On February 23, 2018, the Reform on Tap Act (House Bill 518) had its hearing in front of the Maryland House Economic Matters Committee — along with a lengthy slate of other alcohol and brewery-related bills.
Today, I want to spotlight Joe Petro, owner of Hair O’ the Dog Wine & Spirits in Easton, Maryland.
Joe Petro speaking during Reform on Tap Task Force meeting, Jailbreak Brewing Co.
Source: Reform on Tap Task Force
Petro not only served as a Reform on Tap Task Force member and provided testimony in favor of the Reform on Tap Act last Friday, he also published an op-ed in The Capital pushing for the reformation of Maryland craft brewery laws prior to the hearing.
He felt compelled to respond to a contrarily positioned op-ed from Chuck Ferrar of Bay Ridge Wine & Spirits in Annapolis, who believes that the Reform on Tap Task Force “tried to undermine a system working well for craft brewers, consumers.”
In his rebuttal, Petro said:
“Those who see criticisms of the proposals coming from the Reform on Tap Task Force should not be led to believe that all Maryland alcohol retailers share such views of state Comptroller Peter Franchot’s ongoing efforts to reform Maryland’s dysfunctional beer laws.
I am an owner of a small, family-operated beer, wine and spirits retail store and was a member of Mr. Franchot’s task force. Craft beer sales are integral to my business, which is why I am proud to stand alongside the comptroller and Maryland brewers in pushing for the enactment of much-needed reforms of our state’s laws.” (Read the full op-ed.)
(Quick Disclaimer: While I am a biweekly contributor to The Capital, I was not affiliated in any way with the production or publication of his article.)
A couple of weeks ago, Petro graciously agreed to a follow-up interview with me to discuss his thoughts on these issues further. What follows below is our conversation.
Joe Petro of Hair O’ the Dog Wine & Spirits
ME: For those who may not be familiar with you, can you tell me a little bit about your background and your store, as well as your connection to the craft beer industry?
JOE PETRO: Sure! Well, I have a bachelor’s degree in accounting from the University of Baltimore. I had many different career paths or opportunities, but, I guess it’s about 16 years ago now or 15 years ago, we opened up Hair O’ the Dog
Actually, wait… 2004. It’s been 14 years! We opened up Hair O’ the Dog Wine & Spirits here in Easton. We started with one store, and then we grew. We had two stores at one time. But in 2012, we consolidated to down to the one that we’re located now.
We’ve been fortunate to ever grow our business in one of the most competitive markets in the state.
In Talbot County, they allow beer and wine in grocery stores and supermarkets and drug stores and gas stations. Everybody and anybody can sell beer and wine.
When I was asked to serve on the (Reform on Tap Task Force), I had to do it.
I’ve said many times that these laws need to be changed to help Maryland craft brewers. They’re risking their financial lives and put everything on the line to grow a business in a state where the laws and rules are slanted against them.
I looked at it as, first and foremost, as an issue of fairness.
Even looking at how craft brewers impact my own business, I’ve been able to profit tremendously off of them.
At least in my area, demand for small craft beers, local craft beers is just going through the roof.
We have folks that come in and look for these beers, and once they buy those, they’re buying vodka or wine or whatever, so it’s just a tremendous opportunity for retailers, frankly to piggyback off their success.
That’s why this Reform on Tap is so important to me.
ME: I want to dive a little deeper into something you mentioned in your answer — a culture of unfairness — where we see regulations slanted in favor of other parties over craft breweries. Could you speculate as to why that is?
JOE PETRO: Well, I think just looking at it from the 10,000-foot mark, I mean I would think it’s, you follow the money trail of these big distributors and big breweries. Follow the money. Where are their campaign contributions going to?
Because if you look at it from any other angle, it doesn’t make any sense — when you look at the number of people that are employed by the small craft breweries, their impact on the economy — both local and state — by these guys and women.
It doesn’t make any sense other than the fact that maybe they’re not donating enough money to the right politicians. Local brewers are creating jobs. They’re small businesses. I thought that’s what we’re all about in this state — to help small businesses grow.
ME: If we were to step aside from the money aspect for a second, the people behind that money, what do you think it is that they’re afraid of?
JOE PETRO: You know, Liz, I don’t know.
I look at it from the retailer side. Not being on the distributor’s side, it’s harder for me to speculate, but I don’t know what they’re afraid of.
