Control State News 2018
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Monday, August 5, 2019 www.nabca.org • PA: Convenience and grocery stores selling beer upend • What to Say When You See a Pregnant Woman Drinking Lancaster County market for liquor licenses Alcohol • NE: Health problems linger after beer sales end in Nebraska • The case for increasing alcohol taxes town • Asia: Philippines ‘Iron Lady’ Leads Push for Fair Alcohol Taxes used for Miller’s Ale House, which opened in October CONTROL STATE NEWS 2018. PA: Convenience and grocery stores selling beer upend “I made a nice profit because of happenstance. It’s really Lancaster County market for liquor licenses that simple,” Gargano said. Rather, it was the result of a package of tweaks made Lancaster Online three years ago this month to the Prohibition-era By Chad Umble, Staff Writer Pennsylvania Liquor Code. August 4, 2019 The changes opened up beer and wine sales to a new class The Rutter's in Leola was the first convenience store in of corporate buyers — convenience and grocery store Lancaster County to sell beer. It debuted the sales in chains. October 2016. Since a fixed supply of liquor licenses is available for each In 2011, after more than 30 years in business, Joe Gargano county — and new buyers with deep pockets began decided to start selling beer from his small pizza shop at pursuing them — basic economics explains why prices the center of East Petersburg. more than doubled. Gargano bought the required restaurant liquor license That pushed prices to the point where many smaller from Doneckers Restaurant in Ephrata, which had closed operators, like Gargano, decided to cash out. three years earlier. At the same time, another set of changes created a Gargano said he paid the going rate for such licenses at possible alternative for small operators who feel shut out the time, which was around $125,000 — an amount that by the suddenly high costs of opening a traditional bar. had changed little in decades. “I think who’s lost out are the small, independent Adding beer brought some new faces who would often restaurateurs,” said Aaron Zeamer, an attorney with buy pizza, subs or stromboli and then grab a six-pack on Russell, Krafft & Gruber who specializes in liquor license their way out, Gargano said. transactions. “A chef who has been toiling in the industry But after about five years, Gargano said, his beer sales for a long time and wants to go out on his own, it’s really, began to attract a very different kind of customer — really difficult for them to do that and have a successful buyers who wanted his liquor license. model.” “I had brokers coming at me, I had people directly calling Law changes me,” added Gargano who said the calls, visits and mailings The liquor law changes that went into effect in August were coming weekly. 2016 followed years of efforts to privatize liquor sales in Gargano eventually sold his liquor license in 2017 to the Pennsylvania. While the updates that were rolled into Act developer of The Crossings at Conestoga Creek opposite 39 stopped short of privatization, they represented the Long’s Park. The mixed-use project includes a shopping biggest update since the 1930s. center anchored by Wegmans. Among many other things, Act 39 expanded hours at While Gargano did not disclose the price he got for the state-run Fine Wine & Good Spirits stores and allowed private sale, he said he received the going price at the time, which was around $350,000. The license is now 2 them to start selling lottery tickets, while holders of Cheryl Holt closed The Den outside Elizabethtown in May restaurant liquor licenses could sell wine for takeout. 2018 after she sold the license she bought for $150,000 “It was just kind of ‘throw a bunch of stuff in the bill, and for more than $350,000. The buyer was Sheetz, which see who passes it,’ ” said Melissa Bova, vice president of uses it at its store at 1158 River Road in Marietta. government affairs for the Pennsylvania Restaurant “I’m not going to lie. I wanted my retirement back. I put Association. “We were all trying to figure out what was in my retirement into this place,” Holt said when the bar it at the end of the day.” closed. “It really hurt me to take away the hometown bar. Bova said wine-to-go sales permitted under Act 39 I had so many regular customers.” prompted more grocery stores to begin selling beer and One regular at The Den was Michael Nichols, 49, of wine. Elizabethtown, who likened its closing to the “death of a In Lancaster County, Weis opened the first beer cafe at its cherished family member. Lititz store in 2013. “The Den was more than a neighborhood bar. It was the In a tweak that continues to