A Changing Marketplace
Last fall, a woman walked into my store carrying an unopened single 24-ounce can of beer she had just purchased from the retail liquor licensee down the street. She grabbed a case, and, as I waited on her, I asked (even though I knew), “Do you mind telling me what you paid for that?”
She replied, and I gestured over to one of my new coolers and said, “We have that for half the price”.
“I’ll be back,” she smiled.
This little vignette aptly describes what has happened in the beer marketplace since the PA Supreme Court ruled in 2010 to allow grocery stores to sell beer.
Ask anyone over 25 to describe Pennsylvania’s beer marketplace from 1934 to 2016, and here is what they will say:
- “If you want a single, six or twelve, you go to a bar or six pack shop, but you will pay an awful lot for it.”
- “If you want real value, you go to a beer distributor, but you must buy a case.”
By last fall, however, retail liquor licensees who marketed “beer to go” were publicly complaining about declining sales. A friend noted, in a recent visit to a pizza shop that sells beer, he saw hand-drawn labels for the pricing. He asked, and was told, “We reduced our prices.” Our friend looked out and across the street there was a beer distributor.
Meanwhile, at a recent MBDA board meeting, one of our directors reported seeing a grocery chain put up orange placards, only to then take them down. Those two supermarkets are not going to sell beer now.
What is happening?
My own view is that before 2010, when those who operated food stores looked from the outside at the beer marketplace for singles, six and twelve packs, they saw a multi-million dollar market with extremely high markups, many as high as 200%. They wanted in. They really wanted in!
Now, they got in, but so did the beer distributor, the value-seller of beer. First, we went to court to win the right to sell twelve packs, then, at our urging, the General Assembly decided to give consumers the long-sought-after right to buy any package from us (package reform).
As a result, consumers are quietly moving to us, recognizing that we still provide the best prices, selection, and service.
Remember, the financial statements for food merchants that are publicly traded are available on the internet. They are high-cost operations. To return to shareholders a net of 3 or 4 percent, they must gross 28%. Back in 2010, those 100 to 200 percent markups enjoyed by small package retailers looked terrific to food merchants; now they realize that those days are gone and there is a value competitor on the playing field selling smaller packages.
What does this mean for the distributor?
Our business model has changed. Package reform has enabled us to do an even better job of accommodating our customers. We have always provided great selection. Now we’re able to offer that selection in all package sizes. Now we’re able to quench our customers’ thirst for draft beer at our growler and crowler stations.
We’re excited to have improved our business model, and strive to enhance our stores even more with high-quality shelving, coolers, signage, and lighting. However, we guarantee that one thing will not change. We’ll continue to roll out the welcome mat by offering the highest personalized service, greatest selection, and best value to our customers.