The Montgomery County Council reviewed an option that would privatize wholesale distribution of special-order alcohol to retailers at its sixth meeting Friday.
Although no votes were taken, the council’s Ad Hoc Committee on Liquor Control discussed Option Four, which would shift control of managing special orders of alcohol to private wholesalers and restaurants.
The committee, chaired by Hans Riemer, includes Council President George Leventhal, chair of the Health and Human Services Committee, and Marc Elrich, chair of the Public Safety Committee.
A report released in February from the Office of Legislative Oversight, titled “A Review of Alcohol Control in Montgomery County,” states that local restaurants, beer and wine stores and other retailers with liquor licenses are not satisfied with the county’s Department of Liquor Control as the single wholesaler of alcohol. A formal survey of the county’s alcohol licensees shows that they are dissatisfied with DLC’s operations, high prices and availability of products, particularly special-order products.
Currently, special-order items, including types of beer, wine and liquor not typically in stock, are ordered through the county. These orders make up 85 percent of products sold by DLC, the report states. This additional middleman adds another step for retailers when ordering special items and can take additional time in completing the order, said Craig Howard, senior legislative analyst for Office of Legislative Oversight.
Howard said the best way to address the issue is to make the potential changes optional for wholesalers based on their respective business model and whether it would be financially feasible for each company.
“At the same time, it should not be on a delivery (or) order-by-order basis,” Howard said. The wholesalers would have to decide each year whether they wish to manage special-order products under Option Four or continue to fill them through DLC. That way, there is “some sort of consistency, reliability and transparency for everyone involved.”
By allowing private alcohol retailers to decide if they wish to directly handle special orders, the county could experience increased product availability and efficiency, saving wholesalers both time and money, Howard explained.
“The prices to the licensee should decrease because there would not be a second markup,” Howard said.
There are concerns about lost revenue from the partial privatization. However, the revenue could be made up by charging private wholesalers a distribution fee, either by a flat rate or per-ounce basis, Howard said.
Option Four has the “least potential impact” on county jobs of the five options proposed, the report states. Up to 15 jobs could be lost if all special orders were privatized, but that number would be lower if filling special orders became optional for businesses, Howard said.
DLC plans to open three new county-run liquor stores in 2016, which will employ 22 people and “more than offset” the jobs lost by the potential privatization, Howard said.
“We don’t know the growth that’ll happen. We don’t know how many people aren’t doing special orders right now because it takes too long, you know, or whatever the problems are. So there could be a growth factor,” said Council member Sidney Katz.
Matthew Tucker, director of business development for Country Vintner, a wine and spirits importer and wholesaler, spoke about how his company would be affected by the potential privatization of special orders.
“I feel comfortable that we could work within the DLC, knowing that we do business with the rest of the state,” Tucker said. “I don’t see why it couldn’t work here in the county just as it works in Baltimore.”
The biggest challenge this change would bring is that it requires a change to state law, the report states.
The committee is scheduled to meet Friday morning to discuss DLC’s action plan.