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Giant Eagle aims to sell beer in Pennsylvania stores

| Sunday, Aug. 16, 2009

Giant Eagle's bid to sell beer in some of its grocery stores has raised eyebrows -- and ires -- in Allegheny Township and New Kensington, but the O'Hara-based chain's move isn't the first in Pennsylvania.

Long known for its state control of wine and spirits and its unwillingness to loosen restrictions on the sale of beer by the case or keg, Pennsylvania limits most beer sales to licensed distributors. Still, anyone who's been to a Wegmans grocery store knows they can buy beer there.

Eight of Wegmans 12 stores in Pennsylvania have liquor licenses, including two in Erie and one in State College. Weis, another grocer, maintains two licensed stores in Eastern Pennsylvania.

Giant Eagle spokesman Dick Roberts said his chain is evaluating opportunities to obtain licenses for 12 stores in Western Pennsylvania, despite its withdrawal of an application for an inter-municipal liquor license transfer in New Kensington last week and a denial Monday by the Allegheny Township board of supervisors.

"We believe area customers will appreciate the convenience of the offering, as do Giant Eagle customers in other markets," Roberts said.

If approved, the stores will be able to sell 192 ounces of beer per transaction, or slightly more than what is contained in two six-packs.

New Kensington Councilman Todd Mentecki said the overwhelming majority of what he has heard from the public about Giant Eagle's plan was negative.

"Most of the opposition centered around worrying that it would hurt small businesses throughout town," he said.

Local distributors, primarily Sam Lombardo at Sam's Beer and Pop Shop in Arnold and Tim Lender at Myrna's Brew'ry Outlet in New Kensington, fear Giant Eagle will use its market power to undercut wholesale prices for their beer and price distributors out of the market. Those losses, they say, will affect community efforts in which they invest, such as local advertising and sponsorships.

No discernible effect

Distributors already are coexisting with supermarket beer sales in State College, where Wegmans has had a license for 13 months.

The area's three distributors denied Wegmans has cut into their sales. They cited the two-six pack limit and distance separating the businesses.

Even workers at Pletcher's Beer Distributor, about a mile from Wegmans, were skeptical two six packs made much of a dent in their market for sales of cases of beer.

Because Wegmans buys many kinds of beer from local master distributors, those distributors make money on the new arrangement, one distributor said.

Wegmans Manager Adam Fleming declined to provide specific sales figures for beer, but said the move has been very successful.

"I've lived in Pennsylvania for 23 years and I never thought I'd see beer in a grocery store," he said. "Both sides win here, because people can buy an $8 six-pack of a new kind of beer and, if they like it, buy a case at a lower unit price at a distributor."

The State College Wegmans offers 350 varieties, which Fleming said is on the low end of the spectrum of Wegmans offerings.

Judy Heald of Potters Mills has been thrilled with the ease with which she can buy beer at Wegmans.

"It's single-trip shopping," she said. "It's a high quality store with easy access to a phenomenal selection."

Susan Gordon of Half Moon Township grew up in Cumberland, Md., and is used to buying beer in convenience and grocery stores. Although she would like to be able to buy more than two six packs at a time, she doesn't want to buy cases from a beer distributor.

"They have the best selection in two states," she said of Wegmans. "I wish Pennsylvania would be as enlightened as Maryland about beer sales laws."

Helen Bastian buys a six pack every few months, but says any more beer than that would just take up space in her State College apartment. "I keep it around for my when my grandson visits or if I eat food that goes well with beer," she said.

"I eat my lunch here a lot, but I have never seen anyone drinking beer here, though."

Nobody in the Friday lunch crowd had cracked a cold one.

Beata Wysocki, a math professor at Penn State, doesn't need more than a six pack.

"It lasts us about two weeks," she said, noting that her husband occasionally has a beer with dinner. "If we buy a case, we might be stuck with 23 beers if we don't like them. We'd rather get a variety of kinds, even if we buy a lot for a party."

No changes to law

Giant Eagle won't be applying for licenses for the grocery stores themselves, but for their cafes as separate businesses. The restaurant liquor licenses they seek require at least 400 square feet and seats for 30 people. Although the store and cafe will be connected inside, Giant Eagle will have to create small barriers between the two entities.

