Liquor law uncorks wine shipments to Pa. consumers
The prospect of being able to buy wine in supermarkets captured much of the public attention last week when Gov. Wolf signed Pennsylvania's most significant liquor reform bill since Prohibition.
The prospect of being able to buy wine in supermarkets captured much of the public attention last week when Gov. Wolf signed Pennsylvania's most significant liquor reform bill since Prohibition.
But for the state's most devoted wine lovers, a much bigger deal is the adoption of direct-to-consumer shipping from winemakers nationwide - putting Pennsylvania in line with 43 other states that give residents access to wine clubs from obscure West Coast wineries.
Jeremy Benson, executive director of Free the Grapes!, a California group that has been advocating for direct shipping nationally since 1998, welcomed the shift in Pennsylvania.
"It's a populous state. It is a state with a lot of wine lovers in it, and it is the last of the large states that has continued to effectively bar winery direct shipping," he said. "For all those reasons, it is a very, very important win for consumers."
In year ended in April, U.S. wineries shipped $2 billion worth of wine directly to consumers, according to trade publication Wines & Vines. That is just 5 percent of the $38 billion U.S. wine market, but it is up from $1.5 billion three years ago.
The new Pennsylvania law strips away cumbersome provisions that the state adopted about a decade ago to comply with a 2005 U.S. Supreme Court decision that states could not have different direct-shipping rules for in-state and out-of-state wineries.
Pennsylvania's effort to comply was a flop.
"They made it really complicated to get a license," and the wine had to be shipped to the State Store, said Alex Koral, a compliance law research associate at ShipCompliant, a Boulder, Colo., company that sells software to help alcoholic beverage-makers follow regulations.
Small out-of-state wineries could ship directly to Pennsylvania consumers if they obtained a limited winery license, but only 22 of those licenses are active, the PLCB said.
Now, wineries will only have to pay $250 for an annual direct-shipper license and sign up to collect Pennsylvania sales taxes.
"It doesn't need to go through the control board at all. It can just be essentially through FedEx, just like an Amazon package," Koral said.
The law takes effect in August, but it's not certain when the Pennsylvania Liquor Control Board will have direct-shipping licensing procedures in place.
Still unclear is whether Pennsylvania residents will be able to receive direct shipment of wines that the LCB carries. "This issue and language from the law requires further legal consideration," LCB spokeswoman Elizabeth Brassell said.
While consumers will not have to pay the often-reviled 18 percent "Johnstown flood tax," the biggest source of LCB revenue to the state's general fund, they will have to pay regular sales taxes and a new $2.50-per-gallon excise tax ($5.95 for a case of 12 750- milliliter bottles).
Plus shipping.
The excise tax is high relative to other states, but Benson, of Free the Grapes!, does not expect it to be an impediment to consumers or wineries.
Direct shippers can sell up to 36 cases of wine per Pennsylvania consumer.
When the PLCB starts issuing the "direct wine shipper" licenses, it will be up to consumers to figure out which wineries have the license to ship to Pennsylvania. The license does not yet exist, so there is no way to get a list.
The new law's provisions that will allow supermarkets to sell up to four standard bottles of wine per transaction might not be such a clean win for consumers, depending on how supermarkets deal with LCB prices.
Dan Croce, president of Acme Markets, said he was waiting for details.
"We are extremely competitive in how we sell beer today. We're hoping that the law will allow us to be competitive in wine sales as well, but we don't know that yet," he said.
Licensees, including supermarkets with a restaurant license, receive a 10 percent discount off the shelf price in a State Store. That is not changing, leaving supermarkets little room for profit while competing with State Store prices.
Despite the uncertainty, Acme, Wegmans, and Weis Markets, three retailers that have embraced beer sales under licenses that make them eligible to add a wine license for $2,000, said last week that they looked forward to offering the additional convenience.
"We're extremely excited about the opportunity," Croce said.
Acme has seven stores in Southeastern Pennsylvania with beer, and more in the works. In the five-county area, more than 40 supermarkets are licensed to sell beer.
The LCB had wine sales of $885.1 million and spirits sales of $1.2 billion in the year ended June 30, 2015.
No one knows how much of that wine revenue will be lost to supermarkets, but one observer said that despite the uncertainties over supermarket prices, the law could have dire consequences for the state liquor system.
"It is the first major bill that really weakens the PLCB, and I wouldn't be surprised if you see PLCB retail numbers going down," said Jonathan Newman, a former chairman of the LCB and now chief executive of Newman Wines & Spirits.
"This bill is the beginning of the end of the PLCB," he said.
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