State liquor stores miss revenue goals, grocery stores 'cannibalizing' wine sales

Pennsylvania Liquor Control Board officials say sales at state-owned liquor stores missed their growth projections for the first part of the fiscal year, and increasing competition from grocery stores selling wine might be partly to blame.

Testifying before the House and Senate appropriations committee over the past two days, PLCB officials said revenue had grown less than 2.5 percent in the first seven months of the fiscal year, short of their goal to have 3.4 percent growth when the fiscal year ends June 30.

“Sales have continued to increase, but they are increasing at a slower rate,” board member Michael Newsome told the Senate committee Thursday, in response to a question from state Sen. Kim Ward about the effect of grocery store wine sales. “Traffic to our stores is down. ... People who would come into our stores are going to grocery stores instead.”

The PLCB received some revenue from wine sales through retailers by acting as their wholesaler ­­— Newsome said the state had shipped $86 million worth of wine to retailers — though grocery stores can buy bottles directly from producers. But if shoppers are skipping the state store when they buy wine, it could also be depressing sales of other spirits, he said.

Charlie Mooney, executive director of PLCB, said the state had 588 establishments with the expanded-sales permits, including more than 260 grocery stores and 100 convenience stores.

“Elements like the impact of Sunday sales, and cannibalization of PLCB wine sales by direct shipping and sales by (grocery and convenience stores) are difficult to fully ascertain,” PLCB Chairman Tim Holden said in his prepared remarks to the House. “Because the liquor reforms included a plethora of interconnected changes that continue to evolve the marketplace for beverage alcohol in Pennsylvania, the isolation of any one factor is increasingly challenging over the course of time.”

Spokeswoman Elizabeth Brassell said sales from the beginning of the fiscal year last July through January were $1.24 billion, 2.2 percent higher than the same period in 2016-17.

“While our sales growth isn't as robust as we had anticipated when developing that 3.4 percent estimate, we are seeing increased profitability and decreasing expenses,” she said.

Newsome said that while sales were down slightly, margins and overall revenues from additional sources like auctioning liquor licenses were increasing. While adding Sunday sales meant that longtime employees were getting paid overtime to work the extra day, new hires since the 2016 expansion had Sundays included in their contracts.

In their testimony to the Senate, the PLCB said they could keep up their payments of at least $185 million a year to the state's General Fund for at least the next two fiscal years, but were hesitant to give any guarantees beyond that.

“We feel confident the next year, maybe even the next year,” Newsome said. “We can't predict more than a couple years out, but we expect to remain profitable.”

Matthew Santoni is a Tribune-Review staff writer. Reach him at 724 836 6660, msantoni@tribweb.com or on Twitter @msantoni.