BY ALEXANDER SOULE
Hearst Connecticut Media
Bill Clinton was president and Wine.com had yet to bear fruit in 1998, when Michael Berkoff told members of the Connecticut General Assembly how the state”™s liquor law resulted in needlessly high prices for consumers.
Berkoff, CEO of Stamford-based BevMax, is still waiting for the message to sink in.
Despite a receptive ear from Gov. Dannel P. Malloy, the General Assembly recently declined to alter minimum-pricing rules in Connecticut”™s Liquor Control Act, which critics like Berkoff say result in shoppers paying more for alcohol than they do in other states.
It is an element of Connecticut”™s blue laws that has gotten comparatively little attention next to Malloy”™s efforts this year to expand Sunday hours at liquor stores, or past issues like the debate over the purchase and taxation of alcohol via the Internet.
- BevMax CEO Mike Berkoff poses in one of his liquor stores in Stamford. The retail liquor chain has been fighting to eliminate the minimum-pricing laws in the state. Photo by Jason Rearick
Under the Liquor Control Act, retailers must charge a minimum amount above what they pay wholesalers, with those prices published monthly.
Berkoff says the law hits not just the wallet of Connecticut residents but also the overall economy because liquor stores employ fewer people due to their loss of business to shops in neighboring New York, Massachusetts and Rhode Island.
In 2012, the General Assembly left the pricing status quo in place in the face of strenuous objections by mom-and-pop retailers throughout Fairfield County and Connecticut. The Assembly chose not to address the issue again this year in a bill that would have allowed retailers to sell alcohol at a lower cost if they chose.
Ben Barnes, secretary of the Connecticut Office of Policy and Management, estimated the proposal would increase state tax revenue by $2.8 million annually due to increased sales at Connecticut liquor stores and rejected the idea that new pricing rules would rub out individual package shops, despite the specter of big-box retailers using alcohol as a loss leader to draw people in.
“I’m certainly aware of the objection that changes to these regulations will force some small liquor stores out of business,” Barnes told an Assembly committee in March. “I would point out that the same arguments were used when we implemented Sunday sales several years ago. My understanding is that today there is exactly one fewer liquor store in operation in the state of Connecticut than there was before we implemented Sunday sales.”
End of the retail spectrum
If that is the case, many of those retailers are hanging on by a thread, according to state Sen. L. Scott Frantz, D-Greenwich.
“At this point, the margins have never been thinner,” Frantz said. “This final step ”” or maybe intermediary step here ”” is something that could endanger their end of the retail spectrum.”
In Connecticut today, just more than 1,200 retail liquor permits are in circulation; but the U.S Census Bureau arrived at a smaller count of package stores, at just more than 800 in Connecticut, amounting to one for every 4,450 people. (Connecticut law mandates a cap of one retail liquor permit for every 2,500 people).
- Bottles of Mionetto prosecco at the BevMax liquor store in Stamford. CEO Mike Berkoff says the sparkling wine, now priced at $13.99, could be sold for $9.95 if there were no minimum price restrictions. Photo by Jason Rearick
While that would rank the third nationally for liquor stores on a per-capita basis, the more liberal pricing rules in Massachusetts and Rhode Island have not had a major impact on their own liquor store count, ranked fifth and sixth, respectively. New Jersey and New York are not far behind, at ninth and 13th.
While Connecticut had a vastly higher percentage of mom-and-pop shops than Massachusetts or Rhode Island, with 71 percent of stores here employing four people or fewer, 73 percent of the liquor stores in New York were that small; and New Jersey was not far behind at 66Â percent.
And from a strict jobs perspective, liquor stores in Massachusetts, Rhode Island and New Jersey employ a larger percentage of the population than their Connecticut counterparts.
Function of regulation
Connecticut”™s consumer protection commissioner argued that mandated prices are not the best tool to regulate an industry, with taxation the other obvious option to control consumer behavior, as in Connecticut with taxes on cigarettes or gasoline in congested areas.
“The notion of the regulation of liquor is not and should not be about regulating price and artificial price supports, which of course we”™re not getting rid of ”” we”™re just lowering the floor,” said Jonathan Harris, commissioner of the Connecticut Department of Consumer Protection. “The regulation of alcohol is based on the fact that we work not to sell to minors and not to serve to people that are intoxicated. That’s the core function of the regulation.”
When Connecticut considered allowing discounts on pricing restraints in 2012, as part of Malloy”™s bill opening liquor stores for Sunday business, a small army of liquor store owners and managers locally and statewide went on the record in opposition, with only a few consumers voicing their views.
The owner of Greenfield Liquor in Fairfield predicted at the time that the new pricing would result in fully half of liquor shops in Connecticut being forced out of business at a cost of 7,000 jobs. A manager at the time with Ancona”™s Wines & Liquors in Ridgefield said his own experience working at two of the largest wine stores in southeast Massachusetts convinced him Connecticut has little to gain by the change proposed. And a manager of Warehouse Wines & Liquors in Danbury offered the same perspective after having worked in New York, saying Connecticut”™s system allows for better selection and pricing.
Berkoff, whose BevMax also runs stores in Massachusetts and New York, says his Connecticut stores simply cannot match the prices he is able to offer in those states. If wholesalers like the status quo for the guaranteed pricing they are able to extract from their retailer customers, Berkoff said not to underestimate the aversion to change for many legislators ”” once the genie is out of the bottle, it is difficult to put it back in.
With better pricing the possible result for constituents, Berkoff suggests, they won”™t want to.
Hearst Connecticut Media includes four daily newspapers: Connecticut Post, Greenwich Time, The Advocate (Stamford) and The News-Times (Danbury). See stamfordadvocate.com for more from this reporter.
