Retail Pricing Changes for Restaurant Owners and Small Beer and Wine Retailers

Policy adds extra cost on store purchases

By Charlie Wright

Image via Flickr: 5chw4r7z (CC BY-SA 2.0)

Restaurant owners and small beer and wine retailers in the county will now face additional costs when buying from county retail stores following a policy update by the Department of Liquor Control meant to ease the burden on county store managers.

Restaurant owners and small beer and wine retailers can order cases of alcohol to be delivered from the county warehouse but sometimes go into county-run retail stores and pick up a bottle or two. The practice posed a dilemma for the county-owned stores, which have to order wines by the case, and had to keep an excess inventory of some specialty wines and spirits.

These cases were bought by the store owners at the same price the items were being sold, meaning the retailer wasn’t making a profit.

“We are holding our managers of our stores as financially accountable for the success of their stores as much as any other Mom and Pop beer and wine store would do,” DLC Director Bob Dorfman said. “We have managers that are saying, ‘This is not right. We are incurring an expense.’”

County-owned stores sell liquor, beer and wine to consumers and the county’s DLC acts as a wholesaler, delivering cases of liquor, wine and beer to restaurant owners and small beer and wine retailers. The county is the only one in the nation controlling wholesale liquor sales.

About 11 percent of total sales at the county’s 25 retail stores are to restaurant owners and small beer and wine retailers, for which the owners make zero profit, Dorfman said. He added that he wasn’t sure why such an arrangement was every put in place and figured the DLC permitted it years ago “as a means of placating the licensees.”

At county-owned Muddy Branch Beer & Wine in Gaithersburg, nearly a quarter of total sales go to licensees.

“Basically for the last four years, we’ve been like a mini warehouse for these guys,” Muddy Branch manager Lew Rydzewski said. “23.5 percent of my business is licensees, so that’s 23.5 percent of my inventory I’m carrying just for these guys.”

The policy only applies to retail stores, so restaurant owners and small beer and wine retailers can still buy cases at the warehouse for wholesale prices. Many state-run liquor outlets have “break case” fees for licensees who are only purchasing a few bottles, which are typically twice as much as the new surcharge in the county, Dorfman said.

The new retail pricing policy went into effect March 25, charging restaurant owners and small beer and wine retailers an extra 80 cents per bottle for wine and spirits, and either the retail sale price or 10 percent off the retail shelf price for beer, depending on which is cheaper.

The primary difference is other entities deliver, while restaurant owners and small beer and wine retailers must make their own trips to the county retail stores.

Brian Vasile owns Brickside Food & Drink in Bethesda in addition to a pair of restaurants in Washington, D.C., and prefers the extra delivery cost in the District to the county’s surcharges.

“No problem, you’re delivering it to my door, that’s on me,” Vasile said. “That’s kind of like a convenience fee, I get it, no problem. What I don’t like is now the DLC is charging me 80 cents, which I openly admit is cheaper than $1.50, but you’re charging me the 80 cents to go get it myself. That defeats the purpose.”

Vasile said space issues prevent the DLC warehouse from breaking cases and delivering loose bottles, which reinforces his concerns with the county’s system of alcohol distribution.

“Do the job correctly and build more space,” Vasile said. “If you can’t do it, then privatize it.”

Policy changes from the liquor board coupled with county regulations such as the restaurant patio smoking ban are keeping businesses from the county, said Ronnie Heckman, owner of Caddies Bar & Grill in Bethesda.

“It’s one more thing they’re doing to make it hard on us,” Heckman said.

Dorfman has communicated with multiple concerned customers since they were notified of the changes through a letter that went out March 11. Some were concerned that business owners didn’t have any input, others didn’t care for the tone of the letter, but he said all of the conversations were productive.

Vasile spoke with Dorfman about the policy and confirmed they had a productive conversation. The Brickside owner said while he disagrees with the new regulation, he understands where Dorfman is coming from.

Dorfman has coordinated a meeting in Bethesda on April 3 with the Greater Bethesda Chamber of Commerce, county council member Andrew Friedson and DLC staff to discuss the policy.

The story has been updated to clarify that the policy change is from the county Department of Liquor Control and not the county liquor board. The change also covers smaller retail stores and other businesses that sell alcohol. A misspelling of Brian Vasile was also corrected.