PA Senate expands wine sales to private retailers, but leaves liquor locked up

By Andrew Staub | PA Independent

The Pennsylvania state Senate won’t give Pennsylvanians the chance to have a one-stop shop that sells beer, wine and liquor.

Senators this week gutted legislation that would have privatized wine and liquor sales. Instead, they inserted a plan into House Bill 1690 that would allow some private retailers to sell limited amounts of wine, but keep spirits locked away in state-run stores.

“Pennsylvanian consumers want convenience and a good selection of products at competitive prices – not segregated spirits that force them to make multiple shopping stops,” said David Wojnar, vice president of the Distilled Spirits Council of the United States.

Shoppers in Pennsylvania already have to go out of their way to throw dinner parties.

Under current law, consumers have to buy wine and liquor from state stores and beer from private retailers. In that market, beer distributors can sell 12-packs and cases, but not six-packs or singles. Bars, restaurants, hotels and grocery stores that can sell takeout beer can sell singles, six-packs and 12-packs, but not a case.

The Senate’s legislation would allow restaurant and hotel licensees to sell up to four bottles of takeout wine at a time. Buying anymore than four bottles would mean a trip to the state store.

The revamped bill also would allow the direct shipment of wine to consumers’ homes, something that can happen only in limited circumstances under current rules.

While privately sold wine would mark a momentous shift in the way the state sells booze, it’s not nearly as sweeping as the privatization bill that Wolf vetoed earlier this year. It is also not as transformative as the original version of HB 1690. Before the Senate changed the bill, sponsored by House Speaker Mike Turzai, it would have eliminated the about 600 state stores and given beer distributors a first crack at new licenses to sell beer, wine and liquor.

The Malt Beverage Distributors Association of Pennsylvania opposed that bill because it also gave grocers with restaurant liquor licenses the opportunity to become one-stop shops, too. With a strong base of existing customers, they would have a distinct advantage over a specialty retailer such as a beer distributor.

If the wine-only expansion occurs, the future looks even grimmer for beer distributors. Once given first crack at licenses to become one-stop shops, they get nothing in the new legislation, said Tom Mehaffie, president of the Malt Beverage Distributors Association of Pennsylvania. He predicted that his members would suffer as customers gravitate toward private retailers that can sell wine and beer.

“It’s the devastation of our industry,” Mehaffie said of the bill that passed the Senate, 29-21.

The Distilled Spirits Council also opposes plans that separate wine and liquor sales, worried about shifting foot traffic decreasing spirits sales. The group’s chief economist has predicted that moving wine, but not liquor, to the private sector could send the Pennsylvania Liquor Control Board tumbling into the red. That would compromise the annual profit transfer that state stores make to the general fund and leave them to die a slow death, DISCUS has contended.

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State Sen. Pat Browne, the Republican chairman of the Senate Appropriations Committee, responded to concerns about state store viability by noting that private retailers would still have to buy their wine from state stores. They’d still have the market on liquor cornered, too, he said.

Browne said the changes would net the state $96 million this fiscal year and $88 million the next.

And for those concerned that the legislation does not make broad enough reforms, Browne said it makes the most significant changes to alcohol sales in decades.

“Many of us would like to see us go further than this, but we are looking for consensus,” he said.

Lawmakers didn’t get much of that from outside groups.

The United Food and Commercial Workers Local 1776, which represents employees who work in the state stores, also opposes the wine-only plan, contending it will cost union workers their jobs and the state its revenue.

Wendell Young IV, president of the union, took issue with decreased markups for orders of special liquors, as well as the shift toward a volume-based tax on wine shipped directly to consumers. The notion that state stores will remain viable because restaurants and hotels have to buy wine from them is nothing more than a distraction used in magic tricks, he said.

“That’s the rabbit,” he said.

Among other changes, the bill would give state stores more flexibility in pricing, allowing them to offer discounts or to maximize the return on their best-selling and limited-purchase items. Sunday sales restrictions would also be lifted to improve convenience. A commission established under the bill would also study privatization further.

It’s unclear what fate the wine bill will meet in the House, now that it is not a liquor privatization bill.

A spokesman for Turzai did not return a message seeking comment, but House members have been much more interested in full divestiture of the state’s retail and wholesale wine and spirits operations and giving consumers a one-stop shop.