Small wineries want opportunity

If you're shopping for a bottle of wine produced by one of the five small wineries licensed in Allegheny County, skip state liquor stores. These wines won't be among thousands of varieties on the shelves.

That could change if Republican lawmakers succeed in privatizing the 625 stores the Pennsylvania Liquor Control Board operates. Proponents say that would create a free-market system capable of squeezing $1 billion to $2 billion from competitors bidding for store licenses.

"Privatizing wine and spirits stores will give us the ability to sell to individual owners," said Tony Narcisi, co-owner of La Casa Narcisi Winery in West Deer. "It will also provide the local owner the ability to bring in small batches of wine never seen before in PA."

Winery operators believe that could result in wider selection for consumers, beyond the 25,000 liquor and wine options available at state stores and by special orders at www.finewineandgoodspirits.com.

The Liquor Control Board determines what to sell based on profitability of products in similar price ranges; drink categories such as wine, vodka or whiskey; and the level of "marketing support" from suppliers. From June 2009 to June 2010, the state system reported nearly $1.9 billion in sales and put $488 million into the Treasury in taxes and profits, records show.

Companies that produce wines and spirits can apply in May and December each year to become "listed" by the state agency, said spokeswoman Stacey Witalec. In 2010, the board rejected four of every five applications, accepting 268 of 1,368.

The board rejects most applications for one of 17 reasons. The most common is "no perceived need," said Stacy Kriedeman, another spokeswoman, but others include "low dollar profit potential" and "poor vendor commitment."

If Pennsylvania's stores become privately owned, most customers would find fewer choices, not more, said Wendell W. Young IV, president of United Food and Commercial Workers Local 1776, which represents most of the 1,500 liquor store clerks.

House Majority Leader Mike Turzai, R-Bradford Woods, could introduce a privatization bill by mid-May. A study of potential revenue, authorized by Gov. Tom Corbett, isn't due until mid-July.

West Virginia's experience with privatization beginning in 1991 should be a warning to customers who enjoy the selection of 2,000 to 6,000 varieties in Pennsylvania stores, Young said. West Virginia grocery and small thrift stores with little shelf space own many of the store licenses.

"Retailers aren't going to put as many products out as the LCB does," Young said. "That means these boutique wineries are going to get squeezed out by the much deeper-pocketed production houses."

Large distributors dominate Pennsylvania's market, said Myron Waxman, executive director of the Pennsylvania Wines & Spirits Association, a group of 40 suppliers and brokers that provide 90 percent of the Liquor Control Board's products.

Three distributors -- Diageo of London, Southern Wine & Spirits of Miami and Capital Wines & Spirits operated by The Charmer Sunbelt Group of New York City with an office in Montgomery County -- account for roughly 75 percent of the products distributed to stores, Waxman said.

It's difficult for small wineries to partner with such distributors, he said, because "these guys are so big" that their product portfolios are brimming with brand names.

"We are shut out because the board thinks like a government corporation instead of an independent entrepreneurial wine shop owner," said Robert Rex, wine maker at Deerfield Ranch and Winery in California.

In an e-mail, Rex said Deerfield applied 25 times without responses from the control board. Witalec did not respond to a question about Rex's applications. Three Deerfield wines are available by online order, though not in stores.

John Kramb, CEO of Adams County Winery near Gettysburg, avoids the state system, but would work with a private store owner.

"The commonwealth has zero business being in the retail business," Kramb said.