Tuesday, May 11, 2010

How losing six-pack sales may win us six-pack sales

The Malt Beverage Distributors Association (MBDA) is, and has been fighting the whole idea of six-packs in supermarkets (and convenience stores) for years. I can't blame them -- it's not really fair that Wegmans can sell six-packs while distributors cannot -- but it's not really fair that we can only buy them in bars, either. I also question the wisdom of pursuing it at this point, when beer has been sold in some Pennsylvania supermarkets for over a year. I'll explain that in a moment. Meanwhile, here's what they had to say about it, from the MBDA website. 
On April 14, 2010 the Pennsylvania Supreme Court heard oral argument in the Wegmans case. Representing MBDA was Robert B. Hoffman of Eckert Seamans law firm, who had successfully argued the Sheetz case for MBDA before the same Court in 2008.
Robert Heim of the Dechert law firm was brought in to argue on behalf of Wegmans.
It was an active court with the justices asking many questions of all parties. Those questions focused on whether it was sufficient that the Wegmans' Market Cafes qualify as a restaurant and whether the fact that they were part and parcel of and located within Wegmans made any difference. MBDA argued that the PLCB needed to look at the economic reality of the beer sales, which indicate that Wegmans Supermarket, not Wegmans Restaurant, is making the sales. Wegmans responded that it is within the PLCB's discretion to decide if interconnections between a supermarket and a restaurant disqualify a restaurant from holding a license to sell take-out beer. Wegmans [sic] contention is critical because, if correct, the standard of review that the Supreme Court must apply is to determine if the PLCB abused its discretion. The Supreme Court cannot simply substitute its own judgment for that of the PLCB's. However, if as MBDA contends, the issue is not one of abuse of discretion but simply whether or not the Liquor Code allows supermarkets to sell beer, which is what Wegmans Supermarket is doing, then the Supreme Court can apply its own analysis of whether or not the PLCB correctly interpreted the Liquor Code in reaching its decision to allow Wegmans to have a license
MBDA made a very strong argument, both factual, during the multiple Wegmans hearings that stretched over two years and still continue today with regard to other supermarket chains, and legal, as to why Wegmans is not entitled to a license. We believe the Court will carefully consider all the issues raised and issue its decision by late 2010.
I grew up in Lancaster County, so let me use a farm analogy. The MBDA is locking the stable after their horse already ran away. Pennsylvanians have been buying beer at supermarkets for over a year. They have seen that the MBDA's arguments are hollow, bogus, bullshit. "Kids" aren't buying beer at supermarkets, children aren't irreparably freaked out by seeing beer for sale at supermarkets (any more than my nieces are in New York), drunks aren't hanging around the stores or running over people in the parking lot. What is happening is that beer distributors' businesses are slumping in value, because a large hole has been poked in their monopoly; people who wouldn't go into a bar to buy a six-pack are going into the Giant Eagle. 

More importantly, if the MBDA should prevail in this court case, and the Supreme Court rules that these licenses are void...it will be a disaster for the MBDA. If you give Pennsylvanians beer in supermarkets for a year...and then take it away, I guarantee you, they'll be furious. Their legislators will hear about it, the newspapers will write about it, hell, I'll sing about it! 

The MBDA should not have put all their eggs in the litigation basket. They should have been lobbying for the Legislature to fix up the very best deal that they could get. Instead...they're locking the stable door. Bad move. There were smarter plays to make. Winning may lose them everything. 


Anonymous said...

Had the MBDA put this much effort in pushing 6 pack sales in their own buildings when they had the chance (I believe it was brought up twice to change the law) this would most likely be a non issue. Maybe if I only drank Bud Light I would want the convenience of grocery sales, but as a craft drinker I enjoy going to stores (distributors) that have a large selection for me to chose from. My issue is with spending $80 or $100 on a case of something I'm not sure about. I feel bad for the owners but it was their unwillingness to change that brought this on.

Lew Bryson said...

