Though Pittsburgh and Philadelphia have received significant attention recently for their dining scenes, one area still causing strife is booze. That's not to say that there aren't great wine lists in each city, but the antiquated system through which wine and liquor is imported and distributed in the state of Pennsylvania has, for many years, hindered hospitality operators, and finally a group is speaking out.
Along with Utah, Pennsylvania is one of the strictest "control" states—meaning all wine and liquor sales must pass through the State. In PA, a legislature-governed organization called the Pennsylvania Liquor Control Board (PLCB) was created in the repeal years with the explicit aim of—per Wikipedia, citing a book by Mark Noon—"discourag[ing] the purchase of alcoholic beverages by making it as inconvenient and expensive as possible." Today, the PLCB enforces the legislative code that regulates the sale of wine and spirits (but not beer). Along with determining where and when wine and spirits are sold, that code includes an enormous five-tier price hike, starting with a 30 percent mark-up that channels money into Pennsylvania’s general fund, followed by several other taxes, resulting in layer after layer of bureaucracy. This overall scheme ensures that a wine which would retail for $10 in New Jersey would end up costing $18.25 in Pennsylvania.
That means that restaurants and retailers—or "licensees"—cannot profit in liquor sales in the same way that their counterparts in New Jersey and New York do since the state controls all retail selections to consumers through its Fine Wines and Spirits stores; there are no privately held retail shops in PA. "The State run stores are about as warm and cozy as a Costco or CVS and often staffed with inexperienced employees," said Megan Storm, who works for the wine importing and distributing company Artisan’s Cellar. Licensees also have to go to great lengths to actually get those wines, such as hiring their own delivery trucks—as opposed to working with distributors, as most states do. And furthermore, through the State-run system, restaurant professionals and retailers say they simply don’t see the kind of diverse bottle selection they would like to be able to offer.
Today, a group of industry professionals testified before the House Liquor Control Committee at the Pennsylvania State Capitol, in Harrisburg, with the hope of conveying the message that Pennsylvania’s approach to wine and spirits is hindering the profitability of their businesses and preventing a stronger wine and spirits culture from developing. This perspective was presented by a group comprised of small- to large-scale importers and distributors, brokers who work with importers in other states to bring in small-production wines, beverage directors, restaurants, and hospitality industry associations.
Terri Beirne of The Wine Institute, which represents California wineries, testified before the Committee. She explained that one specific cost mark-up, known as the LTMF (logistics, transportation, merchandising factor), has been steadily increasing for years, with no explanation: "For a 750 mL bottle of wine, it was a flat fee of $1.20 until 2010; then in 2011 they changed it to a percentage of the price, which was a baseline of $1.30 per bottle on average." Over the course of four years, the LTMF was raised to a baseline of $1.37 for "new products" which, for wine, could simply mean a new vintage. "They just keep moving the base line," she said. "We don’t even know the details of this price calculator, this is the best we know."
It’s one thing to imagine how consumers are affected by this mark-up—but restaurants, which often depend on the margins from alcohol sales to make a profit, are really suffering. "Restaurateurs such as Timothy Kweeder of Petruce et al., are struggling to keep their doors open and their wine cellars well stocked," said Storm. She mentioned a Philly Mag review of Petrace et al., a restaurant featuring small-production natural wines that sparked a comment thread lambasting its wine mark-ups, and which then stoked a flame of discontent that was already burning amongst the wine-loving restaurant industry community.
Melissa Bova, the Director of Government Affairs for the Pennsylvania Restaurant and Lodging Association, explained that there are further costs that raise the prices of wine and spirits for retailers and restaurants. It is somewhat labyrinthine. Before the LTMF fee is applied, a non-descript 1 percent fee is applied to the unit cost of an item. Next, a 30 percent markup is applied to the first $65 of the sum above (with 10 percent on any amount above $65). Next the LTMF is applied. On top of the LTMF, there’s an 18 percent tax, which was originally created about 70 years ago to help a town called Johnstown that suffered a flood. Then, for some reason, that number is rounded up to the nearest $.09, and (as in most states), a sales tax is added when a bottle is sold from a state-run store.
Yet, the main complaint Bova hears is that Pennsylvania doesn't "have the selection that a lot of states have. We don’t have the variety we need. And it’s hard to mark up a product that already has five levels of mark-up."
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