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2011 Pennsylvania Profile: Weathers Economy with State Initiatives, Natural Gas

Harrisburg Capitol Building
In Pennsylvania, the unemployment is at 7.6 percent, a good bit below the ­national average of 9.1 percent for July, according to the U.S. Bureau of Labor Statistics

Last updated on September 25th, 2012 at 03:47 pm

[gn_note color=”#b1cbde”]The 2011 Pennsylvania Profile originally ran in the September 2011 edition of The Shelby Report of the Northeast. Due to reader requests we will be posting our Profiles from each edition of The Shelby Report. The profile will be published on theshelbyreport.com one month after it has run in print.[/gn_note]

by Ashley Bates/staff writer

As states increasingly fend for themselves in what seems to be a continually ­sluggish economy, some are finding ways to create their own niche to boost the economy.

In Pennsylvania, the unemployment is at 7.6 percent, a good bit below the ­national average of 9.1 percent for July, according to the U.S. Bureau of Labor Statistics. The reason is, in part, natural gas.

David McCorkle is president of the Pennsylvania Food Merchants Association (PFMA), which has about 1,000 corporate members, with retailers who operate about 5,000 stores. He sees hope with lower unemployment numbers as a result of the booming natural gas industry in certain regions of Pennsylvania.

“We have an interesting phenomena developing (in the) north, central and southwestern parts of the state with the drilling for natural gas…which added a number of jobs and is a rapidly developing industry and has potential of bringing many more jobs to Pennsylvania because of the inexpensive price of natural gas to fuel the manufacturing facilities, retail locations and housing,” McCorkle said.

Also helping the state’s unemployment numbers are Pennsylvania initiatives that encourage farmers and grocers to expand their businesses.

“The state’s department of agriculture has a Pennsylvania Preferred Initiative that has been in place for about 10 years and highlights to consumers the importance of supporting local agriculture businesses. It’s a pretty popular program and has been well received by consumers,” said McCorkle, who has been with the PFMA since 1982 and served as president since 1986. “The Pennsylvania Fresh Food Financing Initiative that started about 10 years ago has been a very successful program in Pennsylvania. It started in Philadelphia with a task force. We participated and one of our directors chaired (it), along with the United Way of Southeastern Pennsylvania and a number of other organizations that were concerned about the fact that supermarkets were leaving Philadelphia and were not being replaced by other retail locations where people could buy different produce and meats at reasonable prices.”

McCorkle added that without the help of certain legislators, it may not have turned out as well.

“Dwight Evans, who was chairman of the appropriations committee, came up with $50 million of state money that was matched by private industry, and currently we have about 80 retail locations … maybe about 90,” he said. “Jeff Brown (of Brown’s Super Stores) is on our board of directors, and he was a key mover in that project. And now on the national level he’s been recognized by the President and Mrs. Obama for his extraordinary work in urban areas, which is really a specialty. He is working on a store in Philadelphia right now and a major remodel” (see Food Deserts story on page 1).

By promoting Pennsylvania businesses and farms, jobs are retained and added across the industry.

Retailers lobby for privatization of alcohol sales

But with all the well-received public programs, there are still hard issues affecting the state, like the ­privatization of beer, wine and liquor.

Pennsylvania and Utah are the only two states in the country that completely control both wholesale and retail sales of wine and spirits.

Danny Hemerle
Danny Hemerle, a representative for Southern Wine & Spirits, puts up a patriotic-themed display of bottles at the Wine & Spirits shop in Towamecin. photo: Mark C. Psoras/Journal Register News Service

But if state House Majority Leader Mike Turzai (R-28th District, Allegheny County) gets enough support for his House Bill 11, that will change, reports the Journal Register.

The bill calls for privatization of wine and liquor sales, which have been overseen solely by the Pennsylvania Liquor Control Board (PLCB) since Prohibition was repealed in 1933.

Under HB 11, state-run liquor stores would have to abandon what Turzai described as a 30 percent price markup in order to compete with privately owned liquor retailers, which would come about through the auctioning off “to the highest responsible bidder” of 1,250 retail licenses.

The 18 percent state liquor tax, also known as the “Johnstown Flood Tax,” also would be repealed under the bill.

According to the PLCB, its contributions to the state treasury for fiscal year 2010-11 were nearly $500 million as a result of more than $1.9 billion in sales.

