Get Rid of the Government Middleman

This commentary first appeared in the Pittsburgh Post-Gazette.

It’s a weekday evening and you’re at Giant Eagle with your kids. Friends are coming over soon and you’re cooking steaks. A bottle of cabernet sure would be nice with dinner, but it’s late, you’re tired, and you don’t want to make another stop and drag the kids into the state liquor store.

Sound familiar? This lack of convenience is part of why the overwhelming majority of Pennsylvanians support liquor store privatization, but it’s only part of the story.  It’s not enough for consumers to simply find wine at more locations. As a recent statewide poll conducted by Red Maverick Media shows, fewer than one in five voters think that allowing grocery stores to sell wine, but making those stores buy from the government is sufficient reform. 

There are good reasons the government shouldn’t be the middleman anymore: It can’t adequately serve current taverns’ and restaurants’ needs, much less expanded retail outlets. 

Bars and restaurants currently have to get their liquor from a government system that has a documented history of bureaucratic boondoggles and inventory problems. Despite the Pennsylvania Liquor Control Board’s markup and fees, they still don’t deliver to the commonwealth’s private businesses – restaurant owners have to pick up their liquor orders from a state store.

Small businesses – restaurants, taverns, and retail stores – suffer under the control of the PLCB.  Rep. Kurt Masser (R-Northumberland) is a tavern owner who knows how poorly the current system works: “I get my meat delivered to my restaurant. I get my produce delivered to my restaurant. I get my beer delivered to my restaurant.  I have to pick up my liquor order.  I can’t get it delivered.  And if the liquor order is wrong, I have to take it back to the store and redo it.”

The PLCB’s wholesale operation does a poor job servicing the limited options Pennsylvanians currently have. If more businesses were allowed to sell wine, this failure would only be compounded. According to an analysis from the Distilled Spirits Council of the United States, efforts to “modernize” the PLCB’s operations and offer delivery to more than 15,000 restaurants, bars and hotels would cost as much as $770 million a year in additional costs. 

In most other states, this isn’t a problem: Private wholesalers, not a government agency, deliver products to restaurants.  Instead of bleeding taxpayers to support the government’s wholesale liquor monopoly, the commonwealth could take in more than $500 million by licensing private, and often family-owned, wholesalers to operate in Pennsylvania as they do across the country.

And if lower prices and greater selection are what you’re looking for, you won’t get it unless the government privatizes retail and wholesale operations. A competitive market—whereby wholesalers compete against each other to get their products served in stores—is critical for a retail marketplace. If the PLCB maintains its monopoly on wholesale operations, you may be able to find wine and liquor more easily, but the government will still determine what products you can choose.

Keeping the government wholesale monopoly would also enable the PLCB to build on its series of boondoggles, like wine kiosks and a $66 million inventory system that couldn’t count correctly.  Because of its wholesale monopoly, the PLCB has even developed and marketed government wines that compete with Pennsylvania wineries.  

You’ve probably seen the wine TableLeaf before, but did you know you already helped pay for it?  The wine for the brand comes from California and gets prime store shelf space and displays, to the consternation of Pennsylvania winemakers who know they can’t compete with the government.  The PLCB’s conflicting missions – promoting and regulating alcohol consumption – would continue if the government fails to truly privatize.

Increased convenience is one of the many benefits consumers will realize if the state finally gets out of the business of selling alcohol.  But if we keep a government monopoly as the middleman between stores and producers, Pennsylvania shoppers will have the same problems, just on a different shelf.

Dawn Meling is the director of community relations at the Commonwealth Foundation, a free-market think tank based in Harrisburg.