have repercussions for gathering place,” said Nichols, a human resources restaurateurs in Lancaster County, the law clarified that manager who moved to Elizabethtown two years ago convenience stores that sold gas could indeed sell beer if from Dallas. In Dallas, such “mom and pop” bars didn’t they did it from a separate area. exist, he said. That change overturned a longtime prohibition on beer Nichols’ partner, David Neels, said his own loyalty to The and gas being sold at the same place, although Sheetz had Den is the reason he won’t buy beer or even stop for gas been selling beer by arguing that its stores were actually at the Sheetz in Marietta. restaurants. “I just drive by it now,” he said. “There’s a Rutter’s across “I think the grocery stores did help spark (price increases) the street. I usually stop in there.” but when convenience stores got the right to own the While restaurant liquor licenses typically change hands as liquor license — which most people realize is an R bars open and close, Zeamer said the influx of corporate (restaurant) license — that basically did jerk the prices owners fundamentally changes the historic churn of higher,” said Rich Hewitt, a broker who handles liquor licenses, where bars that are closing sell to others that are license sales in New Jersey and Pennsylvania. opening. The first Lancaster County convenience store to sell booze “Instead of selling a license, a larger corporate owner will was the Rutter’s in Leola. It began selling beer in October just shift it to another location,” he said. “We’re not going 2016 with a liquor license it acquired a year earlier for to see those licenses come back to the market, so it $230,000 from The Pub in New Holland. (permanently) shrinks that pool of licenses that are While that seemed expensive at the time, prices would available for your local or neighborhood restaurants.” soon jump to around $400,000 as Sheetz and Turkey Hill Brewery/distillery alternative starting buying them. While Act 39 created a dynamic that has shrunk the “I don’t know that anybody foresaw how much it would number of available restaurant licenses in Lancaster impact the prices of licenses,” Zeamer said. County and driven up their price, it also created a possible Lancaster County impact workaround for small operators. With liquor-license offers that sometimes exceed what Act 39 allows Pennsylvania breweries or distilleries to sell their businesses are worth, many independent operators any other Pennsylvania-made beer, wine or liquor cashed out. alongside their own. “One of their biggest assets was the license, and when That means there’s a new opportunity to open a they got these big numbers, they sold,” Hewitt said. restaurant without the cost of a restaurant liquor license. Craig Harnish, who owned the Swan Hotel in Strasburg, “(Operators) see that as a way to get into the industry and closed the bar in March 2018 after selling his liquor be able to sell alcohol without having to then pay the cost license — for a price he didn’t disclose — to Weis for its of a restaurant license,” Zeamer said. Gap store. The restaurant, which opened in January at 3572 Lincoln “The bad part of it is, you lose the local bar,” he told LNP Highway East, features fresh-made pasta as well as when the bar closed. sandwiches and pizza. It also sells Pennsylvania-made 3 beer, wine and liquor because it operates as a retail amounts of alcohol near South Dakota's Pine Ridge Indian location for Paradise-based distillery Hillside Spirits. Reservation, public health officials are still trying to clean Thompson said the new arrangement is unique, although up the damage left by decades of alcohol abuse among she admits it would have been easier with a traditional tribe members. license. For example, customers still often ask for non- The stores in Whiteclay, Nebraska, faced intense criticism Pennsylvania beers such as Miller Lite, Coors Lite or Bud for selling millions of cans of beer annually, primarily to Light, she said. members of the Oglala Sioux Tribe. Native American Piccola Italian Bistro took a spot formerly occupied by activists and others who wanted the stores closed blamed Kinzers Station Tavern, which was owned by Thompson’s them for widespread alcoholism and cases of fetal alcohol parents, Michael and Judie Narducci. The Narduccis sold syndrome on the officially dry reservation. their liquor license to Primanti Bros. in January 2017. The problem has drawn the attention of state lawmakers Another restaurant that sells Pennsylvania beer, wine and and officials with the University of Nebraska Medical liquor without a restaurant liquor license is Shot and Center, but both acknowledge there's no easy fix.