Latest Chapter In Great Liquor Debate Is Beer Distribution

Posted: May 26, 1987

HARRISBURG — The availability of an $85 bottle of Dom Perignon may have dominated Pennsylvania's Great Liquor Debate in the past, but arguments over a $5.99 case of Old Milwaukee could be the focus of the future.

As the legislature haggles over how best to construct a new state liquor system, an intense lobbying campaign has begun that has nothing to do with fine wines.

Instead, the issue is beer - or, more appropriately, beer distributors.

"I think the issue of wine has been over with," said Sen. Eugene F. Scanlon (D., Allegheny), minority chairman of the Senate panel that will deal next with the liquor issue.

The two major beer questions that will be addressed by the Senate in the coming weeks are:

Should beer distributors be allowed to advertise beer by price?

Should beer distributors be allowed to sell wine coolers?

And the answers, like the number of special-interest groups who believe they will be affected by them, are as plentiful as all the ales, lights and lagers in Germany.

At stake, according to the rhetoric, are the very survival of mom-and-pop beer distributors, the potency of the First Amendment and the ease by which teenagers will be able to buy alcohol.

Those most directly affected, of course, are the state's 1,571 licensed beer distributors.

The General Assembly has until June 30 to come up with the answers to the two questions. That is when the Liquor Control Board goes out of existence and takes with it, theoretically, the authority for anyone in Pennsylvania to sell beer, wine and liquor.

On April 29, the House passed an amended version of Gov. Casey's plan to make changes in the liquor system. Principally, Casey's bill would turn the LCB into the Alcoholic Beverages Commission and shift enforcement of state liquor laws to the state police.

The Senate Law and Justice Committee is expected to begin its discussion of the legislation - and make changes to it - during the first week of June. If the Senate and House can't agree on a bill, which is likely, a conference committee will be appointed to work out a compromise.

"This is crunch time," said Sen. John J. Shumaker (R., Dauphin), the Law and Justice Committee chairman. "Wine coolers and advertising are two of the major issues at this point."

Here is a look at those issues.

Advertising. David vs. Goliath. That's how small beer distributors view the issue of advertising. Big distributors with large warehouses buy beer from suppliers at discounts for quantity, then sell it at lower prices.

When the big guys advertise their prices, the little guys lose business.

Two years ago, the LCB reversed its policy prohibiting advertising by price. Since then, as many as 20 distributors in Pittsburgh and more than a dozen in Harrisburg, the areas where beer discounters are causing the most turmoil, have gone out of business, according to trade publications. Much of the blame goes to advertising, small distributors say.

"We're against advertising," said James Yaple, owner of Westy Beer Distributor in suburban Harrisburg. "They make us look like robbers, and we aren't, because we aren't getting it at the same price. They're moving the little guy out."

They, primarily, means distributors such as Beer World, located in Harrisburg and Pittsburgh, which has used aggressive marketing and merchandising practices to move its products.

David J. Trone, who started Beer World in Harrisburg three years ago and now works as a consultant to the Beer Worlds, has lobbied hard for allowing advertising, including engineering a massive letter-writing campaign to legislators, equating advertising with low prices.

Scanlon, a key supporter of the advertising ban included in Casey's bill, said consumers might enjoy lower prices from the discounters now, but he predicted that prices would climb.

"Ultimately, if all the little distributors are put out of business," Scanlon said, "the Beer Worlds will set the prices. That's anti-consumer."

But John Trone, owner of Beer World in Harrisburg and the brother of David, rejects that notion.

"We're for advertising, not just because we can sell for lower prices. The consumer has a right to know the price," Trone said. "How is he going to shop fairly if he can't compare prices? That's how the free market system works."

The Miller Brewing Co. also argues that theory.

"The governor has stated . . . this was a pro-consumer bill," said Richard J. Klemp, a company lobbyist. "But I don't see how it can be pro- consumer without the one piece of information the consumer wants - advertising."

Christine Garvey, a lawyer for the Pennsylvania Newspaper Publishers Association, whose newspaper members benefit financially from additional advertising, said the issue might be beyond the purview of the legislature to decide anyway.

"Any restriction of advertising is a restriction of First Amendment rights, even though it's commercial speech," she said. "We do believe it would be found to be unconstitutional, and we are actively lobbying in the Senate."

