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Issue Date: Vol. 45, No. 3, March 2005, Posted On: 4/10/2005


Taverns Witness On-Site Liquor Sales Drop In Changing Climate


Marcus Webb

U.S.A. - Sometimes it's hard to tell if the bar industry is crying in its beer, or crying all the way to the bank. It may be doing both at once, according to VT's latest glance at seemingly contradictory trends in the American tavern industry. But for all the confusion, one fact about the tavern business remains indisputable: the marriage of bars and amusements endures in rock-solid shape, as both parties continue to value , and profit from , the relationship.

Statistics reveal a very mixed picture for on-premise beer and liquor sales. In the last 20 years, U.S. per-capita consumption of alcoholic beverages overall (including off-premise) has dropped 20%, according to Helen Conibear, editor of Alcohol In Moderation (aim-digest.com). Of all the adult beverages sold in 212,000 licensed locations in the United States, 82% are  sold for off-site consumption, while a mere 18% are consumed in bars, restaurants, taverns and nightclubs, reported Rexam, one of the world's top consumer packaging firms. Yet even that modest minority of market share is shrinking, it seems. "There has been an ongoing shift in business from on-premise consumption (bars, taverns, restaurants) to off-premise," declared George Jacob, president of Brewers Distributing Company.

But there's plenty of good news for bars as well. Americans are drinking less, but also, according to tavern industry experts and beverage manufacturers, "drinking better" , spending more money on upscale brands. Despite continued aggressive lobbying by Mothers Against Drunk Driving, the DUI situation appears to have stabilized at last. Better still, the alleged "death" of mom-and-pop bars has been (in Mark Twain's classic phrase) "greatly exaggerated." That's the word from Ray Foley, who's been publishing Bartender Magazine (circulation 148,000) for 25 years.

"Independent neighborhood taverns are the backbone of the industry," said Foley. "The mom-and-pop bar still makes up 70% of the market. People like to go to their local places. DUI has an impact on this too; nobody wants to drive too far after they've had one or two. You're safer staying close to home. And there's the familiarity factor: we all prefer someplace where 'everyone knows your name,' as the old theme song went on the TV show 'Cheers.'"

More good news comes from the Beer Institute, which forecasts that beer sales will continue their annual climb in the 2% range as more members of Generation Y hit the legal drinking age, and as more members of the Baby Boomer generation hit the empty-nest years, freeing them for more nights on the town. Over the next eight years, the Institute says these two trends are poised to expand the prime bar patron market by 25 million. The upscale Boomers will keep buying more upscale brands, too, said BI. The expanding bar clientele will then keep growing , although perhaps not at quite the same pace , through 2020, according to the Institute.

Bars, the experts agree, aren't going anywhere. "As populations rise, the restrictions on licensing decreases since laws typically condition the number of permissible permits on the number of people in the region," explained John Bodnovich, communications coordinator for the American Beverage Licensees. "So, the number of liquor-licensed locations is generally rising. Taverns , neighborhood bars , have been around for hundreds of years. They are part of the fabric of American social life. Despite the headaches with taxes, DUI and smoking bans, they will continue to survive."

And the marriage between bars and to amusement and vending operators will remain indissoluble, according to Bartender Magazine publisher Foley. "It's the most fun industry in America," he enthused. "People come into a bar to be entertained, have a drink and have fun. The bartender is the ringmaster and he just has to hope the animals don't take over the circus. The amusement machines contribute a lot of money; operators split their profits with bars and everybody makes money. Owning your own equipment, you don't make more money; you have to pay the taxes and handle the aggravation. It's much better if you let somebody else update the music, recover the pool table, and stock more cigarettes in the vending machine, so the bar owner can concentrate on what his business is: selling drinks.

"Most bar owners still like working with operators because it keeps things simple," Foley continued. "Let the vending company install the machines, repair them and maintain them. At least they keep updating things and they bring in a little excitement. In most bars, a jukebox and pool table are still the whole entertainment.

"And how about those downloading jukeboxes!" Foley exclaimed with genuine admiration. "Once upon a time, a big jukebox sat on the floor and offered 200 songs. Now a small box is perched on the wall and you can get 1,000 tunes. I think the bar industry loves the new generation of downloading jukeboxes. They love having the choice of music; they love the digital sound quality; and they also love having something new to talk about."

A TOAST TO THE RECESSION

Foley strongly endorses the old saw that says, "the hospitality industry performs better in a recession," although he puts a different twist on it. "It's true, everybody drinks in hard times. In good times, they drink better. People are either celebrating with champagne or crying in their beer," he chuckled.

ABL's Bodnovich agrees: "When times are tough, people do like to gather and share their experiences," he said. "Taverns are not just for entertainment; they are community gathering places that provide the comfort and company of others, a need that is especially felt when times are tough."

The amusements industry shares common causes with the tavern industry in fighting higher taxes, smoking bans, tougher DUI laws, and more. While the two industries have managed to forge close alliances in certain states (such as Illinois and Pennsylvania, to name just two), taverns and operators have never jelled on a national level. Foley blames the tavern and beverage industries' national trade associations for this failure.

"My personal opinion is the tavern and liquor industry organizations became bigger than the people they represent," he said. "I admit they do good in some cases. As they constantly remind everyone, we haven't returned to Prohibition yet. But the leadership of these associations is also self-serving and self-satisfied. They are not responsive to the needs of their industry. They get used to hobnobbing with the high and mighty folks they're supposed to lobby, and they forget the people who pay the dues, the people who pay their salaries, the people who are barely scraping by."

