Not So Consumer Friendly? Pa.L.C.B. Says No Discount for Breweries, Wineries, and Distilleries When Purchasing Wine or Spirits from the State Stores

Recently, the Pa.L.C.B. released a legal advisory opinion regarding a brewery, winery or distillery’s ability to purchase and sell the products from limited wineries and limited distilleries that are carried in the state stores.  The legal advisory opinion addressed two issues: (1) what price must a licensed limited distillery and limited winery sell their products at if the same product is sold in the Pa.L.C.B. state store system, and (2) now that, under Act 39 of 2016, breweries, wineries and distilleries can sell wine and spirits made by Pennsylvania licensed distilleries and limited wineries, can they buy products from the state store system at the same wholesale discount received by all restaurants, hotels, and clubs in Pennsylvania?

The short answer to the first issue is the limited distilleries and limited wineries that sell their products in the state stores are required to sell their products to consumers and other licensees at the exact same price as the state stores charge.  While Act 39 of 2016 was billed as the “consumer friendly” legislation aimed at reforming the Prohibition-era liquor laws that Pennsylvania operates under to benefit the consumer, it is clear convenience comes with a cost.  When a limited distillery chooses to sell its products in the only legal retail liquor stores in Pennsylvania; namely, the Pa.L.C.B. state stores, the limited distillery cannot sell directly to its customers or other licensees at a discount when it so chooses.  Some of our manufacturing clients are choosing not to sell to Pa.L.C.B. state stores to avoid this issue (along with the 18% Johnstown Flood Tax plus 30% mark-up charged by the Pa.L.C.B.)

Now, for the second issue, the Pa.L.C.B. has taken the position that breweries, distilleries and wineries do not qualify as “retail licensees” – such as restaurants, hotels and clubs – which means that they do not qualify for the 10% discount wholesale pricing offered by the state stores.  The result of this position is two-fold: (1) distilleries and wineries that have product listed in the state stores must sell to other licensees that are not “retail licensees” (for example, breweries) at the price the product is listed at in the state store with no discounts applied for quantity purchased; (2) distilleries and wineries can only apply the 10% discount when selling product that is listed in the state stores to “retail licensees”.  Again, consumer convenience at a cost.  This brings in an important consideration for limited distilleries and wineries to make when deciding whether to place product in the state stores.  Do you expand your footprint and brand by placing your product in the only legal liquor retailer in Pennsylvania, or do you have complete control over your price points by using other licensees, including “retail licensees”, and your own sales to grow your brand?  Ultimately, that will be for you and consumers to decide.

For information regarding national and state liquor law matters or general manufacturing and distribution advice, please contact our Liquor Law, Licensing, Manufacturing, and Distribution Practice Group: Liquor Law Department Chair Theodore J. Zeller III, Esquire (tzeller@norris-law.com); David C. Berger, Esquire (dberger@norris-law.com) for Pennsylvania and New Jersey retail and manufacturing licensing; or contact our offices at 610-391-1800.