Wine coolers. After lawmakers and the courts rebuffed attempts by Gov. Dick Thornburgh to kill the state liquor store system, no one expects the legislature, in any serious fashion, to resurrect the issue of complete privatization of wine and liquor sales.

The exception, however, might be a concession to allow beer distributors to sell wine coolers, an idea that passed the House one day last month, only to fall short on a reconsideration vote the next day.

"Wine coolers may be the final chip to get this bill to pass," Scanlon said. "I want them to stay where they are, but I'm willing to concede it."

Among those supporting expanded wine cooler sales are individual beer distributors and their trade organization, the Pennsylvania Beer Wholesalers Association, as well as Anheuser-Busch, the nation's largest brewer, and Miller Brewing Co., the No. 2 brewer.

Distributors recognize the increasing popularity of wine coolers and would enjoy nothing more than to put them on their store shelves, especially at a time when beer consumption is considered "flat" in Pennsylvania.

Industry records show per capita beer consumption in Pennsylvania falling

from 25.6 gallons in 1981 to 24.9 gallons in 1985. Nationally, consumption rose 1.6 percent in 1986.

In contrast, state liquor stores, which have the exclusive right to sell wine coolers, have watched wine cooler sales climb steadily to account for a substantial portion of store revenues.

Wine coolers, which did not exist a few years ago, make up 11.6 percent of State Store wine sales and 5.6 percent of total store sales, according to LCB spokesman Robert D. Ford.

Ford said the LCB sold 620,686 cases of wine coolers from March 31, 1986, to March 31, 1987. The LCB expects to sell a million cases during the next March-to-March period.

Distributors also see a discrepancy in the law. They sell malt coolers; so why not wine coolers, which are basically the same kind of drink and contain about the same amount of alcohol?

"Everybody can sell beer coolers. They can't sell wine coolers. That doesn't make any sense on the face of it," said Daniel E. Beren, a lobbyist for the beer wholesalers.

Anheuser-Busch and Miller also support expanded wine cooler sales, even though neither company now markets a wine cooler in Pennsylvania. They manufacture wine coolers, however, and view the accessibility and longer hours of distributors as the best way to market them.

For every argument in support of allowing wine cooler sales by beer distributors, there is an argument against. Opponents include Pennsylvania breweries, such as Stroh's in Allentown, and the United Food and Commercial Workers (UFCW), the union that represents State Store clerks.

Oddly, the California Wine Institute, whose members are some of the largest makers of wine coolers, also oppose sales by beer distributors.

"Our client feels that if any product is going to be removed from the State Stores . . . it should not be limited to a very narrow segment," said David Tive, a Harrisburg lobbyist for the wine institute. "We don't see why they should favor one group."

What the wine institute wants, Tive said, is the sale of wine and wine coolers in grocery stores.

"The issue of wine coolers in grocery stores is not going to go away," Tive said.

Executives of Pennsylvania breweries oppose the introduction of wine coolers in the beer distribution network for several reasons, but chief among them is the effect on sales of malt coolers, which they produce. Malt coolers are sold by beer distributors.

"The main beneficiaries of a wine cooler amendment would be large California interests that neither employ Pennsylvanians nor produce their product in Pennsylvania," Jack Barthwell, a Stroh's executive, said in a letter to the Senate. "The losers would be seven breweries that produce a Pennsylvania product, employ Pennsylvanians and pay Pennsylvania taxes." Stroh's produces White Mountain Cooler.

The bottom line for private companies is not the only issue. If wine coolers were given to distributors, State Store revenues would obviously plummet - a fact that makes State Store clerks and their union nervous.

"When they're talking about spending those dollars to beef up (liquor) law enforcement, it isn't logical to take away the growing revenues of wine coolers," said Robert Wolper, a lobbyist for the clerks' union. "Whether it's wine coolers in beer distributors or wine in supermarkets, it's been our consistent position to oppose them."

Control is also an issue, Wolper said. State Stores are better able to handle attempts by minors to buy alcohol. And if the State Stores lose wine coolers, will they later lose new concoctions that include hard liquor?

"It's not a good social thing. Wine coolers are the kind of thing kids are going to go after," he said.

Perhaps the most important opponent of expanded wine cooler sales is the governor.

Casey's position, said spokesman John Taylor, is direct: "Keep them in the State Stores."

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