New Castle News

February 28, 2013

Liquor store profitability explored

John Finnerty

HARRISBURG — While the state-run liquor system posted a $103 million profit last year, the 25 worst performing of the 605 state stores posted a combined loss of $274,074, data provided by the Liquor Control Board shows.

Thirteen of the state stores that posted losses in 2011-12 have modest profits halfway through the year, but that includes the extremely lucrative holiday season and some of the stores now in the black may fade back into the red by the end of the fiscal year, an LCB spokeswoman cautioned.

Skip Brion, chairman of the Liquor Control Board, said it is unlikely the state-run monopoly will ever be able to completely eliminate unprofitable stores. The board will “always have some unprofitable stores in rural areas.”

Brion was appointed by Gov. Tom Corbett, who has proposed privatizing the liquor system as a means of improving consumer choice while generating $1 billion for schools.

The issue of profitability was raised by Sen. John Gordner, a Republican from Columbia County, in the appropriations committee hearing on Monday. Gordner said the question of store performance is something to consider when one wonders about the impact of privatization on rural areas of the state.

Gordner noted that while the governor’s privatization plan would guarantee all counties have at least one liquor outlet, in geographically large counties, that would still mean some residents would have to travel an inordinate distance to get to the liquor store.

“I know there would be liquor stores near the colleges in my districts” but other areas might be under-served, he said.

But Brion said he does not believe privatizing would necessarily mean less access to retail outlets serving beer, wine or hard liquor.

“We are a monopoly,” he said. “If privatization were to occur, those licenses would go to bigger entities like Walmart and grocery stories.”

The number of stores bleeding red ink has dropped from about 50 a few years ago, as the Liquor Control Board has tried various cost-cutting measures, Brion said.

In some locations, the board has cut store hours so fewer employees are needed and some poor performing stores are only open three days a week, Brion said.

“I’m pleased with the progress we’ve made over the years in diminishing the number of unprofitable stores,” said Liquor Control Board member Bob Marcus.

Marcus said when the revenue generated by the Johnstown flood tax is included, all stores turned a profit. “Our staff has worked hard to make that happen.”

Tuesday, Gordner said his concerns about privatization extend beyond the potential change in availability in rural areas.

“I believe that the stores are run and managed pretty well, especially with the modernization emphasis over the past five to 10 years. But there is also a ‘control’ element.’ I am not aware of any underage purchasers of alcohol at state stores for example because there are full-time state employees that would otherwise lose their job working the cash registers.”

Gordner added the hours of operations at the state store that offer “sufficient convenience in my opinion but also do not allow for a midnight or 3 a.m. purchase of 100-proof alcohol.”