A proposal to drive down alcohol prices in Connecticut drew sharp criticism Tuesday from distillers, distributors, and package stores.
Opponents of the plan packed a hearing room at the Legislative Office Building to argue against the call by Gov. Dannel P. Malloy to lower the minimum price of bottles of alcohol sold to consumers.
Carroll Hughes, a lobbyist for the Connecticut Package Store Association, said it could wipe out 2,000 jobs and force many mom and pop package stores to close.
“The sky is falling on this one,” Hughes told a General Law Committee hearing.
The existing law mandates that package stores can’t sell a bottle of alcohol for less than the “bottle price” set by wholesalers and posted each month. It’s a system that allows smaller stores to hold their prices close to the ones available at larger retailers.
Consumer Protection Commissioner Jonathan Harris said the measure the governor is proposing would maintain the bottle price system, but would shift the way it’s figured so that minimum prices would be based on how much retailers have to pay for bottles purchased by the case, instead of individual bottles. The difference would likely be a couple of dollars on a typical bottle of liquor, he said.
“I would call this a small step. I do not think it’s dramatic,” Harris said.
But lawmakers, who appeared skeptical of the plan, said they’re still scrutinizing it. “We’re trying to decipher what’s real and what’s not real” about the proposal, said Sen. Carlo Leone, D-Stamford.
Jay Hibbard, vice president for government relations for the U.S. Distilled Spirits Council, said consumers in the state typically pay about 15 percent more per bottle than they would if Malloy’s proposal is adopted.
He said it’s easy to see why package stories want to maintain the built-in markups that boost their bottom lines.
Hibbard said that if the state revises the law, it could rake in as much as $8 million more through increased sales and the “recapture of business that is going out of state” as consumers seek lower prices in neighboring states.
But Rep. Daniel Rovero, D-Dayville, said the loss of sales tax revenue from lower prices might exceed the amount raised from any additional sales. He said the projected revenue increase presents “a false figure.”
Opponents said they’re worried about large, predatory retailers driving out small package stores.
Lawrence Cafero, executive director of the Wine and Spirit Wholesalers of Connecticut trade association, said the regulations are important to the public’s health.
“It works here in Connecticut,” he said, and does well in comparison to neighboring states.
Retailers said that changing the minimum bottle pricing to case pricing will open the door for large sellers to buy in bulk when bottles are cheapest, giving them a big competitive advantage because they’ll be able to sell cheaper than family-owned retailers can purchase the bottles separately.
As “big box comes in more and more,” said Patrick Monteleone, owner of Harry’s Wine & Liquor Market of Fairfield, “we are in a very difficult position as retailers.”
Daniel Flanagan, a Teamsters executive, said that “nobody’s getting rich off the built-in minimum bottle price” and that the governor’s plan would create an unfair playing field for store owners.
Rankin said Connecticut has created a robust business atmosphere with many small businesses and is “a leader in having diversity and choice” on package store shelves, something it should cherish and preserve.
Adam van Gootkin, owner of Onyx Moonshine, an East Hartford distiller, said one of the advantages of Connecticut’s rules is that package stores have a much wider variety of brands on their shelves than in places where major companies dominate the market.
“This law helps us compete with the billion-dollar brands,” Van Gootkin said.
He said it has also helped boost the number of craft distillers in Connecticut because they can get their product on the shelves and reach consumers, something that might be impossible in a marketplace where large stores and large companies control what’s available.
John McKinney, a former Republican state senator, said there’s already plenty of competition in the industry and not much public pressure seeking lower prices.
“We should not pull the rug out from under them,” McKinney said.
Senate Minority Leader Len Fasano, R-North Haven, said trying to increase the amount of alcohol sold, one consequence of lower prices, would bring more problems with alcoholism and drunk driving.
He said the change eyed by the administration would represent “a major shift” that would run people out of the business.
Harris, though, insisted “it is a small change that injects some price competition into the marketplace.”
Malloy’s measure, which has been pitched in the past, appears to face long odds.
Even most of the Democrats who spoke about it appeared at least wary of the proposal.
Sen. Timothy Larson, D-East Hartford, told Harris he is “not convinced” there’s a reason to make the change.
Rep. David Baram, D-Bloomfield, co-chairman of the General Law panel, said he wonders if the state should focus on more than just the retail level. He said manufacturers and distributors also have a major role that deserves scrutiny.
Harris said he agrees that the industry is “large and complex,” but wants to focus on a small change that would help both the state and consumers and can be done this year.
He said it’s better to do “something that is targeted, narrow and relatively small.”