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Fight against privatization traces back to Wegmans beer case

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By Mike Wereschagin and Brad Bumsted
Sunday, March 24, 2013, 11:03 p.m.
 

For Carl Ulmer, privatizing the state's liquor system goes beyond debates about convenience or the proper role of government.

“If this goes through, I'm out of business,” said Ulmer, 53, owner of Beer World in Westwood. “This has been my life's dream. If this goes through, I've got to start looking for a job in my mid-50s.”

Similar sentiments shared by beer distributors across the state have galvanized opposition to a privatization plan the state House passed on Thursday.

During the past few years, as loosening regulations have allowed beer sales to trickle away from licensed distributors, the industry has organized into a potent political lobby, say lawmakers and advocates on both sides of the debate.

The state Liquor Control Board's decision in 2006 to allow Wegmans Food Markets Inc. to sell beer through a restaurant attached to the store spurred the Malt Beverages Distributors Association, once a loose-knit industry group, to take aggressive political action, said R.J. O'Hara, a partner in the Downtown firm Flaherty & O'Hara, who represented Wegmans when the association sued to block its beer sales.

“The organization sort of gelled around the Wegmans case,” O'Hara said.

That case kicked off the recent privatization debate by sparking discussion on whether it should be more convenient to buy alcohol in Pennsylvania, O'Hara said.

Market slipping away?

Suggestions to modernize the state's post-Prohibition system prompted the Liquor Control Board to try things such as automated wine kiosks in grocery stores, a failed experiment that nonetheless fueled more debate, O'Hara said.

Beer distributors began to worry. State law restricts them to selling beer by the case but designates them as primary sellers of beer for homes and restaurants.

The Wegmans decision “has taken a niche market that was supposed to be for the licensee, the take-home distributor, and allowed restaurant licenses to be used to allow (grocery stores) to act like a beer distributor,” said Mark Tanczos, owner of Tanczos Beverages in Bethlehem and president of the Malt Beverages Distributors Association.

By the time House Majority Leader Mike Turzai tried to push through a liquor privatization bill last year, beer distributors were a foe alongside the union representing state store workers. United Food and Commercial Workers Local 1776 helped defeat privatization efforts in 1983 and 1997.

Turzai's bill stalled, and lawmakers didn't vote.

When Gov. Tom Corbett introduced his privatization plan in January, Turzai, R-Bradford Woods, asked Liquor Committee Chairman John Taylor of Philadelphia to fashion legislation that could win support. Taylor set out to draft a compromise that could get out of committee and pass the House — and the bill did.

Under the plan, beer distributors get “right of first refusal,” for a year, to decide whether they want to apply for a license to sell wine and spirits.

The state initially would issue 1,200 licenses, and there are 1,138 distributors statewide. Beer distributors' fees for wine licenses range from $7,500 to $37,500. The cost of liquor licenses for beer distributors range from $30,000 to $60,000.

That's about 75 percent less than what the public would pay for the remaining licenses. Distributors can own as many as five distributorships, according to a bill summary House Republicans provided.

“It was fashioned originally to get 102 votes,” in part to dilute opposition of beer distributors, House GOP spokesman Stephen Miskin said.

The bill moved to the Senate, familiar territory for Malt Beverages Distributors Association lobbyist David J. “Chip” Brightbill, the former Senate majority leader and a lobbyist with Stevens & Lee law firm.

A joint effort

In addition to the industry's collective effort to stop privatization, individual beer distributors have mounted campaigns.

Influential beer distributors such as Pasquale Deon, the Bucks County Republican who sits on the turnpike commission and Southeast Pennsylvania Transit Authority board, and smaller operators such as Ulmer pressed lawmakers to reject Turzai's bill. Deon couldn't be reached.

“At the end, it became a very high volume of contacts on both sides of the issue,” said state Rep. Brian Ellis, R-Butler County, whose father used to own a beer distributorship. “As it goes to the next phase, the amount of contacts we're going to get are going to go through the roof.”

Ulmer, who usually advertises beer specials on KQV radio, recorded an advertisement slamming the privatization bill and criticizing Corbett. He hands out fliers at his store and shares his opposition with any customer who asks, he said.

“I've been writing legislators, getting the word out to anyone I know. (Beer distributors) are doing everything they can,” Ulmer said.

Ulmer and Tanczos say they're the underdogs in a fight against wealthier grocery store chains and public opinion.

“Most Pennsylvanians want the convenience” of buying alcohol at grocery stores, Ulmer said. “But it's killing small business, which is supposedly the backbone of this country. ... The big guys have the wherewithal to wipe everybody out.”

Mike Wereschagin and Brad Bumsted are Trib Total Media staff writers. Reach Wereschagin at 412-320-7900 or mwereschagin@tribweb.com. Reach Bumsted at 717-787-1405 or bbumsted@tribweb.com.

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