By Melissa Daniels | PA Independent
HARRISBURG — Buying and selling beer in Pennsylvania has always happened outside of the state monopoly on other kinds of adult beverages.
But as privatizing the state’s liquor, wine and beer system inches closer than ever to reality, lawmakers are scratching their heads trying to find the path of least resistance for beer distributors.
As a result: They may be picking winners and losers in the alcoholic beverage industry — intentionally.
The House was debating House Bill 790 late Thursday and had yet to vote on the plan that would create a private retail and wholesale wine and spirits industry. The proposal gets rid of the state-owned stores and opens wine, liquor and beer sales to new state licensed privately operated locations.
No doubt this would mean new competition for retail beer distributors who’ve operated in their own private-sector bubble for decades.
In Pennsylvania, beer laws are almost as tightly regulated and arcane as they come: beer is available at distributors by the case and the keg, and at bars and certain grocery stores by the six-pack.
The original proposal that had beer sales in grocery stores, convenience stores, big-box stores and gas stations was pared down. At this point, only gas stations will be able to sell beer alongside retail distributors, taverns and stores with restaurant licenses.
Under this plan, beer distributors would have the right-of-first refusal for one year to purchase retail wine and spirit licenses. Licenses to sell both wine and spirits would cost between $37,500 and $97,500, depending on the county. To help offset the cost, distributors could opt into a four-year payment plan with 5-percent interest.
Anyone else buying the remaining licenses would have to pay between $240,000 and $450,000 and pay it all up front.
Rep. Matt Bradford, D-Montgomery, said he was concerned about the seemingly arbitrary way the licenses fees were set. He said it seemed to undermine the concept of a free-market system.
“If this is truly about a free-market system that values the private market as the most efficient way to allocate resources, it would seem that is the way licenses should be doled out, not in an arbitrary manner where we seem to pick and choose between winners and losers based on favored status,” Bradford said.
Appraisals or auctions to determine the value of licenses might be better, Bradford said.
Despite the changes lawmakers have made to the plan to lessen the blow on beer distributors, the official distributor lobbying arm is having a hard time lending its support.
Mark Tanczos, president of the Malt Beverage Distributors Association of Pennsylvania, said while the organization has no formal stance on getting rid of the state system, privatization will still put retail beer distributors out of business. Grocery stores and convenience stores, he said, would buy restaurant licenses to sell beer and pinch traffic from the retail distributors.
Some beer distributors would sell their licenses outright, and those distributors that choose to get into the wine and spirit industry would have an uphill climb, he said.
“If you don’t sell out, you’re going to have a heck of a time competing against these major corporations that have been permitted to grow unfettered,” he said. “Now we’re expected to run a marathon with them tomorrow.”
What matters to beer distributors is updating the heavily regulated environment they operate in already. They’ve been pushing since the 1930s to be able to sell six packs directly to customers, not just cases and kegs, Tanczos said.
With the niche microbrew industry hitting its stride, Tanczos said a growing segment of the business is being stifled. Craft brews typically are more expensive, and customers might not want to splurge on a case the way they would a six pack.
“We’ve been asking for this for 76 years,” he said. “Let us sell in a quantity the customer wants to buy in.”
The legislation does include a $1,000 annual permit that would allow retail distributors to sell smaller quantities.
Rep. Scott Petri, R-Bucks, said he understood why beer distributors were dissatisfied with the proposal.
Retail distributors may not have the money to expand stores to stock wine and liquor, he said. Grocery stores or national chains that purchase restaurant licenses to sell beer, and also choose to buy wine licenses, would have that ability.
But, Petri said he the bill likely will change before it heads to the Senate for consideration.
“We’re trying to make this as palatable for the ‘mom and pops’ that are already in the industry,” he said.
Contact Melissa Daniels at melissa@paindependent.com