Montgomery County Council member Tom Hucker is pushing back against a Department of Liquor Control (DLC) proposal to increase the department’s price markup by 10 percent on certain special-order fine wines.
DLC officials detailed the changes to the department’s wine markups during meetings Wednesday with its customers, which are the privately owned beer and wine stores and restaurants in the county. The changes, which also includes a 10 percent reduction in stock wine markups, are scheduled to go into effect Wednesday. Some fine wine retailers and restaurants said some of the changes could result in decreased selection of fine wines in county stores and restaurants.
“The shocking price hike that the Montgomery County Department of Liquor Control announced yesterday is poorly timed, and sends the wrong message to our consumers and customers,” Hucker said in a statement. “The DLC has to become more competitive and much more collaborative. But yesterday’s decision, announced with no input or notice from stakeholders, is the exact opposite.”
Many licensees interviewed by Bethesda Beat said they weren’t notified about the changes until they were invited to attend informational meetings at the DLC headquarters Wednesday and Thursday.
The DLC handles the distribution of almost all alcohol in the county (besides some breweries who self-distribute) as well as the retail sale of all liquor at its 25 county-run stores. The department makes a profit by applying markups to its products, as private distributors do. Under the changes, the department would mark up all wine prices by 25 percent, while previously bottles of wine that cost more than $18 per bottle were marked up by 15 percent.
Hucker, who identifies himself as a supporter of the DLC, urged the department to hold off on the increase until a planned task force appointed by County Executive Ike Leggett can study the department and issue its recommendations for possible changes, and a search for a new DLC director is completed.
“The only thing worse than the unilateral nature of the decision is their timing,” Hucker said. “Decisions about any new price structure should be made by the new director, upon consultation with all stakeholders and after study by their new task force. The DLC should be conducting surveys and holding forums to seek input from licensees and customers, not making significant unilateral decisions at the staff level.”
Hucker said the DLC failed to reach out to the County Council, the county’s General Assembly delegation or other stakeholders before making the price changes.
The department distributes stock items such as Yellowtail wine that are ordered in large volumes by the DLC and special-order items—for example a Brunello di Montalcino from a Tuscany winery—that are ordered by licensees in smaller volumes. John Zeltner, the DLC’s director of wholesale operations, said the pricing changes are being implemented as a way to help move special-order items into stock, which the DLC is more efficient at delivering.
The DLC also plans to reduce markups on stock wines by 10 percent—these wines make up the majority of what the department distributes and licensees said this would be a positive change. In the past, the department has charged a 35 percent markup on these items before selling them to licensees–the new markup will be 25 percent under the plan.
Hucker said in an interview Thursday he didn’t have a problem with the stock wine price decrease.
“My main concern is the process and timing,” Hucker said. “There might be merits to the proposal, but to just announce it as a decision and not as a proposal that’s shared with licensees, the community-at-large and elected officials is not right. I feel like they’re tone-deaf to the climate they’re in and the challenge to be collaborative.”
Patrick Lacefield, a spokesman for County Executive Ike Leggett, said there’s no interest in reversing the price changes. “We want to drop prices on stock wines,” Lacefield said. He added that overall “97 percent” of the wine sold by the county would be the same price or lower. He said the change would help put the DLC on more stable financial footing because it costs the department more to store and distribute special-order wine than stock wine.
However, licensees reliant on sales of fine wine, said the 10 percent increase in markups for bottles of wine over $18 would hurt their businesses—by either resulting in less profits for them or causing price increases that customers may not want to pay. They also warned that the changes could result in less selection of fine wine in the county as licensees turn to stock wine products to save money.
Council member Hans Riemer, who chairs the council’s ad-hoc liquor control committee, said Thursday the latest controversy involving the department is another example of why private distributors should be able to distribute the special-order alcohol products in the county. Riemer previously led efforts to support a council proposal to remove the monopoly on the distribution of special-order products from the DLC and allow private distributors into the market that failed in the General Assembly this year.
“We need to evaluate the fine wine segment… I would argue to just get out of the market there, rather than further refining the price structure,” Riemer said. “I think it’s true we don’t want to have a reputation as a county that’s unable to serve the high-brow market. “
The task force that Leggett is forming was suggested by the county’s state legislative delegation after members failed to vote on two proposals to reform the county’s alcohol monopoly during this year’s General Assembly session. One of those proposals would have ended the monopoly on special orders, while the other proposal, sponsored by Del. Bill Frick (D-Bethesda), would have called for a referendum to allow voters to decide whether to end the entire DLC distribution monopoly.
Leggett has not announced who will serve on the task force it or what its timeline for issuing recommendations will be. Lacefield said the county’s administration is close to settling on the makeup of the task force.