Take-out beer sales stuck in overhaul of Pa. liquor laws

Posted: July 24, 2012

The calls for overhauling Pennsylvania's byzantine liquor laws have grown ever louder. But Philadelphia tavern owner Earl Martin fears what he is hearing is a last call for a big swig of his business.

Like tavern owners across the state, Martin counts on take-out beer sales for a significant share of his revenue at Fibber McGee's Pub in Bridesburg.

The booze business in Pennsylvania is peculiar. Beer isn't available at state liquor stores. Under current law, distributors can sell only by the case or keg; other take-out outlets are restricted to 192 ounces.

All that could change, however, as the legislature considers reinventing the system. One bill, on hold for the moment, would permit distributors to sell beer in any quantity, along with wine and liquor.

That would endanger the six-pack and quarts markets traditionally left to the taprooms, bar-restaurants, and small take-out shops that have proliferated in the last decade.

In the last two years, 900 such businesses have gone under, said Amy Christie, executive director of the Pennsylvania Tavern Owners Association, a lobbying group. If the state allows distributors to sell six-packs, she said, 1,000 more of the 11,738 licensees might go out of business.

Martin and others in the take-out trade say they would have to compete for sales with the very distributors from whom they must, under state law, buy their beer.

That, they contend, would put them at a distinct disadvantage. They say they have no choice but to charge more than distributors because their pricing is governed by what distributors charge them and by the local taxes levied on take-out beer - 17 percent in Philadelphia.

With their businesses already staggered by economic conditions, fundamental changes in drinking habits, and the arrival of new purveyors of carry-out beer such as Wegmans and Whole Foods, they say there is hardly a worse time to undercut their sales.

"It's not a game-ender," said Martin, who estimated take-out constitutes 10 percent to 15 percent of his revenue. But "it's another nail in the coffin."

Efforts to change the way beer, wine, and hard liquor are sold in the state have run into walls of resistance from politicians, union members, beer wholesalers, and distributors. That's a big reason this debate has been going on since Prohibition ended.

Now add the tavern owners to the resisters.

No one argues that the current system is easy for consumers to swallow. When he tells customers they can't buy more than two six-packs from him, said Curtis Mason, owner of Penn Brewing Station, a take-out beer and restaurant complex in West Grove, Chester County, they "look at you like you have three heads."

The take-out people are also crying foul because they say they bought their licenses – at costs up to $250,000 - under a given set of rules. Changing them now could seriously dilute the licenses' resale value.

Licenses are sold on the open market and aren't state regulated.

"I got into the business based on what I knew then, and now they're talking about total upheaval," Martin said.

The percentage of revenue constituted by take-out sales varies widely and can be as high as 80 percent among some stores, said Amy Christie, executive director of the Pennsylvania Tavern Association, the bar owners' lobbying group.

The take-out market is vital to the beer industry. Beer drinkers evidently believe that you can take it with you. Nationally, about 85 percent of all beer is bought for take-out in some form, said Eric Shepard, editor of Beer Marketer's Insights in Suffern, N.Y.

In recent years, however, the beer universe has been on the flat side.

You wouldn't know it from watching sporting events, or from the endless craft varieties that keep appearing, but overall beer consumption dropped 5 percent from 2008 to 2011, according to the Beer Institute.

Drunken-driving enforcement also has contributed to slower sales. Bar owners agree that although no one wants a drunk on the road, state law burdens them unfairly. Instead of having three drinks, customers are stopping at two, and on any given night, half the folks at the bar aren't drinking.

"Everything is piling on," Martin said.

"It's been tough for them," said Jay Goldstein, former chairman of the distributors' association and an ex-Liquor Control Board enforcement officer who has advocated allowing the distributors to sell six-packs.

In part, he said, bars are suffering the consequences of a bizarre system whose post-Prohibition designers somehow managed to overlook an important stakeholder: the drinker.

"The attitude was very anti-consumer," Goldstein said. "I don't think anyone thought, 'If we do something that's pro-consumer, we'll sell more beer.'

"It was all about the packaging and production."

He said that in the 1980s, when he served on a state blue-ribbon commission, he advocated "package reform," under which distributors would have been allowed to sell beer in six- and 12-packs.

Domestic brewers resisted it, he said, because it would have meant refitting their machinery for different packaging.

He said after big foreign breweries, such as Heineken, began shipping 12-packs, U.S. beer-makers had to compete.

Beer distributors long have advocated package reform that would allow them to get into the six-pack business.

If that were to happen, said John Longacre, owner of the American Sardine Bar and the Bottle Shop, in South Philadelphia, tavern owners and package stores should have the right to sell cases.

"Leave it alone," Longacre said, "or level the playing field."


Contact Anthony R. Wood at 610-313-8210 or twood@phillynews.com.

Inquirer staff writer Angela Couloumbis contributed to this article.

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