Friday, March 28, 2014

Let’s Kill Another Privatization Myth

Like the movie, some supporters of the State Store System will "say anything" to keep the PLCB jobs program and prevent the citizens from having the choice, selection, and service enjoyed in the majority of states.

The latest in their series of  "Look (at our) Interesting Example," or LIE as I like to call it, is that privatization will kill craft beer, micro-distilleries, and small wineries (you pick: one, two, or all) in Pennsylvania. 

Really? Consider:
1.       What state has the largest number of craft brewers?
2.       What state has the largest number of micro-distillers?
3.       What state has the largest number of small wineries?
4.       What do these states have in common?

Not hard to figure out that California is the answer to #3, but they also lead in #1 with 316 as of last year. Question two goes to the state best known for distilling, Kentucky, with 16 micro distillers as of 2013 and California is second with 14

Both California and Kentucky have private alcohol sales - retail and wholesale. So tell me again how privatization will kill off these businesses in PA?  I’ll wait while you make up something.
.....Right. Exactly.

My next article will prove that PA rural roads have nothing to do with DUI fatalities compared to our surrounding states. Another LIE that pops up a lot.


Anonymous said...

You believe that the number of wineries is related to privatization? That it is not the climate? I find it very difficult to believe that climate is not the sole reason that California has more wineries. Even with the difficult climate PA is sixth according to

Oregon and Washington which has or recently had the state involved are third and second, respectively. Delaware is 49th and there is no liquor control there.

I get from your blog that you hate the system, but to state the California has more wineries is solely or even partially due to who controls distribution is way off base.

Lew Bryson said...

I don't believe Albert is saying that California has the most wineries and microbreweries because they have a privately-owned wholesale and retail system, but pointing out that they have the most while having private distribution and retail systems. He's addressing the specious argument of the PLCB partisans that privatization would be bad for the Commonwealth's wineries and craft breweries. Pennsylvania's craft breweries are obviously thriving with a private system, and they do equally well when they sell in other states. Beer's lucky; the Pinchotistas never tried to 'control' it.

Albert Brooks said...

Lew is correct, the point was to show that craft alcohol thrives in private systems. Here in PA beer especially does well in spite of the PLCB enforcing a quasi-oligopoly of beer distribution and the sheer idiocy of the current case law. Take those shackles off and it will really thrive.

Anonymous said...

California is a much larger state both by geography and population. Are you arguing that the case law restricts growth of craft breweries? If so why are California and Pennsylvania essentially tied? California is 19th is craft breweries per capita and PA is 21st. Could it be that having beer only stores actually encourages shelf space and opportunity and that would allow the two systems to be tied? How does having beer-specific stores infringe upon a new craft brewery? I don't see that logic. Doesn't PA also have beer-specific six-pack stores? Would they also provide a unique avenue for small breweries to get shelf space? One of the complaints in Washington State has been that since privatization the beer and wine specific stores have observed decreased sales of approximately 15% per year and the grocery stores carry only a small fraction of the breweries represented on the shelves in wine and beer stores. As such, the craft breweries are seeing reduced sales and the wine and beer shops are pushing for legislation to be able to sell craft liquor.

Lew Bryson said...

No one said that the case law restricts the growth of craft breweries. But I'd argue that PA's craft brewers have thrived despite the case law, not because of it. PA has traditionally been a strong market for draft beer (older brewers have told me that for years), which probably helped.
But no, I don't believe having "beer-only" stores helped that much. I've been buying beer in PA since I moved back here in 1991, and those beer-only stores were mostly notable for being resistant to craft beer. There were exceptions -- Shangy's, for instance, and the Beer Yard in Wayne, where I worked myself in 1994 -- but craft by the case was a tough sell.

PA does have "beer-specific six-pack stores," but they're really repurposed tavern licenses; letting full-sized stores sell beer would seem to allow for greater choice. I've been to beer-only stores in New York state, for instance, the size of supermarkets (Half Time in Poughkeepsie, and Beers of the World in the Rochester area), that have well over 1,000 craft and imported beers.

Unless you can give a link to your Washington State numbers, I'm afraid I don't buy them. There are different stories there, and the numbers change every month. Privatization in Washington is still changing; things haven't settled. If you can prove that craft sales are actually down in Washington State, I'd be very, very surprised. Craft sales were up 16% nationally...and you're telling me that Washington State's craft beer sales are down? Prove it. This is a consistent conjecture by those against privatization, but I don't see the numbers. Just because Washington bobbled privatization doesn't mean it's a loser; in fact, every Washington beer and whiskey enthusiast I've talked to about this has said that although prices are up -- thanks to the new taxes! -- the selection is better. Anecdotal? Sure. But consistent.

Again, the success of craft breweries, small wineries, and craft distilling in states with private distribution systems seems to let the air out of the argument that privatizing PA would somehow be "bad" for the state's small brewers. The only problem for them that I increased competition from wine and spirits when private stores start selling them.

Albert Brooks said...

I have to disagree with Lew, I do think the case law limits craft beer because it puts unnatural restrictions on sales in general.

You stated that beer and wine specific stores in Washington have had decreased sales. I can believe that but not for the reasons you think. There is more competition in Washington state because there are more stores, stores that sell everything. It isn't that total sales of craft beer are down it is that the sales are spread out over a larger amount of stores. Washington, while having some of the lowest per capita consumption of beer in the US (45th) has one of the highest percentage of craft beer sales (25%) compared to total beer sales.

Liquor licenses in Washington are very inexpensive so I don't understand nor have I heard about any legislative relief for these stores to buy a liquor license. If you could provide a link I'd like to read about it. Now if you are talking about small liquor stores in general there was a disparity in taxation whereas a distributor didn't have to charge a 17% fee to sell to bars and restaurants that the small retailer did. That has been corrected so taxation is now equal.

Anonymous said...

Senate bill 5731 was passed by the senate but voted down by the house and would have allowed the beer and wine shops to sell craft distilled spirits.

Per the question before, craft beer by state is difficult to come by, but the Symphony IRI Group did put out an analysis in 2012 that indicated that Deschutes, Red Hook, and Pyramid were the largest Washington State craft breweries and sales changes from 2011 to 2012. No other Washington-based breweries were in the top 10 of craft sales in the state. Sales over the one year period only within Washington State were down for Red Hook and Pyramid but up for Deschutes. Compared to Oregon where 5 of the top 10 craft brands are Oregon-based. I received a copy of this report, so I don't know if it is on the internet.

My point here is did Washington State screw up by focusing on big retailers? In my opinion, yes! I think the 10,000 sq ft restriction actually hurts small businesses. PA has the 8th best beer distribution (availability) . Hopefully, beer does not get screwed up in a wine and spirits privatization.

Lew Bryson said...

We don't disagree, Albert; I do believe the case law was a drag on craft beer, but we've compensated for it with mad enthusiasm. If we hadn't had the case law, I think we'd have had an even bigger craft scene.

I do agree with the latest Anonymous (names, people, names, please! Even fake ones are useful) that the square foot requirements are a bad idea. I hope we don't see any such restrictions in any privatization bill.

Albert Brooks said...

Thank you for the link, it was very informative. While I try to stay on top of things that aspect certainly escaped my attention.