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Traditional beer sellers grapple with new liquor laws

Rich Pluta is owner of Newport Beverage in Perry County. Since the passage of Act 166, a long wall of shelving, once reserved for cases of beer, is now dedicated to six-packs of craft brews. - (Photo / Amy Spangler)

Rich Pluta says he’s having fun discovering and selling more types of craft beer in the wake of a new state law that allows distributors to sell beer in smaller quantities.

“It’s a different world,” said Pluta, the owner of Newport Beverage in Perry County. “It has really drawn in the customers.”

The change in state law, ushered in by Act 166, dropped the recently enacted 12-pack minimum and granted distributors additional flexibility to sell six-packs, four-packs, singles for mix-a-six and larger bottles of more unusual or rare beers.

While he’s excited to expand his inventory and sell higher-priced beers that may have sat longer in the past because of packaging restrictions, Pluta also realizes it will probably be a few years before he recoups recent investments made at his store — from new shelving to cooler changes — to accommodate the new options.

And more changes in state law are looming as lawmakers in favor of a private-sector alcohol market continue to chip away with new reforms proposed in the name of greater consumer convenience.

“We don’t know what the next change is and that’s the scary part in all of this,” Pluta said.

Opinions have been pouring in recently from various trade groups representing restaurants and retailers, as well as lawmakers and legal experts, about what tweaks could be coming next or are needed to improve the system.

Takeout sales of hard liquor, similar to wine-to-go changes last year in supermarkets and convenience-store chains, has already been proposed. And beer distributors could get permission to sell wine.

There is chatter, too, about streamlining the transaction process in supermarkets and convenience stores by allowing beer and wine to be sold at the same registers as food. Also on the table is creation of a new class of liquor license for large retailers and allowing restaurant liquor licenses to move across county lines to help control costs for restaurateurs and meet demand in growing areas.

Distributors don’t really have a choice but to take what new piece of business the state gives them, Pluta said. If distributors don’t adapt, growing competition from supermarkets and convenience-store chains, which are stockpiling high-priced restaurant liquor licenses, will hurt them.

Pluta, who supports liquor privatization, said that as larger food retailers add more liquor licenses, it will put greater pricing pressure on those with little else to sell besides beer. That could knock some traditional beer sellers in Pennsylvania out of business.

Newport Beverage doesn’t yet face beer competition, despite being next to a Giant supermarket. Pluta’s business also is in a rural area with few bars and grocery stores that are or could be selling takeout.

“If I was a package shop in a town like Harrisburg, I would be greatly concerned,” he said.

Change is in the air

Local changes have already started to occur under the new state laws.

Al’s of Hampden, a West Shore six-pack and mix-a-six establishment, recently dropped its takeout beer business and restaurant liquor license because of Act 166, which put it in direct competition with distributors.

Amy Spangler

However, the Hampden Township company has a brewery business, Pizza Boy Brewing Co., to fall back on. Pizza Boy, which produces many of the beers on tap at Al’s, continues to makes its beers available for people to take home, while Al’s is still able to serve other Pennsylvania draft beers on tap as a brewpub.

Harrisburg liquor law attorney Fran O’Brien of F.X. O’Brien Associates expects other craft producers may follow Pizza Boy’s example and shy away from restaurant licenses because they may no longer need them. Changes made last year under Act 39 allowed breweries, wineries and distilleries to sell more of each other’s products, which boosts the menu and can help attract different audiences.

“That’s something the marketplace has to figure out,” said O’Brien, a lobbyist who represents the Pennsylvania Beer Alliance, a trade group for wholesale distributors, among other alcohol-related clients.

In York, the Holy Hound Taproom decided to close its bottleshop, citing Act 166 and the growth of beer and wine sales in larger retailers.

Other beer-centric businesses in the midstate are also looking for ways to adjust.

Kurt Wewer, executive chef at The Garlic Poet restaurant and the Grain Verse Bottlehouse in Fairview Township, said the latter’s beer business has not yet been impacted by changes in the law.

Most customers are still coming to eat and to try a beer from the restaurant’s selection. Others pop in to grab mix-a-six packs, but the cost is higher than at larger retailers and distributors. Good service and better selection are the selling points for places like Grain Verse.

However, Wewer knows change is inevitable.

“I mean, it’s going to get us eventually,” he said. “People aren’t accustomed to going to a distributor to mix-a-six. But they will become accustomed to it and I’m hedging my bet on that lag time to get my place in order.”

