The Pennsylvania Senate Law & Justice Committee and Pennsylvania House Liquor Control Committee held a joint public hearing to receive testimony on the issue of ready-to-drink cocktails (RTDs). Pasted below is written testimony from Tom Tyler, president of the Pennsylvania Licensed Beverage and Tavern Association. Mr. Tyler owns McStew’s Irish Sports Pub in Bucks County.

 

Chairmen Regan and Metzgar, Chairmen Brewster and Deasey, members of the Senate Law and Justice and Liquor Control  Committees, thank you for allowing the Pennsylvania Licensed Beverage and Tavern Association to provide testimony concerning proposed legislation to allow Ready to Drink (RTD) product manufacturers to distribute their products for sale through the PLCB or through the existing three-tier system .

The Tavern Association represents more than 400 small business taverns, pubs, and licensed restaurants across the state. Most of our Members own “R” and “H” licenses while some may have an “E” or even a club license.  For the most part, we are your local bars, taverns, pubs, and licensed restaurants.  We do not actively recruit large chains, grocery stores, or convenience stores which also may have R licenses.

In terms of business, our average Member makes a living primarily from alcohol sales. Based on our Membership studies, about 63 percent of their business is alcohol sales including liquor and malt beverages and 37% of sales are from food.

Historically, the state and stakeholders in the alcoholic beverage industry have agreed that within the three-tier system beer distributors would sell malt beverages, while state stores and other liquor licensees would sell wine and spirits products.

At one time, there was also agreement that beer distributors would sell larger volumes of malt beverages, while “R” licenses would sell smaller amounts, typically up to the equivalent of two six-packs.

Many tavern and licensed restaurant owners bought into that historic agreement, and willingly invested savings to purchase their properties, and licenses, built their businesses based on expectations under the existing law.

Act 39 broke that agreement in the name of customer convenience – on one side – when beer distributors were given the right to sell down to a single bottle, and given opportunities for them to sell slushies to go.  R and H licensees were still limited to 192 oz. of malt and brewed beverages, and clubs were still barred from even selling six packs.

A study conducted by the Tavern Association in 2019 to measure the impact of Act 39 on our Members discovered the following:

• 75% saw a drop in six-packs-to-go sales
• 81% indicated an overall drop in beer sales
• 32.5% saw a drop up to 10 percent in beer sales
• 29.2% had a drop up to 20 percent in beer sales

The sudden financial losses seen by many taverns and licensed restaurants across the state went hand-in-hand with the broken historic agreement.

And, then came the pain of COVID-19 closures, while beer distributors (and some R licensees like grocery stores and convenience stores) were allowed to remain open, further expanding their sales in those “to go” markets for beer and wine, and taking business from our members. That was like pouring salt in a wound.

Now, as we understand the proposed legislation, it would  allow beer distributors to sell ready-to-drink cocktails to go, again modifying the historic agreement amongst the industry, and expanding their markets, while being another gut punch to Pennsylvania taverns and licensed restaurants. It effectively would give beer distributors their first entry into selling liquor.

We do not know if this proposal would prevent beer distributors from creating to-go slushies with these products, much like they do with malt-based products.  But I can already see customers driving home from a beer distributor with a Malibu Pina Colada slushy.

If it is the committee’s interest to permit beer distributors to get into liquor sales, then a much bigger conversation should be held to discuss balancing the playing field for all parties involved on all licensee issues.

For example, because beer distributors may now sell as little as a single bottle of beer, we would suggest R, H, and E licenses should be allowed to sell more than the 192-ounces now allowed. And maybe the time has come to allow clubs to sell six-packs-to-go to their Members. Should grocery stores be allowed to sell liquor bottles like the state stores? Do we get out of the business of beer distributors and state stores as we know them today, and move into businesses like Liquor Barn that can be found in Kentucky?

These are all very good and fair questions, as Pennsylvania plans changes to the way it delivers alcohol products to consumers.  But until those larger questions are answered, the Pennsylvania Licensed Beverage and Tavern Association will oppose legislation that expands beer distributors rights at the expense of bars, taverns, restaurants  and club license holders … or that tilts the playing field even more instead of leveling the playing field for all licensees.  At this time, as we understand it, the Tavern Association cannot support RTD legislation that would allow beer distributors entry into selling liquor products.

We look forward to discussions of how R, H, E and club licensees can recover from the losses created by state orders during the 2020-21 Covid-19 response, how the Commonwealth can ensure all licensees have a level playing field in marketing and sales of alcoholic beverages, expand consumer convenience, and engage in those larger discussions over the future over Pennsylvania’s spirits, wine, and malt beverage economy.

Again, thank you for this opportunity to share our thoughts and concerns.