Expectations run high for liquor pricing task force

Legalizing Sunday liquor sales grabbed the headlines last spring, but the Connecticut legislature’s 2012 venture into the complexities of liquor regulation and price controls was judged as much on what it ignored as what it tackled.

Not surprisingly, expectations were riding high Wednesday when a new task force began its work on what many believe will be a blueprint to guide the liquor debate’s second round in 2013.

“This is some pretty heavy lifting,” Rep. Kathleen Tallarita, D-Enfield, co-chairwoman of the Competitive Alcoholic Liquor Pricing Task Force said shortly after the panel expanded its scope of study within minutes of its launch.

The legislature tasked — but did not limit — the group with studying liquor taxes, quantity and volume discounts, minimum pricing and price posting and liquor permit restrictions.

The group quickly added regional exclusivity rules regarding wholesale transactions of beer and liquor, and Tallarita wouldn’t rule out new topics as the panel invites industry and consumer representatives and other stakeholders to assist the group.

“It’s our job to come up with what we think the next General Law Committee should look at,” Tallarita said, referring to the standing legislative panel that would review any liquor sales-related bills in the 2013 session, which starts in January.

The 2012 debate began last January when Gov. Dannel P. Malloy unveiled a sweeping array of pricing and competition reforms.

Malloy said Tuesday he remains convinced that Connecticut needs major changes to its alcohol pricing laws.

“I think we’ve got to get out of the business of minimum pricing. I made it very clear I think we’re anti-consumer in this state. We’re driving up costs artificially.”

While the measure enacted this spring allows no one to own more than three package stores — up from the two in the previous statute — Malloy originally proposed a limit of nine, and then revised it to six.

Minimum prices also largely remained intact with one notable exception: Retailers can sell one item a month for 10 percent below the cost of acquisition. The governor’s last proposal was for five items.

“We’ve been clear all along that we believe Connecticut can be a lot more consumer friendly,” Brian Durand, an administration policy and communications associates and one of Malloy’s representatives on the task force, said after Wednesday’s meeting. “I think that many of the issues that were raised in the governor’s proposal will be looked at again.”

The longtime executive director of the Connecticut Package Store Association, Carroll Hughes, had tried to convince lawmakers last spring to reform rules governing quantity discounts on wholesale liquor purchases.

Hughes, who doesn’t serve on the task force, said many times smaller package stores can’t take advantage of quantity or volume discounts because the amount they must purchase to qualify is too high.

And some that can have to sacrifice variety to do so, Hughes said. In other words, a small store might spend all of their budgeted funds to purchase one brand of a particular spirit in the bulk required to qualify for a discount. But that store then cannot afford to buy other brands.

“About 15-20 spirit items control 70 percent of the marketplace,” Hughes said.

Connecticut also needs to spend more time looking at the disparity in prices that liquor manufacturers charge wholesalers, depending on the state those wholesalers are located in, Hughes said.

“I think it’s important that they learn about all of the competitive factors, not just price,” if the task force is to be successful in reforming the industry, he added. “I think they’re going to be surprised at how complex the issue is.”

The question of whether to legalize Sunday sales dominated the 2012 legislative session, in part because legalization had strong public support and also because it was relatively less complicated that other liquor industry issues.

Tallarita also noted, though, that lawmakers were limited by the short timetable of the last session, which ran from early February through early May.

“We weren’t ready to deal with all of those issues, especially during a short session,” she said.

The Enfield lawmaker agreed with task force member David Leon of Simsbury, owner of Super Cellar Warehouse Liquors, who pushed to have regional exclusivity rules studied as well.

A Groton package store owner presented the legislature last spring with a petition signed by about 7,000 customers calling for repeal of rules that require retailers to purchase beer, wine and other spirits only from distributors within an assigned franchise area, arguing that this lack of competition inflates prices.

“The conversation that was started on that needs to be continued,” Tallarita said.