It’s hard for me to answer that because these breweries, we benefit by them, the distributors benefit by them, and the breweries benefit by having the retailers and distributors putting their product out there in front of tens of thousands of people.
The three-tier (system) works for all of us, and I’m not sure where the threat is or what the perceived threat is.
ME: So, when we look at an editorial like the one published by Chuck Ferrar of Bay Ridge Wine & Spirits — to which yours was a response — why are some retailers taking a strong line to leave things as-is?
JOE PETRO: Chuck’s a great guy, and he’s got a very successful store. I can’t speak for Chuck, so I don’t want to put words in his mouth. Maybe he’s concerned that this is the first brick in taking out that three-tiered system. Maybe it’s the segue to allowing the grocery stores to come into his area. It’s hard for me to say.
Some retailers have said, well, they’re concerned if these breweries can sell unlimited amounts beer under these reforms on their own premise, that’s going to take away customers coming into their retail shop.
Of course, that cold happen. But think that would be shortsighted, because the brewers I know still look to retailers as an important component of their growth. It’s important for them to get their products out to as many people as possible, and not everybody can go to the brewery.
Frankly, for me, if a brewery opened up down the street and started undercutting me on their own products, I could always replace them with another local beer.
To me, it’s just all part of the free-market system. Everybody has to make a decision that best suits their business. But I think there’s just more, way more good to be come out of this by letting these folks do what they do and let them grow.
ME: What do you think the potential is, if we were to let Maryland craft brewers grow with fewer limitations?
JOE PETRO: Well, I think if you take the reigns off, we’ll see a lot more breweries start up. The good ones will flourish, and the bad ones will go down by the wayside. That’s with any business, and that’s how it should be. We should not have the artificial constraints placed on brewers or play favoritism — again, with the big guys vs. these little guys.
I’ve always been a proponent of the free market. Like I said, in Talbot County, I have to deal with that with beer and wine in grocery stores, so I know what it’s like.
We need to do is get out of the way, and let them Maryland brewers grow their businesses.
ME: Let’s go back to your time on Reform on Tap Task Force. Was there anything in particular that surprised you or stuck out to you in terms of either something you heard from peers or from brewers or others?
JOE PETRO: There wasn’t anything really that surprised me. I mean the brewers made their point, and it was what I would expect.
I guess the only thing that might’ve surprised me a little bit — but not a lot — were the distributors and how vehement they were against a lot of these changes.
I would’ve thought there would be some leeway, some understanding of the market, and understanding where the market’s heading. If I’m a distributor, I’d kind of want to get out in front of that, but I guess I was taken back a little bit by the ferocity of their opposition, but other than that, no.
ME: How do you articulate the importance of this issue to people who may not be beer drinkers?
JOE PETRO: In my opinion, you argue the basis of free market.
Whether it’s with a beer manufacturer or somebody who’s manufacturing furniture or whatever, — don’t have those artificial constraints put on. You look at it from the standpoint of the free market and capitalism.
From a retail perspective as well, the laws in Maryland — the liquor laws — they’re so slanted in the favor of the distributors on every issue.
For example, the state effectively acts as the credit collector for the distributors. In most counties or at least a lot of the countries, beer is cash on delivery (COD). With wine and spirits, you get essentially 30 to 45 days to pay for those.
If a retailer misses an invoice — or there’s a discrepancy in an invoice, and they pay short to the distributor — they can put on a list. Until you get off that list — in other words, until you clear that invoice or you clear that discrepancy — you’re paying COD with everybody, every other wine and spirit distributor in the state.
So, the state is actually enforcing credit collections on behalf of the distributors. It’s crazy. What other industry has the state acting as their accounts receivable department?
I’m just saying these distributors are huge, and a lot of money behind them. Not only that, but they have the state working as their bill collectors. It’s crazy.
ME: I remember this from the (Reform on Tap Task Force) meeting that we had at Jailbreak — which I believe you were in attendance at — where we spent a lot of time talking about the fact that beer is handled so differently from any other type of alcohol.
JOE PETRO: I think I’d mentioned it at that meeting at Jailbreak. And my point was these distributors that have the Anheuser-Busch, Coors and Miller Lite products, they use the retailers as warehouses.
You have to load in 100 to 200 cases of these 30 packs or Bud Light or Budweiser — which you make no money on — and you’re paying COD up front.
It squeezes out a lot the money that I have to bring in craft beer, because I’ve got to buy all this commodity stuff.
