Pennsylvania restaurateurs are alarmed by changes the Pennsylvania Liquor Control Board is making to the way they buy wines and spirits that are not carried by state stores.
Starting Oct. 1, restaurant owners and other licensees ordering through the state’s special liquor order (SLO) system will have to pay 100 percent up-front, and they won’t be allowed to inspect an order when they pick it up at the state store. To fix an order or get their money back, a convoluted seven-step process is involved.
The agency is implementing this new model on relatively short notice and at the beginning of the restaurant industry’s busiest season.
“We believe the upcoming changes will improve accountability and accuracy of Special Orders, provide better customer service to Special Order recipients, and streamline Special Order processing for the PLCB,” the agency said in emailed response.
Marnie Old, a former Philadelphia sommelier who writes wine recommendations for The Inquirer and Daily News and consults for hospitality and wine-trade clients, had a different take: “I expect to hear wails of distress from restaurants as they figure out just how serious this is.”
It wasn’t supposed to be this way, industry representatives said. One of last year’s tweaks to Pennsylvania’s alcoholic beverage control system said the board “shall” establish a procedure for direct shipment from distributors to restaurants and other licensees.
That law also reduced the state’s markup on SLOs to 10 percent from the then-standard 30 percent and eliminated the 10 percent discount licensees received off the shelf price.
But subsequent legislation said the PLCB “may” establish a procedure to allow direct shipment to restaurants.
Why did it change? Speculation in the industry is that the PLCB was smarting from the reduction in the margin and worried about the loss of a SLO fee.
“We’ve been told that the PLCB would lose $8 million a year if they lost the [fee],” said Melissa Bova, vice president of government affairs at the Pennsylvania Restaurant and Lodging Association.
The PLCB, which described the Oct. 1 changes as “a first step in working toward a direct-delivery model” said it does not track how much that fee brings in. The PLCB had $1.9 billion in gross revenue in the year ended June 30, 2016. Of that, $104 million was for special orders.
Michael McCaulley, wine director and partner at Tria Restaurant Group, which relies entirely on the SLO program for wine, said he was at a meeting three months ago with PLCB officials and their big concern was how the agency would keep collecting its fee and how it would get paid if direct shipping were allowed.
“If it were delivered directly, they couldn’t justify the handling fee,” he said.
What irks McCaulley is having to float money to the PLCB before he gets product to sell. “If I order wine, it might take five to seven days to actually get the wine in the building, to actually turn into a profit. Right now, when I order wine, I don’t have to pay for it until I pick it up,” he said.
Jason Malumed, a partner in a small distributor that specializes in organic and biodynamic wines, says the SLO changes could be a step toward the elimination of the program. That would leave slim pickings for consumers.
“If the PLCB had their way, they would want all the restaurants in Philadelphia to just buy whatever wine is available in the PLCB stores on the shelf, which would destroy any wine culture we have in restaurants in Pennsylvania,” Malumed said.