- Grove City, Pennsylvania

April 12, 2013

Beer distributors, Pa. rep at odds

Owners work to stop liquor privatization

By Felicia A. Petro/Senior Reporter
Allied News

GROVE CITY — Some local beer distributors believe privatization of liquor sales will only damage their businesses, but state Rep. Dick Stevenson feels the state needs to get out of the alcohol trade.

Last Thursday, the majority of the state House of Representatives agreed; voting 105-90 on House Bill 790 to end state involvement with alcohol sales. It will become law if passed by the state Senate, and signed by Gov. Tom Corbett, who fiercely endorses the effort.

"I felt for a long time that there is an inherent contradiction in the current system, where the state is responsible for policing, controlling and overseeing the legal sale of alcohol in Pennsylvania, while at the same time, the (Pennsylvania Liquor Control Board) - or the state - is being asked to sell alcohol and have programs to sell more of it through advertising and marketing," Stevenson said.

"I think the state's proper role is in the control of the sale of alcohol, not in the marketing of wine, spirits and beer."

Pennsylvania has been involved in this capacity for 80 years, since prohibition, Stevenson added. It, along with Utah, are the only two states that haven't privatized.

House Bill 790 would stop the state from selling alcohol primarily through the operation of state stores, where wine and spirits can be purchased. State stores in Pine Township and Slippery Rock are in shopping plazas, for example.

However, the bill would "retain the responsibility of alcohol control, licensing and policing the sale," Stevenson added. "They're currently (policing and selling) and that's the inherent contradiction."

Under the new bill, the state would save money by not renting commercial space for state stores and hiring staff to man them. Advertisements produced and paid for by the LCB would be a thing of the past, Stevenson added.

For the last six years, the LCB's operating costs exceeded its sales by $178 million, Stevenson noted. "Some argue that liquor privatization will cause state to lose money, just the opposite is true."

If the bill passes, the state would continue to make money on taxes from alcohol sales. It would also be authorized to create 1,200 wine and liquor licenses for each beer distributor currently operating in the state who wants to expand their inventory.

Distributors currently can only sell beer by the case, but House Bill 790 would allow those beer licenses to allow the sale of smaller quantities of beer, Stevenson said.

Under the bill, "Beer distributors will be the only places in PA where consumers may purchase all alcohol products under one roof," he added.

"The Malt Beer Distributors Association was part of this negotiation ... in an effort to protect their interests."

The bill would allow 820 grocery-store wine licenses - although current liquor laws allow beer sales at stores if they can find and purchase a restaurant license.

The beer distributors would also be given a significantly reduced fee for the 1,200 wine and liquor licenses for a year, if the bill is passed.

Depending on the size of the county, fees to buy a wine license will range from $7,500 to $37,500 for the distributors; licenses for spirits would range from $30,000 to $60,000, Stevenson said. 

If the beer distributors don't take advantage of the licenses after the first year, they will be made available to the open market, but fees would go up astronomically. The wine licenses would run from $97,500 to $187,500; the spirits license, $142,500 to $262,500, Stevenson said.

"This is done in effort to protect the beer distributors," he added, as they are currently the primary private businesses who sell beer.

Local beer distributors weren't so confident.

Tami Jo Rendos, co-owner with her husband, Buck, of Rendos Beer Distributor on Route 19 in Springfield Township, said the new licenses would cost too much for small, family-run beer distributors.

"We couldn't compete," she said, noting Rendos has also dumped about $60,000 in renovations to their business.

Chad Magee has been the new owner of Grove City Beverage on West Main Street in the borough since 2011.

"I've already took on so much debt. They said that I could sell wine and liquor but I'm already stretched out on funds," he said.

Once the new licenses are put out on the open market, "the big box stores" will be able to afford them, Magee added. They will also "be able to carry wine and beer sales in bulk ... and put everyone out of business and there's a monopoly again."

However, he believed the quality would change, as those store wouldn't carry the variety a small vendor would "in terms of craft and microbrews," he noted.

Other beer distributors Rendos has spoken to "feel about the same," she added. Local distributors, Brewmeister in Pine Township and Foster in the borough, could not be reached for comment before deadline Tuesday.

The state liquor store staff in Pine was unable to comment on the issue; however, the Pennsylvania State Liquor Control Board issued a statement by Robert S. Marcus and chair Joseph E. Brion: "The issue of privatization is to be addressed by the governor and legislature. The Pennsylvania Liquor Control Board's role is to regulate the sale of wine and spirits based on the current liquor code and provide the best customer service we can to our consumers. We will continue to look for ways to improve convenience and ensure that we run the agency as efficiently as possible.

"We look forward to the conversation."

Legislators against the bill and some beer distributors worry that the extra licenses will open up alcohol sales too much and breed corruption.

"Anyone who buys a license and pays that initial fee and annual renewal fee has a lot to lose if they don't abide by the law," Stevenson said.

"These are business people and I think they will be very careful about how they sell alcohol, because stand to lose the license and business."

The LCB can reject alcohol license applicants based on a number of criteria, but one idea of House Bill 790 is that the state doesn't have to have a hand in everything.

"It's losing money and consumers who travel to other states want the same convenience and increased selection," Stevenson said. "I think private businesses can do a better job with sales and marketing."

The Senate doesn't have to consider the bill, could tweak it or accept it as is.

"We'll have to wait and see," Stevenson said. "This is an attempt to begin the process and discuss."

He's heard the concerns of beer distributors against the bill, he said, "And I've heard many people in support of state getting out of sale of alcohol. Over 60 percent of the population in Pennsylvania historically support the move towards privatization."

Rendos has put together a petition to give to state Sen. Bob Robbins before the Senate votes on the issue.

"Basically it's against Gov. Corbett's proposal to privatize and restructure our entire alcohol system, essentially putting us out of business," she said. She took the petition to other distributors, as well as "a couple of bars," she added.

Rendos doesn't want Pennsylvania to be like other states. 

"Pennsylvania was one of the very first colonies, which makes us a very special state. We're doing good," she said. "There's no problem with the system now. It's working fine."

Published March 27, 2013, in Allied News. Pick up a copy at 201 A Erie St., Grove City.