"It's a misconception that we've changed the law, or the interpretation of the law, to allow alcohol sales in grocery stores," Pennsylvania Liquor Control Board spokeswoman Francesca Chapman said. "The law provides for licensing of restaurants, and if groceries are incorporating restaurants into their business models and comply with the law, then it becomes appropriate."

"If they have 30 seats, 400 square feet and meet the requirements of the code, it's something we have to consider."

Malt Beverage Distributors Association President David Shipula said that effectively makes a distributor's license out of a restaurant license.

"Grocery stores are acting as beer distributors without following the rules," he said. "They're pretty much doing what we said they would do, selling them at close to cost."

He said the trade group worries about that because the grocery stores can take a loss on the product that is their members' lifeblood.

"We just sell beer, we don't sell 50,000 items," he said. "We can't use beer as a loss leader, an impulse item, like they can."

He said the group's opposition was not only economically motivated

"Yes, it would be more convenient, but would it be the right thing to do?" he said. "Nobody asks that. The more outlets you have for beer, the more opportunities for problems."

Possible hearings

If Giant Eagle does not submit a new application for an inter-municipal license transfer for its Allegheny Township or New Kensington stores, it could try to buy unused licenses already assigned in those communities or active licenses from businesses in operation. Neither of the last two options would require approval from municipal officials.

Nor would there automatically be a public hearing before the LCB. The only notice the public would get in either of those cases would be bright red posters on Giant Eagle's stores and a legal notice in a newspaper's classified ad section -- both required by law.

The LCB will investigate and rule on any transfer, although the board will only hold a public hearing if receives a protest.

The liquor code says the LCB can grant or refuse a license on its discretion if the applying business is within 300 feet of a public facility.

"A license is not necessarily forbidden," Chapman said. "A child-care facility, for example, could file a protest if it is within the distance, but it doesn't preclude transfer approval."

The state's liquor code allows protests by these community stakeholders:

• People who live within 500 feet of the store.

• Other license holders within 200 feet.

• Institutions within 300 feet including churches, schools, hospitals, public parks and various charitable institutions.

Precedent has liberalized who can protest, however, to include any person or party with a definite interest.

"This is where the lawyers tend to split hairs," Chapman said. "Any and all are invited to submit protests to the transfer."

Failed attempt

The current attempt to sell beer from its stores isn't the first for Giant Eagle -- at least according to the state Liquor Control Board.

In 1987, the state cited two Beer 4 Less stores -- one in New Kensington and another in New Castle -- charging that someone other than the license holder had a financial interest in the outlets. Under state law, only those listed on the license can have a financial interest in a beer distributor.

LCB investigators said the parent company of the stores, Tarbridge Distributors Inc., had ties to Giant Eagle.

The original applicant for Tarbridge's licenses was Joseph Faccenda, then senior vice president of merchandising for Giant Eagle. The license then was transferred to Nicholas F. Farina, a former Giant Eagle assistant manager.

Farina denied that his former employer had anything to do with his beer distributor business but the LCB cited his company for having an unlicensed financial partner in the business and for lying on the original license application.

The case lead to the closure of the Tarentum Bridge Road Beer 4 Less, which was renting its space from Giant Eagle.

Sam Lombardo of Sam's Pop Shop in Arnold, argues that the incident should count as a strike against the grocery chain should it chose to pursue liquor licenses now.

"Our store has been open since the end of prohibition and never had any violations, and Giant Eagle was caught lying on its application," Lombardo said. "Why should they be able to get a license again?"

Whether that case affects future transfer requests is unclear. LCB spokeswoman Francesca Chapman said there may be a statute of limitations on violations, plus the applicants at the time were the corporate officers, not the corporate entity itself.

Without more information about the 1987 case, she was unable to say more about the case's effect on the pending applications.

Additional Information:

Applications for licenses

Giant Eagle is seeking liquor licenses for its in-store cafes in 12 Pennsylvania stores:

• Allegheny Township

• Erie (two)

• Hempfield, Westmoreland County

• Homestead

• Pine

• Robinson

• Seven Fields

• South Strabane

• West View

• West Mifflin

Additional Information:

To learn more

Information about the Pennsylvania Liquor Control Board, including the state liquor code, is available here .

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