License costs are issue

Restaurant owners in Cumberland County, where liquor licenses are among the most expensive in the commonwealth due to heavy demand and little turnover, said that businesses have to offer something special to stand out. Licenses in Cumberland cost around $500,000.

But a liquor license is still necessary, especially for the bottom line.

“It’s very difficult for a restaurant to make a go of it on the food. The margins are incredibly low,” said Mike Page, who opened Vrai in Lemoyne with his wife, Shelly, a little more than a year ago. “Often times liquor is 25 to 40 percent of your business in some restaurants.”

Vrai, which was the first restaurant to serve booze in Lemoyne, a previously dry borough, also has a cutting-edge menu. The Pages have focused on unprocessed and organic food using locally sourced ingredients. They serve free-range, grass-fed and hormone-free animal products and work with local farms to source many of their eggs, meats and dairy products.

Mike Page said that while Vrai has a strong following, it probably couldn’t survive without a liquor license.

From the standpoint of consumers and budding restaurateurs, it would be nice if license prices were lower, or at least more stable, to allow more eateries to open up with a liquor option, Page said. But as a business owner with a license, rising prices make it a good asset to hold if the market changes.

Restaurateur Nick Laus, who recently opened Cork and Fork Osteria in Hampden Township, doesn’t see prices coming down.

“If anything, I think it’s going to make it more difficult for restaurants down the road,” he said, noting the growing number of licenses going to large chains with deep pockets.

Laus got lucky and was able to buy a license from Rillo’s in Carlisle for use at the Cork and Fork.

“Because of all the grocery stores driving the cost, that is an asset to us,” Page said. “But the state could come in and totally reverse that, and that asset could become a liability.”

Pluta sees his distributor license as a liability. His license is not growing in value and may actually be losing value, he said, because people aren’t looking to get into the distributor business.

Full-service appeal

Rep. Scott Petri (R-Bucks), prime sponsor of the bill that became Act 166, disagrees about the declining value of distributor licenses and said changes under Act 166 are helping distributors make more money, which should boost their licenses’ appeal if current owners want to get out of the business.

Amy Spangler

Becoming large full-service takeout businesses that can sell all kinds of alcohol may be the only way distributors can survive long-term, Pluta said.

Petri said he doesn’t see any other big liquor law changes looming and believes there is room for everyone to co-exist. “In the end, the grocery stores can’t carry the same variety.”

He also believes the Pennsylvania Liquor Control Board’s auction format of releasing a few dozen expired restaurant licenses, spread across many counties each time, gives the market more time to adjust to new businesses selling alcohol. Most of those licenses are being bought by big companies such as Giant Food Stores and Sheetz, among other chains.

“I think we’re moving in the direction of a consumer-driven free-market system,” said Alex Baloga, vice president of external relations for the Pennsylvania Food Merchants Association, a trade group for national and regional chain stores, as well as independent retailers.

The association believes more could be done to address the lack of licenses in some counties, including Cumberland, to help contain the costs for small-business owners who want access. A new class of license for food retailers might be the best approach.

Even then there would still probably be a shortage of licenses, he said, but the new class could help eateries. And it may also help cut license costs.

Melissa Bova, vice president of government affairs for the Pennsylvania Restaurant and Lodging Association, said lowering the cost of takeout wine permits and allowing spirits to-go could help smaller restaurants compete. The association also is advocating for removal of the 192-ounce takeout limit, the equivalent of two six-packs, as well as adding a separate class of license for grocery stores.

Overall, though, it would like to see gradual moves instead of immediate, large-scale changes.

“We’d prefer a slow process that allows us to catch mistakes,” she said. “It’s a complicated licensing system where you tweak one thing and it affects someone else.”

But the only constant is change, O’Brien added. “I think efforts will be made to improve or take some of the rough edges off some things.” Bigger changes, such as selling off the state’s wholesale business that controls the retail distribution of wine and spirits across the commonwealth, could depend on the willingness of pro-privatization lawmakers, including House Speaker Mike Turzai (R-Allegheny).

Some Republicans seem happy to take small steps to try to boost state revenue and consumer convenience, while maintaining an asset in the PLCB that could be hard to replace following a one-time payout from its sale.

“Sometimes it’s good to make changes and sit back and watch how everything works,” Petri said. “The industry is so interconnected.”

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