amount of support, including from neighborhood residents, industry officials and state Sen. Anna Wishart, who represents that part of town.
But it also has a lot of opposition, mainly from residents and neighborhood associations primarily in the older areas of the city's core.
They argue that the change won't only apply to Open Harvest but to any commercial property in similar zoning districts around the city, which potentially covers several hundred properties.
"We see a bigger can of worms opening up if we were to allow this," said Jim Friedman, president of the Near South Neighborhood.
Pat Anderson Sifuentes with NeighborWorks Lincoln and the Lincoln Policy Network said she wants stores to be competitive, but noted that the city is already inundated with businesses selling alcohol, and neighborhoods have few protections.
Open Harvest does have some other options to meet the special permit requirement, including building a separate space in the store with a separate entrance to sell alcohol.
But Tabor said all of those options are either too complicated or too expensive.
The proposed zoning change is narrowly tailored so that it would apply only to grocery stores and not to pharmacies or convenience stores. The main provision is that to be considered a grocery store in the zoning code, a store would have to derive 65 percent of its gross revenue from non-taxable food products. The proposal also would limit alcohol sales to no more than 10 percent of gross sales.
Planning Commissioners were as divided over the issue as supporters and opponents. The board voted 4-4 on denying the change, effectively stalling the proposal. Five votes are needed to move the change to the City Council.
Commissioner Deane Finnegan said she is not opposed to alcohol sales at the location and doesn't think it will hurt the neighborhood, but she voted against the zoning change.
"I don't think we should change the law for one entity," she said.
The nine-member commission will reconsider the proposal at its Nov. 15 meeting.