Pennsylvania: Despite burst of reform, liquor privatization likely to keep waiting
Source: Central Penn BJ
By Jason Scott
December 22, 2016
Following a series of legal changes this year, Pennsylvania residents have been tasting the fruits of a more modern liquor system.
And more change is coming in mid-January when retail beer distributors can start selling beer in six-packs and other-size packages.
So maybe it’s time to take the next step and get the state out of the booze business. Many Republican lawmakers have been looking to privatize liquor for awhile.
With the state running a growing budget deficit, now would seem like the opportune time to privatize, a move that could minimize the budget shortfall. And a few Republicans have already said those conversations will be had in 2017 when lawmakers return to Harrisburg for a new legislative session.
But Alva Mather, a partner at law firm Pepper Hamilton LLP, who heads the firm’s alcoholic beverage industry practice, doesn’t think privatization will happen next year.
“I think it’s probably going to be more of a pause and adjustment,” she said. “I have a hard time seeing privatization pass in the next couple of years.”
Most retailers selling beer and wine are still trying to assess the impacts of this summer’s Act 39, which opened up wine sales in supermarkets and convenience stores, let vineyards ship wine directly to consumers and launched a statewide auction system for expired restaurant liquor licenses to give more businesses opportunities to sell booze.
The beer distributors bill, known as Act 166, takes effect Jan. 17.
“That class of license holders needs to get caught up and get used to these new rights that they have,” Mather said. “The drive to change laws is to modernize the structure, but modernize toward consumer convenience.”
Pennsylvania now has that under the recent changes in the law, she said.
In addition, the Pennsylvania Liquor Control Board, meanwhile, has been remodeling stores and expanding its retail footprint in an effort to improve the experience for consumers, which also helps stave off privatization.
PLCB Executive Director Charlie Mooney said Act 39 has given the agency the ability to negotiate for better pricing. Pennsylvania is already the largest buyer of alcohol in the country as most states are not in the liquor business.
“It’s our intention to reduce our cost of goods,” Mooney told the Business Journal in a recent interview. “It is not our intention to broadly raise shelf prices. There are factions of businesses and people out there construing we are going to raise the shelf price. That is not true.”
But that doesn’t mean Pennsylvania’s liquor system is not without a few flaws.
Industry experts and retailers now in the takeout wine business because of Act 39 have said additional steps could be taken to streamline transactions in Pennsylvania, as wine and beer purchases are made at separate registers.
Independent restaurant owners, meanwhile, have been clamoring for a new class of liquor license. Large grocery and convenience-store chains such as Giant Food Stores and Sheetz have been buying available licenses at a premium, which makes it harder for small mom-and-pop businesses to obtain licenses.
Lawmakers also have hinted at the possibility of takeout spirits in Pennsylvania, similar to the new wine permits, while other licensees, such as bar and tavern owners have argued they should be able to sell more than just six-packs if distributors will be able to sell any amount they want.
Prior to Act 166, beer distributors were pushing to sell takeout wine to compete with other retailers. Spirits would be the next natural progression.
“The state has tried hard to strike a balance,” Mather said. “There will always be tension between expanding wine and spirits out of the state store system.”
She added: “Maybe we’re better to take the model we have, do it better and move on.”
And when the retail system is generating record revenue each year, it becomes harder for the state to simply sell and get out of the business, Mather said.