Corbett privatization plan worries beer distributors
Local beer distributors are worried that the changes to the alcohol business proposed by Gov. Tom Corbett might just be the end of their livelihood.
Under the governor's plan, announced Jan. 30 in Pittsburgh with further details included in this week's 2013-14 budget address, state liquor stores would be privatized and the licenses for 1,200 stand-alone wine and spirits stores would be auctioned off. It sets up a situation where beer distributors could bid for wine and liquor licenses and become the only places to get all three - wine, beer and liquor.
But can they compete is the question for at least two local distributors.
Coal Township-based Irish Isle owner Earl Sheriff and Sunbury-based Brewers Outlet manager Cory Fasold think there's a good possibility that large market stores such as Weis, Giant or Walmart will scoop up the licenses and drop prices so low that small business owners can't compete.
"They can put any price they want on it. It will never be normal again. They'll put every distributor out of business," said Sheriff, 60, owner of Irish Isle, 911 W. Arch St.
The big business will "knock us out," and the personal touch of mom
and pop shops will never be available again, said Sheriff, who has operated businesses for 41 years.
Fasold, a manager at Brewers Outlet at 231 Reagan St. for more than 30 years, also argues there should be an equitable way to compensate those who acquire beer licenses, since he thinks the plan will diminish the value of what the distributors already have.
"People have put up a lot of money and assets to get those in the first place," he said.
The money generated by the governor's plan, which needs the Legislature's approval, is estimated at $1 billion over four years. It would help fund public education.
Most of the revenue, a projected $575 million, would come from the sale of wholesale liquor licenses.
An additional $224 million is anticipated from the auctioning of 1,200 wine and liquor licenses, with 800 reserved for large retail stores and 400 for smaller ones. Those licensees would be required to set up separate stores to sell wine and liquor. A business would be able to hold a maximum of 40 licenses statewide and 10 percent in any county (or one in a county with fewer than 10 stores).
Every county would be allocated at least as many wine and liquor stores as it now has, and is likely to gain more, officials said.
Other revenue would flow from the sale of beer and wine licenses to retailers, including big-box stores, grocery stores, pharmacies and convenience stores.
Beer distributors, in addition to bidding to sell wine and liquor, could also obtain an enhanced license that allows them to sell beer in smaller quantities rather than by the case, as is the current limitation.
But that's where the good news ends, local distributors say.
The big-box stores, grocery stores, pharmacies and convenience stores could pay a one-time application fee and annual license fees to sell wine and beer. There would be no limit on the number of licenses, but limits on how much beer and wine they could sell, based on the type of license.
Fasold said the prices of the liquor licenses should be different depending on the county, since one in Philadelphia would be worth more than one in Northumberland County.
If there's a bidding war for those licenses, Fasold said, the "little man of the state" will lose, which is why he would support beer distributors getting first pick.
"As long as it's a fair ballgame, I would look at the price. I'd be very interested," Fasold said of purchasing a liquor license.
If he would have the additional beverages, Brewers Outlet would be a "one-stop shop for all your beverages," he said, noting not only alcohol, but soda, water and sports drinks.
Sheriff said he doubts he'll be able to afford to bid for a license.
"Why would you invest in a liquor license when you can't compete? You might as well put a lighter to it and burn it up," he said.
The two businessmen are concerned with more than just the auctioning of the licenses.
Sheriff criticized Corbett's plan, asking what would happen to the state employees once the liquor stores were sold and privatized.
If the stores are going to be privatized, then, Fasold said, wholesalers should also be independent, so no one is forced to buy it from a particular place.
"It will keep the pricing down for the consumer. If they don't do that, the consumer loses," Fasold said.
According to Corbett's plan, the state would negotiate wholesale licenses to distribute wine and liquor products to stores, bars and restaurants by brand. After paying a license fee based on valuation, a wholesaler would have the exclusive right to distribute that brand throughout Pennsylvania.
Sheriff isn't sure what will happen.
"Am I mad? Yeah, but there's nothing I can do about it. If worse comes to worse, I'll have to close up," he said.