Not surprisingly, ABL's Bodnovich takes a sharply different view. ABL was formed in 2002 when the National Licensed Beverage Association, representing on-premise alcohol consumption sites, merged with the National Association of Beverage Retailers, which represented off-site liquor sales outlets. Today, ABL comprises nearly 20,000 members in 32 states. Its 45 allied associations (affiliate members), include mostly state and regional associations, but also a handful of groups representing other industries, including the American Gaming Association.

ABL's board has its hands full just keeping up with the many challenges that confront the liquor sales industry, Bodnovich explained. The top of the list is familiar: smoking bans, DUI and so-called "sin" taxes.

SMOKING DILEMMA

"Smoking bans are one of the biggest, if not the biggest, concern for our members," said the ABL spokesman. "We've seen that in places with bans that don't have climates conducive to outside smoking areas, it has really hurt business. In some areas, smoking bans are slowly driving taverns out of business. Our members like to provide an environment where customers can enjoy their individual freedoms. Some tavern owners have invested considerable sums in air-filtering technology; others restrict smoking to certain areas within the establishment. But members don't want to be told what to do, nor do they want to invest $50,000 in air systems only to be told later by the local city council that all workplaces must be smoke-free, period. But retailers operate on a thin margin; they can't afford to lose smokers as customers because it means they'll lose their businesses. One of our officers testified in Minnesota before the legislature , he personally doesn't smoke, because he has asthma, , and he doesn't want his kids to smoke , but he said he needs those customers."

There is no dedicated line item in ABL's national budget to fight smoking bans, Bodnovich stated. "To my knowledge, we don't fund local battles but we do try to organize and coordinate in support of local and regional associations," he sad. "One tricky issue is that much smoking-ban legislation is done at town or county levels. That makes it more difficult for a national organization to address. Most of those battles are being fought on the local level by state associations. The South Dakota retailers association was successful in February in defeating legislation on smoking bans, so I don't think it's a lost cause."

According to publisher Foley, "Smoking bans are a huge problem but you'll never get the true facts from the politicians. In New York, smoking bans have caused 30% revenue drops and 20% layoffs in many cases."

On the DUI front, Mothers Against Drunk Driving , the most powerful lobbying group on this issue , is marking its 25th anniversary this year with a call for more roadside drunk-driving inspections. MADD also wants drunk-driving offenses treated as harshly as violent crime that results in serious injury. Both Bodnovich and Foley agree that MADD is fueled by a "prohibitionist" mentality today.

"MADD operates on an annual budget of over $40 million," ABL's Bodnovich said. "They began as opponents of drunk driving and underage drinking; ABL opposes both as well and we work with our allies to prevent irresponsible use. Somewhere along the line, however, a more prohibitionist tone came up, a much harsher tack suggesting that having any amount of drink and getting behind the wheel should not be allowed. General Motors contributes funding to MADD," Bodnovich noted. "Mandatory sentencing for DUI convictions is state issue; on the national level ABL does not support federally mandated increases in roadblocks which are intimidating, require a great deal of manpower, and have not been shown to be effective."

An ongoing MADD objective, noted Foley and Bodnovich, is to have the U.S. force all 50 states to lower the blood alcohol content (BAC) limit for DUI to .05 (where it currently is in Canada). "It's an increasingly aggressive attack on the blood alcohol content threshold for intoxication," Bodnovich said. "The legal limit is now down to .08 in most states through a federal mandate attached to federal highway dollars. We don't agree with the steady incremental increase below .08. There has been a sharp decrease in the last 20 years in the number of alcohol-related fatalities in the U.S. That figure has hovered in a stable range during the last six years.

ABL provides a voice reminding legislators that it is possible to drink moderately and still not be intoxicated. "Every one of our members opposes drunk driving 100%," said Bodnovich. "Yet we must make distinction that it's legal to drink moderately and drive responsibly, such as enjoying a glass of wine with dinner. People should be allowed to do that; this gets lost in the rhetoric. We take the approach 'Drink Responsibly, Drive Responsibly,' which is very different from 'You Drink, You Drive, You Lose.'

Statistics show a sharp increase of fatalities at double the legal limit, which is the hard core or extreme drunk driving case with .15 BAC. Harsher penalties should apply in such cases, whether automatic license revocation or other measures. These are the problem people and we must have new approaches to deal with them. Bringing legal BAC down to .05 or .02 will only put our small, family-owned retailers out of business. It would kill them. They have families to feed and are active community members who contribute to the well-being of their cities and states through tax dollars."

TAXING TIMES

Speaking of taxes, that issue represents the third devil in the tavern trio. "Beverage alcohol is one of the most highly taxed commodities on the market," Bodnovich said. "It seems increasingly popular to implement so-called sin taxes, which we call hospitality taxes, on beer, wine and tobacco even among officeholders who run on an anti-tax platform. It's not just a revenue measure but is perceived as a disincentive to engage in certain behavior."

However, Bodnovich and Foley agree that regardless of taxes, DUI laws or smoking bans, the classic bar will remain a going concern in America , and that the tavern industry's alliance with the amusements industry is, if anything, stronger than ever. Patrons who drink less, require some other diversion, such as more music and more games, more league competition and more ritualized interaction with other customers. And, as on-premise liquor sales continue to drop in volume, bar owners become more appreciative of the reliable power of amusements to generate earnings and drive traffic.

Perhaps, then, it should not be surprising that the top four machines on the great American route , downloading jukeboxes, countertop videos, golf videos and pool , are all classic tavern staples.

Is there a love-hate character to the bar-operator relationship? Foley, who worked as a bartender for years before founding his magazine, said there is , but quickly dismisses it as no more consequential than the grumbling of an old married couple. "The combination of drinks and games and music is a natural," he said. "Nothing but nothing is ever going to change that."


Topic: Music and Games Features

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