Two large alcohol distributors in Maryland say a council-supported proposal to loosen the county’s liquor control monopoly by allowing private distributors to sell certain craft beers and wines directly to restaurants and retail stores wouldn’t be economically feasible for the distributors.
However, a Montgomery County Council member says despite these distributors’ claims, other smaller distributors are more likely to enter the county’s market if the council-supported bill becomes state law.
Under current law, the county’s Department of Liquor Control (DLC) controls the wholesale distribution of all alcohol in the county as well as the retail sale of all liquor.
The county’s proposal to open up the “special order” market depends on private distributors entering the market to sell products that the county’s Department of Liquor Control has been criticized for failing to deliver on time, accurately and at a price point that’s competitive with neighboring jurisdictions.
The two large distributors wrote a joint letter to the three members of the county’s Ad Hoc Committee on Liquor Control—Hans Riemer, Marc Elrich and George Leventhal—in July that says the profit on such deliveries would not cover the companies’ costs. The letter was highlighted by Adam Pagnucco, a Silver Spring political consultant who has been leading a campaign to end the county’s liquor monopoly. It was published in a blog post Thursday that Pagnucco wrote for the local politics website The Seventh State.
The letter is signed by Kevin Dunn, president and CEO of Reliable Churchill, and Tom White, regional president for Republic National Distributing Co. It was sent by the Licensed Beverage Distributors of Maryland, a lobbying group that represents distributors in the state.
The business leaders claim in the letter that their companies are distributors of 95 percent of the wine and spirits in Maryland.
Read more about the debate over the county’s alcohol monopoly in Bethesda Beat’s previous coverage.
They note that the county’s plan, which would allow private distributors to sell “special order” products in the county, but would continue to ban them from selling high volume products like Bud Light, would not enable the distributors to make money.
“By their nature, special orders are for small quantities. The profit on such a small transaction would not cover our delivery costs incurred by sending a truck for a special delivery. In other words, there is no financial incentive to make the special delivery and, in fact, a disincentive,” the letter said.
The executives also wrote that a planned surcharge—designed so the county can recoup profits that the DLC would have made from supplying special order products—would also have a negative effect. They say it would drive up prices and make deliveries of the products more costly for distributors. The two distributors did not respond to a request for comment Thursday.
Delegate Bill Frick (D-District 16), who is sponsoring a bill calling for a referendum that would end the county’s alcohol monopoly, said the letter shows the county’s proposal wouldn’t work.
“The distributors’ letter is a deal breaker for the council proposal,” Frick said. “Without distributor participation, their legislation does nothing but ensure the status quo.”
However, Riemer, who chaired the ad hoc liquor committee, disputed Frick’s assertion. He said the two large distributors primarily sell stock items that the DLC hasn’t had trouble delivering accurately, on time and at a competitive price.
“All that letter does is reemphasize that the distributors that sell stock items don’t stand to gain from our proposal, but stock items aren’t the problem,” Riemer said. “The distributors that sell special order products will indeed sell in the county. It doesn’t matter if stock item distributors don’t support our bill.”
Other distributors also sent letters to the council saying they would support the option to open up the special order market.
Legends Limited, a distributor based in Rosedale, wrote in May that the council’s proposal could be “economically viable.”
“It may be worth the investment by Legends to invest in an additional truck and personnel to make special order deliveries directly to retailers in Montgomery County, just as deliveries are made direct to retailers in the ordinary course in every other locality in the state,” Erin Tyler, general manager for Legends, wrote in the letter.
The Country Vintner, a distributor of fine wine and spirits based in Ashland, Virginia, also wrote in May that the county’s proposal regarding special orders would be economically feasible.
“Contrary to assertions made by the Licensed Beverage Distributors of Maryland, [the council’s proposal] is economically viable and there would be no extraordinary financial burden associated with making special order deliveries directly to retailers in Montgomery County, ,” Matthew Tucker, vice president of business development for The Country Vintner, wrote in the letter.
The restaurants and shops who depend on the DLC have most vehemently criticized the DLC over special order products. An examination of the department’s operations found that the DLC purchases 81 percent of its special order items from distributors, meaning most products have double price mark-ups, so both the DLC and the distributor can make a profit. However, 82 percent of stock items are purchased directly from producers, meaning most only have a DLC markup.
Also, because the DLC doesn’t typically stock most special order items in its warehouse, the department often has to order them from the distributor after receiving an order from a licensee, which can lead to variable wait times for the restaurant or shop to receive the product, according to the report.
Country Vintner – Letter to Ad Hoc Committee