However, Rep. Kate Harper (R-61st District) said that the $500 million is likely a gross figure, and the contribution, in reality, is closer to $100 million after subtracting the PLCB’s operating expenses, the report said.

Turzai says the bill will bring “significant job opportunities” to Pennsylvania while keeping revenue within the state’s borders.

“There are about 610 retail locations where you can buy wine in Pennsylvania; that’s about one-tenth what you would have in the average state in the country. Some people have to drive 45 minutes to buy a bottle of wine,” McCorkle said. “Our members have always been interested in changing the laws here to make it easier for retail food stores to sell beer, wine and spirits.”

Religious groups as well as Mothers Against Drunk Driving and Students Against Drunk Driving are opposed to the change, but the real political stronghold relates to the amount of money that is contributed to the general fund by the state store system—roughly $100 million, as noted—and the unions that represent all of the employees at the state stores.

“We’ve been trying to get beer in supermarkets for 40 years and also we’ve been trying to be able to sell wine in our stores for the same period of time,” said Carole F. Bitter, Ph.D., CEO and president of Friedman’s Freshmarkets, a Butler-based retailer that operates six stores in the state and has been in business for 111 years. “We need to make sure that when the state store system is privatized that the independent grocer and the regional grocer has the same opportunity to buy licenses that the big-box stores do.”

McCorkle added that unions retain a substantial portion of political power in Pennsylvania with the privatization issue.

“Our legislature meets in two-year sessions; they are in session full time for two years. We have a new governor (Tom Corbett) that supports privatization but he doesn’t have a plan that he supports at this point, so we have tried to draft one for him and we have asked him to consider it.

“… we are working with them to do something that makes sense for consumers in the state and for businesses that want to sell alcoholic beverages to adults.”

HB 11 calls for retaining the PLCB’s enforcement, licensing, inspections and alcohol education functions, the report added.

Discount stores proliferating

Privatization of beverage alcohol sales would likely please the new crop of discount stores that Pennsylvania residents are seeing all over the state.

“In the last two years I’ve seen expansion of stores like Bottom Dollar and Food Lion—Delhaize (banners), Save-A-Lot, Aldi … Aldis and Save-A-Lots are also really growing and are a major portion of the retail sales in the food industry in the state,” McCorkle said.

Bottom Dollar Food, a discount grocer, announced plans on July 22 to open 14 stores in the greater Pittsburgh and Youngstown, Ohio, markets, with most stores opening in early 2012.

The expansion will create more than 600 jobs and will bring a fresh, new grocery option to consumers in the greater Pittsburgh region and Youngstown, Ohio.

Bottom Dollar Food has small stores that compete with other discount stores like Aldi and Save-A-Lot.

The chain is part of Delhaize America, the U.S. division of Belgium-based Delhaize Group. The Food Lion and Hannaford banners also are part of Delhaize.

“There are more smaller format stores cropping up…and there’s a lot more focus on fresh. What we did a number of years ago when we knew that Walmart Supercenters were coming to our market area is we started attending the N.G.A. (National Grocers Association) Supercenter Share Group meeting,” Bitter said. “That was the single most helpful thing we could have done, and most independent grocers could have done, because we learned you can’t beat Walmart on price because they will bury you, so we began focusing on fresh in the late 1980s.

“As we remodeled our stores, our produce departments got bigger, meat departments got bigger and center store began to shrink,” she added.

Walmart’s presence in the state began in the early 1990s and is still very strong.

“In 1982 they didn’t have a single store in the state,” McCorkle said. “They are the largest employer in Commonwealth with over 50,000 employees and a sub­stantial part of the distribution system located in the state of Pennsylvania. Walmart is a major influence here in every community of the state.”

In an economy that Bitter describes as conservative with a recession mentality, loyalty programs that link grocery and convenience stores to discounts on gasoline are becoming popular.

“Most of the major supermarkets, if they don’t sell gasoline themselves, have linked up with a nearby convenience store chain to provide customers with gasoline discounts for purchases made inside the supermarkets,” McCorkle said. “The convenience stores have a similar loyalty program with their customers. It’s really quite interesting and it’s a growing trend. People, of course, will drive miles to save a couple of cents on gasoline, and it’s a very attractive discount offer for consumers.”

McCorkle does see price-consciousness easing in the future among customers.

“I think we’ll have some short-term, continuing problems with the economy, but long term we’ll be fine and see sustained growth through the next decade or so,” he said.

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