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Pa. LCB approves bottle fee for new items; will consumers pay more?

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Evan Sanders | Trib Total Media
James Orr, an employee at a Fine Wine & Good Spirits store in Murrysville, arranges bottles of various spirits from Pennsylvania craft distilleries on Wednesday, June 3, 2015.

HARRISBURG — The Liquor Control Board on Wednesday unanimously approved increasing a bottle “handling” fee for new items, a move that could amplify future price increases, industry observers and legislative critics said.

“The (fee) is an important component of their whole markup formula and when you raise that, ultimately it will increase the cost of wine,” said Terri Cofer Beirne, eastern counsel with the Wine Institute, an advocacy group for California wineries.

The fee for new spirits will increase 5 to 7 cents per bottle and the fee for new wines or new vintages of a brand will increase 3 to 22 cents per bottle, according to the LCB. The fee hikes vary depending on the volume and base cost of a product under a complex pricing formula the agency uses to determine shelf prices.

The agency portrayed the fee as minimal, intended to make items listed after Aug. 1 consistent with the fee on existing items. The new fees don’t apply to existing products.

Tom Muldoon, a spokesman for the Pennsylvania Wine and Spirits Association, cautioned the board during its meeting that higher prices could result. The three-member panel did not debate the proposal before voting.

Dale Horst, the agency’s director of marketing and purchasing, said the move would “not necessarily” mean consumers will pay more, though he acknowledged after the meeting that “you could make the argument (prices) could be slightly higher than they would have been.”

The LCB has a multi-step pricing formula, so an increase in the handling fee is compounded as each step of the formula is applied, Beirne said.

“They can say all they want (that) it’s not going to raise prices,” Beirne said, but the only choices are for suppliers to absorb the increase or pass it along to consumers.

Beirne said the effect could be an indirect price hike. A winery could hold the line on one brand’s price if it’s competitive, for example, but raise prices on another vintage or brand to make up for that, she said.

“So either way … somebody else is losing money while the PLCB is making money,” Beirne said.

But Horst said increasing the base fee will generate just $68,000.

“This wasn’t done to generate money; it was done to make products equal; $68,000 doesn’t go very far,” he said.

The agency uses the fee to cover its costs of running distribution warehouses, transporting bottles of wine and spirits to stores, stocking shelves, and ultimately selling items to customers, said Horst.

The LCB’s vote gave fodder to critics of the system who want to sell the state stores. The House and Senate approved liquor privatization but Gov. Tom Wolf vetoed the bill this month. Republicans are pushing for it in negotiations with Wolf, a Democrat, on an unresolved state budget.

“In yet another stealth move to raise taxes on consumers, the PLCB has once again strengthened the case for its own elimination,” said Jay Ostrich, spokesman for House Speaker Mike Turzai, R-Marshall.

“The handling fee, whether new or old, is emblematic of a system that will always fail to deliver what Pennsylvania consumers and taxpayers demand — freedom to buy what they want, where they want, at a fair price,” Ostrich said.

Jeffrey Sheridan, Wolf’s spokesman, said the governor does not favor selling the state store system. It brings in steady revenue, Sheridan said.

LCB officials plan to review the handling fee annually, Horst said. Established in 1993 under another name, the fee had not changed since 2010, he said.

Kari Andren and Brad Bumsted are Trib Total Media staff writers.

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