Retailers ready to serve Pa. market if liquor privatization becomes law
By Alex Nixon and Brad Bumsted
Published: Saturday, Feb. 2, 2013, 10:30 p.m.
If lawmakers agree to privatize the state's liquor and wine shops, David Trone is “100 percent certain” he would open several alcohol superstores in Pennsylvania.
The Pittsburgh native owns one of the nation's largest chains of liquor, wine and beer stores. He operates 88 stores in 15 states — but not here.
“I look at myself as a Pennsylvanian,” said Trone, 57, who started as a beer distributor in Harrisburg in the 1980s.
He and his brother, Robert, with whom he owns Total Wine & More, based in Potomac, Md., left Pennsylvania in 1991 to expand their business.
“It's where I grew up,” said Trone, who lives in Potomac. “I moved here because I couldn't do business (in Pennsylvania) other than beer.”
As debate begins in Harrisburg over a proposal Gov. Tom Corbett floated last week, retailers in this state and elsewhere are preparing to grab a piece of the closed and restrictive system of selling spirits, wine and beer.
Private management could mean a substantial uptick in sales for a range of retailers and increased tax money for the state, supporters say.
Corbett, whose Republican Party holds majorities in the state House and Senate, made good on a campaign promise by releasing his plan to replace state stores with 1,200 private shops, and to expand beer and wine sales to convenience stores, pharmacies, grocery stores and big-box retailers.
The proposal is far from assured. Support among Corbett's own party is mixed, and he faces strong opposition from the union representing 3,500 state store employees.
Two governors tried and failed to privatize wine and liquor sales — Dick Thornburgh in 1983 and Tom Ridge in 1997 — yet supporters believe the time is right for Corbett's plan.
“It's the best seen in Pennsylvania since 1933,” said David McCorkle, CEO of the Pennsylvania Food Merchants Association/Pennsylvania Convenience Store Council. That's the year the legislature created the Pennsylvania Liquor Control Board.
Thousands of convenience and grocery stores are ready to join counterparts in 48 states that allow more open beer and wine sales, McCorkle said.
There are “roughly 7,000 food stores in the state that I'm sure are very interested in selling wine and beer to their customers,” he said.
Corbett's plan would sell an unlimited number of beer and wine licenses to retailers for annual fees ranging from $15,000 to $35,000.
In position to move quickly are several Western Pennsylvania companies with wide retail presence, space for stock, and experience in handling the products. Among them: O'Hara grocer Giant Eagle Inc., with 104 supermarkets and 87 GetGo convenience stores in Pennsylvania, and Altoona-based Sheetz Inc., with 226 convenience stores.
Giant Eagle issued a statement supporting Corbett's vision for “a more consumer-friendly approach.”
“We look forward to working with him and the state legislature to accomplish that goal,” the company said.
The supermarket chain is one of the largest sellers of beer, wine and spirits in neighboring Ohio, and it sells six-packs of beer and single bottles in some Pennsylvania grocery stores under restaurant licenses.
Louie Sheetz, executive vice president of marketing, said 210 Sheetz stores in five other states have sold beer and wine “successfully for many years.”
“We do very well with beer sales,” he said.
Sheetz stores could be quickly outfitted to handle six-packs.
“We'd just rearrange some cooler doors. We could get into it pretty quick,” he said.
Under the plan, a convenience store would sell one six-pack at a time and pay an annual fee of $15,000.
Pharmacies would pay $15,000 a year for a license but could sell two six-packs and up to six bottles of wine at a time.
Camp Hill-based pharmacy operator Rite Aid, which owns stores in 31 states including 400 in Pennsylvania, said in a statement that it is “encouraged by the governor's initial proposal,” but declined to comment further.
Grocery stores would have the same quantity restrictions as pharmacies, but their licenses would cost $25,000 or $30,000 a year, depending on store size.
Big-box retailers would pay $35,000 a year for the chance to sell cases of beer and up to six bottles of wine.
Wal-Mart said it was reviewing Corbett's proposal. The company is “always looking for opportunities to expand our product base to better serve our customers,” spokesman William Wertz said.
Costco sells beer, wine and spirits in stores where state law allows, said Jim Stafford, vice president of merchandising for the Northeast.
“It's fairly common in our business,” Stafford said. “But we're at the liberty of what the laws are in particular states.”
He declined to comment on Costco's plans if Pennsylvania's law changes.
Retailers pleased about the opportunity are not happy with the cost of licenses or the restrictions on quantities.
Sheetz said the fee is unreasonable, estimating it could take an average Sheetz store six months to generate profit on beer sales to cover the cost. He worries that a one six-pack limit might send potential customers to other outlets.
Don Bowers, a manager for gasoline distributor Superior Petroleum Co., which owns gas station convenience stores across Western Pennsylvania, said the six-pack limit would be fine but predicted that few independent gas stations could afford the license.
“The fee is crazy,” he said.
The costs climb for a company such as Total Wine, which would try to establish superstores in Pittsburgh and Philadelphia to sell spirits, wine and beer. The typical Total Wine & More stocks 8,000 varieties of wine, 3,000 brands of liquor and 2,500 beers.
To do that under the proposal, Trone would need to buy a beer distributorship and pay a one-time fee of $150,000. He also would have to win one of 1,200 retail liquor licenses the state would auction.
Yet Trone said he's committed to opening stores if the law permits. To do so all over the country but not in his home state, he said, “makes no sense at all.”
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