Pa.’s LCB corks speculation of higher markup

The Pennsylvania Liquor Control Board is not considering boosting its markup on wine and spirits, an assurance from the board’s chairman that comes after a leaked memo suggested the 30 percent markup get its first increase in roughly 20 years.

The memo shared with the Associated Press was penned by the LCB’s financial department and suggests a 5 percent increase to the agency’s 30 percent markup on wine and liquor.

Interest groups representing bars, restaurants, and hotels sprang into action, saying such a move would drive prices up, and was proof that the LCB’s financial situation is precarious.

“Any other business would be making some hard decisions, but the LCB doesn’t have to make hard decisions, because there’s nobody else competing with them in the market,” said Melissa Bova, spokeswoman for the Pennsylvania Restaurant and Lodging Association. “They could very easily raise their prices and no one can tell them otherwise, because there’s no one out there competing with them.”

LCB Chairman Joseph “Skip” Brion disputed the notion that the agency’s financial position is dire, calling it “far-fetched.” He pointed to annual profits of more than $100 million for the past three years. And this year, he said, the agency essentially advanced $80 million to the state’s main budget.

“There have been discussions in the past about the markup, since it has not been changed since 1994,” Brion said. The financial department floated an increase this year, according to the memo, because the agency saw higher costs from employee pensions, benefits, and salaries. Enforcement officers and building leases were more expensive as well, Brion said.

A 5 percent increase to the markup, Brion added, wouldn’t necessarily mean higher costs for consumers.

“It may, it may not. We have no idea whether it would cost them anything or if the 5 percent would be shifted to the sales price,” Brion said. “We don’t know that.”

Product shelf prices are set by wine and spirits suppliers, an LCB spokeswoman said. Those parties set the shelf price based on how well they expect the item to sell, a calculation that takes into account the 30 percent LCB markup.