Lawmakers Say LCB's Not Saving Enough Money On Liquor Negotiations

Mar 3, 2017

Pennsylvania has long been notorious for its state-run liquor stores and old fashioned restrictions on selling alcoholic beverages.

But last year, the legislature passed its first meaningful liquor reform in decades.

As lawmakers search high and low for more dollars to fill gaps in the state budget, they’re urging the state Liquor Control Board to use its newfound flexibility to become more profitable.

Prior to the change, the LCB had to set a state-mandated 30 percent markup on the wine and liquor it bought from distributors.

That lessened the agency’s negotiating power, since manufacturers tend to adjust their prices to each state’s rate.

But now the board is free to bargain—a change designed to lower wholesale prices and increase revenues overall.

That’s leading lawmakers like Republican Sen. Gene Yaw to ask—why isn’t the LCB getting better deals?

Yaw noted that the state is paying more for certain liquor products than some neighboring states, like New York.

“I don’t understand what’s wrong with the Walmart approach,” Yaw told the board. “It’s like, if you want to sell your product in our stores, here’s the price we’re going to pay … I’m not sure we’re using the market clout that we have.”

Board member Michael Newsome said negotiations with sellers are still ongoing.

About 60 out of 80 readily lowered their prices. But the rest, including some of the state’s largest distributors, have been tougher to convince.

Newsome said the board doesn’t think hardball tactics are called for yet.

“That would be one approach, to go in and just strong-arm. We could do that. We have the ability to do it, we have perhaps the will to do it,” he said. However, he added, “we chose not to take that approach in the beginning. The approach we chose to take was to work collaboratively with our suppliers.”

Newsome said he thinks a less aggressive approach will preserve important relationships and work better in the long run.