PA State Store Privatization Debate Marches On

Beer wholesalers in Pennsylvania are speaking out against ending the state’s longtime liquor monopoly.

In a letter sent out earlier this week to members of the House of Representatives, the Pennsylvania Beer Alliance said privatization initiatives could pose a risk to the beer business in Pennsylvania and create an uneven playing field.

They oppose legislation by House Majority Leader Mike Turzai, an Allegheny County Republican, to privatize the state-run liquor system.

The Patriot-News, 2008Cases of beer are stacked high at Glenn Miller Beer & Soda Warehouse in Lemoyne.

“It will be detrimental to the beer industry,” said Jay D. Wiederhold, president of the beer alliance which represents 34 beer wholesalers in the state.

Up until now, the industry was quiet about the issue, largely because beer was not part of the original legislation.

But in December, legislators gutted Turzai’s bill, stripping out language to sell off the state’s wine and spirit stores in exchange for language that would allow beer distributors to purchase licenses to sell wine and beer.

“It changes the game on us,” Wiederhold said.

The association’s letter was prompted because of rumblings Turzai is preparing to re-introduce the bill on the House floor.

In a copy of a proposed amendment obtained by The Patriot-News last month, Turzai’s latest plan calls for selling 1,600 licenses, up from the original proposal to auction off 1,250 licenses.

A projected sale of retail licenses is estimated to generate $500 million to $750 million in revenue.

Beer distributors also would be permitted to sell six-packs of beer; they currently can only sell cases or kegs. Bars, restaurants and supermarkets with restaurant licenses could sell 18-packs of beer or less.

The plan also allows for giving beer distributors the opportunity to purchase up to 10 retail licenses to sell wine and liquor.

That is what has the state’s beer industry fired up.

Doing so would create an unfair advantage for Pennsylvania beer wholesalers and distributors who would face increased competition from out-of-state third-party companies such as Total Wine & More and Walmarts, Wiederhold said.

“They have experience and billions of dollars in revenue,” said Horace Howells, general counsel for W&L Sales Co. Inc., a Harrisburg beer wholesaler. “They will come in and crush the market.”

“It would put beer distributors out of business. They just wouldn’t be able to compete. They just wouldn’t have the financial capacity,” Howells added.

Wiederhold said it would be expensive for existing beer distributors to purchase licenses and build larger stores to accommodate the extra inventory, something they would likely need to remain competitive.   Full details here.