They should have pushed harder. The Tavern Owners fought 6-pack sales (at distributors), but the MBDA could have sweetened the deal by pushing the Leg to give the taverns a better deal from the State Stores on wine and spirits (because it wouldn't take much to make their deal better).

Anonymous said...

Hey Anonymous
Just came back from Flordia and one corner their was a Publix that would be similiar to a Wegmans and the craft isles in the store were huge,there was a Wallgreens across the street with a nice selection and a wine and liquior and beer store under one roof,sure their was some loss leader items Bud,Millecoors but the rest were very large and local beers displayed and easy acess to 24-packs and six packs and also 18 teen packs all at very good prices.
When you have many places you can purchase Beer in a state their is greater competition and prices are fair unlike Philadelphia when your Beer goes through a few greedy wholesalers who make huge dollors and cares very little about their customers or Beer distributors lets open up the state..
Lew might not agree and we all have our own reasons why or why not but hell if you take up a poll you might have seventy five percent of the people who would love to buy beer supermarkets...

Lew Bryson said...

That model works some places, but the "package store" model -- all-booze stores with wine, spirits, and beer -- works well in Massachusetts. Both would work here. What doesn't work is what we have. I mean, it works, but the case law should go away and the State Stores should go away.

And I know you like beating up "a few greedy wholesalers," but you know what? I talk to brewers and distillers and retailers all over the country, and wholesaler consolidation is a fact everywhere. Not saying it's good or bad, but it's happening -- it's happened. As with a lot of things in PA, lay this at the feet of the Legislature. This is a highly regulated market: business follows the regs.

Anonymous said...

Hey other Anonymous,

I'm in South Florida every other year and unfortunately my grocery store (Publix as well as others) experience has been the opposite of yours. It's usually all the BMC beers, a dozen or so caribbean corona-type knock off's and mavbe 8 to 10 craft options. That is one of my concerns with the distributors going by the way side in Pa, most poeple look at this argument from the Pittsburgh or Philly point of view where craft beer has a firm if not greater footing. Living in the rural middle of the state I'm concerned what if anyone will step up and fill the void if the one out of nine we have that focus on craft here locally go under. I would hate to see our already lagging craft beer scene take a step backwords by losing 30% or more of the options we have. Please don't bring up Wegman's as a counter to this as they have already stated they will not move into our area.

Kevin said...

If the court were to rule in the PLCB's favor would they then have to remove their Wine and Spirits Shoppe from the Acme in Phoenixville? You have to enter, walk through, and leave through the Acme.


Lew Bryson said...

Nothing to do with the Wine & Spirits stores; this is strictly a beer issue.

Anonymous said...

Hey Anonymous
Agreed that the wholesalers in South Flordia might be a little biased toward Millercoors and Inbev but to pay for their consolidation efforts as in the case in Flordia to expand into different locations they must consolidate their competition this has to be done with a strong line up of high end beers to pay for this.

Vertical consolidation purchasing brands within the territory you presently service like the large wholesaler in Philadelphia is doing
will give you alot of clout with the large chain store in Penna if this ever happens..There would be some financial impact if you could cut the number of retailers you service in half selling the same volumn.
To Lews point of consolidation is not going away he has some valid points that it is not going away.Their will be fewer wholesalers in the future just talk to the employees who used to work for Kunda,Spaz.and Bounds.This is neither good nor bad it simply is.But if I were a betting man in almost all situations the new wholesaler will have considerable debt.The smaller wholesaler is debt-free and has much more financial flexibility..and is not making business decisions on bank covenants.So maybe in Philadelphia why not merge you get all the benefits of consolidation money money and more money and you know how that effects some people and put into their pockets,not the bankers...

sam k said...

Talked to a distributor who attended this year's MBDA gathering a while back. Said that the dinner was $30 a head, they served it buffet style, ran out of many dishes, had only plastic tableware (for pick up on the buffet, no place settings), no dinner napkins (just cocktail napkins), no dessert, no water, no coffee.

I told him they had spent too much on litigation to spend any money on food. He said he thought that's where some of the $30 must have gone, because the meal wasn't worth $10.