Why the MBDA is bad for beer and bad for citizens.

On face value, the Malt Beverage Distributors Association of PA would seem like a good thing. The organization is standard fare for a trade association in the sense that it is a group banded together to promote the business of selling beer. If you were to look at their Facebook page, you might see linked articles promoting craft beer, which makes sense, since the trend in beer sales continues to move more and more toward American craft brews.

But this particular association is perplexing, not only to the average citizen, but also to the people within the industry. The surface claim is that this association acts on behalf of those in the industry for the betterment of “strength, service and value” for consumers. This idea of strength, service and value is stated in the headline of their most recent newsletter.

In order to understand how this organization actually contradicts the idea of service and value for consumers as well as strength within their industry, we need to look at its current membership numbers and how the number of beer distributors has decreased over the years.

There are a third less beer distributors operating today than there were in 1970, even though the population has increased by a million and interest in craft beer has increased dramatically. There were about 1800 beer distributors in 1970, 1600 in 1985, 1400 in 2000 and there are approximately 1200 today. This is an average loss of over 13 distributors per year. Maybe this is why out of the 1200 in existence today, only 450 or so are actual members of MBDA, according to their web site.

What happens to those distributor licenses when the businesses close? After a specified period of time, typically five years, the license — kept in a safekeeping account by the PLCB — becomes unavailable to anyone else for purchase. In other words, it disappears. This means that Pennsylvania consumers, already strapped for alcohol retail diversity, have even fewer choices of where to shop for their beer.

This is where the conundrum begins with regard to the MBDA. The MBDA did their best to maintain the status quo in all of the liquor privatization efforts because they said it would hurt their numbers. How can the numbers dwindle more than they are already? More than 13 small beer businesses have disappeared each year during the last 44 years

P.W. Botha, the last president of apartheid-era South Africa, said, “We are moving into a changing world; we must adapt, otherwise we shall die.” The MBDA has chosen to avoid adaptation and refuse compromise over and over again when discussing change in Pennsylvania’s beer and liquor laws. They insist on package reform that would permit beer distributors to sell singles, six packs, and twelve packs, but will not agree to terms to allow other liquor licensees to sell cases. This inability for a collaborative approach to change has set the stage for the biggest threat to the beer retailing industry in Pennsylvania.

Frustrated grocery and convenience stores have figured out that they can purchase a restaurant “R” liquor license and sell beer in their stores. They have to turn themselves into pretzels trying to get around the existing restrictions in the law, adding "cafes" and separate checkout areas, but time and time again the court has upheld the validity of their approach. In 2009, the State Supreme Court did not originally find in favor of the Sheetz organization selling beer, but ultimately, with a few changes, Sheetz has been able to meet the obligations of the law and to set up beer sales in some of their locations. At the time of the finding, the court chastised the legislature for not taking action to fix the antiquated laws. Yet, in 2014 we remain chained to ancient legislation and organizations rooted in the past: the PLCB and MBDA..

In 2010, the court upheld the decision that Wegmans could sell beer in their stores with proper separation of registers and departments. The point is, consumers want to try a variety of beer and they don’t want to have to buy a case to do it. With a few tweaks, stores such as Giant, Sheetz, Wegmans, and Giant Eagle are obtaining R licenses (about 200 have done so, putting even more pressure on beer distributors).and providing consumers with what they want. Sort of.

The problem is that the R licenses are not necessarily available in the areas where these particular retailers want to purchase them, and in some counties, the value of the R license has become incredibly inflated, meaning that not only is it impossible for a grocer to buy a license, there are no new restaurants going into those communities either.

This situation is terrible for consumers and worse for beer distributors. So, getting back to the MBDA, you would think that an association wanting to create value for its members and provide service to consumers would be actively trying to make changes. Not so.

Not only are they objecting to any kind of change, they’re actively working to ensure anti-competitive and anti-environmental practices, which works against the good of the citizenry. Here are a few examples of what they tout as achievements, taken straight from their web site:

1. Defeated legislation to allow credit sales among licensees. – Credit makes for easier and smoother business. Even the PLCB uses credit although they were 16 years behind other businesses. Why wouldn’t beer distributors want to use this business tool?
2. Kept mandatory deposit bills and referendums bottled up. – Nice pun on their part but deposits reduce litter and promote recycling which it seems they don’t want to do.
3. Blocked legislation to legalize interstate sales of beer. – That's understandable. Even with government limitations on entry into the business and lower beer taxes than surrounding states, they definitely don’t want people to know it is usually less expensive to buy beer elsewhere.
4. Eliminated language from a bill to permit food stores to sell candy that contains liquor. Why? Is there any candy with beer in it? I’ve seen chocolate with a dab of liquor in it, but cough syrup and mouth wash has more alcohol and I can buy both in a grocery store.
5. Helped secure injunctive relief in federal court against mail-order beer clubs. Yep, don’t want people trying something new that they might buy a case of if they like it.
6. Supported Clean Air Act exclusion for distributors. They don’t want clean air?
7. Drafted and secured passage of the Quota Law. This one is a bit confusing, and on talking to a few beer distributors, they seemed confused too. Is the quota for distributor licenses, or for tavern licenses? We’ll have to pick this one apart in another post sometime unless some MBDA representative wants to clarify it for us.

Can you see what is missing in all of this? There is not one piece of active legislation that the MBDA has INTRODUCED to help their industry in an already transitioned market place. They seem completely uninterested in providing better price and selection for their customers. Given their stonewall opposition to any liquor privatization bill...that's not surprising at all.

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.