Again, there are a lot of good distributors. I don’t want to paint with a wide brush here and paint them all as these evil people. I know they’re getting forced down — this is all getting forced on down them from Anheuser-Busch, Coors and Miller Lite. It’s coming from the top down.
It’s a major impediment. It is one of the major impediments for the craft beer guys because they’re getting squeezed out — a lot of times I would imagine — by having to take on these big commodity brand deals.
There’s only so much money in the pot.
And there are certain times when business is slower. Just like any business, you may not have cash flow, and you got a lot of Bud or Miller cases of 30-packs coming — that you’re banking basically $1 a 30-pack on if you’re lucky — and you only have $70 in the pot that you can spend on a given week.
Sometimes, that squeezes out the smaller craft guys.
ME: What advice would you give to other retailers or distributors who may be feel differently than you do about loosening the restrictions around Maryland craft brewers?
JOE PETRO: I guess everybody’s got to run their own business and look at that, what benefits them and so forth, but I guess I would say let’s remove the impediments to these folks. Let them grow their business.
But I don’t know, from a retailer perspective, what anyone’s concern would be. Maybe retailers worry about the three-tier system kind of getting broken loose a little bit with breweries potentially competing on a retail end with their own stores — but frankly, it’s a small part of the business.
If one brewery down the road from a store wants to get into the retail business to the point that they’re under-cutting their local retailers, my argument (to retailers) has always been there’s a lot of other brewers and beers you can put on your cooler shelf. So, if somebody wants to play that game, I mean it’s really not benefiting anybody.
Beer selection at Hair O’ the Dog Wine & Spirits
I think there’s a fear factor involved that people just have to kind of get over and just realize that we’re all in it together. If the manufacturers in this case grow, then we’ll all benefit by it, including the distributors.
Again, it’s hard for me to address that because I can’t understand the argument. I don’t see any threat from Maryland brewers. I feel positive. I don’t see any real negative. If the system’s working properly in this three-tier system, we’re all benefiting from it.
The craft breweries need the distributors. They need to get their product out in front of the most people they can. They need to get into retail shops. We’re all dependent on each other, and we’re all profiting from each other.
So yeah, it’s just so confusing to me why the distributors — I mean I hear your arguments, but I don’t buy them.
They’re going to benefit because the more craft breweries that pop up, guess what? They’re going to need distribution. They’re going to want to put their beer out into the markets into the retail stores, so, it’s just mind-boggling.
The bottom line is we need Maryland craft brewers to grow because we’re all going to benefit by it.
ME: What are you hoping to see come out of this year’s Maryland General Assembly session?
JOE PETRO: Well, not being a seasoned political student, I would hope that the HB 518 would pass, Or at least more awareness, more groundswell support for movements Bill 518 that could carry momentum in the next year — maybe get a few things going this year checked off.
We just need to let the climate… I fear like there’s kind of a undercurrent of uncertainty with breweries or breweries that maybe thinking about starting up. They might be wondering or thinking about expanding — maybe not even expanding but relocating entirely out of state.
It would be nice if, if nothing else, to calm that fear down.
Remove all the static and at least make it look like the state is receptive to these small businesses, if nothing else. That’ll give their fears out of the way
Show them and tell them to, “Go ahead and expand. We’re going to make a friendly business environment for you.”
And then next year, maybe check off a couple of other blocks of the legislation.
ME: Can you tell me more about why you support the Reform on Tap Act (HB 518) in particular?
JOE PETRO: Sure, the bill helps all of us in the three-tier system. I’m going to benefit as a retailer by more of these breweries popping up, growing, becoming more successful — and, frankly, I think it’s the right thing to do.
Whether it hurts me or not down the road — I mean if I’m a brewer and I’m starting a new business, I’m going to be concerned about my business and my employees and growing my business.
It’s really not fair for me as a retailer to say, “Well, whatever brewers do, it’s got to benefit me.” I don’t believe in that. I think it’s a free market. I think folks should be able to invest and build a business and start a business, and make it or fail on their own merits. No one else’s.
But I know as a business person, as these businesses grow and succeed and more of them come into the pipeline, I know I’m going to benefit, and we’re going to be better off with it.
ME: Is there anything else you want to add?
JOE PETRO: No, I don’t think so.
Hopefully, that gives you a better perspective on a retailer’s side, at least on my side. Maybe not Chuck Ferrar’s, but from somebody who’s a lot smaller in shop. I think it’s important that folks know that not all retailers are against this reform.