Plan will hurt beer retailers

Posted: February 23, 2013

By Mark Tanczos

Gov. Corbett's proposal to create a $1 billion "windfall" for state government by making substantial changes in the retail alcoholic beverage industry will likely close 1,200 small family-owned beer distributors. The plan also will raise prices for consumers and result in fewer choices at the multitude of new outlets. Is this what consumers want?

Our state's alcohol distribution system is a descendent of the post-Prohibition hopes of separating brewers who manufacture beer from retailers who sell it. After 1933, reformers did not want "big business" retailing beer - and today most malt and brewed beverages sold for off-premises consumption are made available at locally owned, family-operated beer distributors.

We operate these family businesses in a niche market that sells beer by the case, with 80 percent of the beer being served by 1,200 distributors. Those of us who are in this business got there by borrowing and investing. Corbett's plan collapses this "niche" market by adding 6,200 new sellers. Diluting the market would result in the closure of our businesses and put more than 10,000 employees out of work.

Why should the public care?

First, prices will undoubtedly increase. A key part of the governor's proposal is a new merchant fee, effectively a 70 percent increase in taxes on retail establishments selling alcohol. Is there anyone who doubts that alcohol sellers will pass these new fees onto their customers?

Currently, retailers pay an annual fee to state government of $700 or less. Under the governor's plan, that cost will dramatically increase, ranging from $5,000 for a tavern to $35,000 for a big-box or grocery store, with distributors paying $10,000 annually. The governor expects this fee to generate more than $200 million each year, which he calls a "windfall." His plan adds these fees to the current tax on beer and the Johnstown flood tax, which currently provide the commonwealth with $290 million of revenue.

As alcohol prices in Pennsylvania increase, so will border bleed. Consumers will travel out of state to take advantage of the lower prices of alcohol - and the lower taxes - in neighboring states.

And, finally, while the number of sellers here will increase, clearly the selection at each outlet will decline as retailers selling lower volumes strive to stock only fast-moving brands and thus reduce inventory. Customers will have less selection than is currently available through a beer distributor, and with us closed, cases will only be available at big-box stores.

Our small group of family-owned and operated beer distributors has been playing by the rules designed in 1933 to "keep beer sales local" and prevent big out-of-state corporations from controlling the beer business. Though we've always been "privatized," we are heavily regulated and limited in what we can offer. For example, this is our 76th year of asking the General Assembly to allow us to respect our customers' wishes and sell them packages that they desire, often smaller than a case.

We believe that this commonwealth can devise a "more convenient and rational system" of distributing alcoholic beverages, and stand ready to help the governor and the General Assembly devise one.


Mark Tanczos is president of the Malt Beverage Distributors Association. E-mail him at mbdassn@aol.com.

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