UPDATED – 3:15 p.m. – County Council President Roger Berliner took aim Monday at the county’s Department of Liquor Control, claiming its liquor pricing policies resulted in the announced closure of longtime Bethesda restaurant Grapeseed.
In an open letter addressed to Grapeseed owner Jeff Heineman, Berliner, a frequent critic of the DLC, wrote that the two of them had discussed the “negative impact that our county’s unique monopoly of liquor” had on the longstanding Cordell Avenue restaurant, which announced Thursday it will be closing at the end of July.
The letter, which was distributed to reporters at a press conference Monday, was critical of the DLC’s mark-ups of wine and beer.
“The mark-up has made it impossible for you to achieve the same level of profitability on this critical component of your operation as other fine restaurants throughout the region,” wrote Berliner, who is running for county executive in 2018. “I think it is important for our public and policy makers to understand the impact our unique monopoly of liquor has on county business,” the letter continued.
The DLC controls the wholesale distribution of all alcohol and the retail sale of all liquor in the county under current law. The department sold wine to licensees at a 25 percent markup until it shifted from its formula-based approach at the beginning of this month. Some local officials believe it is time for the county to get out of the liquor business while others don’t want to lose the annual revenue generated by the department and are looking to make improvements instead.
Heineman told Bethesda Beat on Tuesday that Berliner had called him Friday and asked how much revenue he believed he had lost over the years due to the mark-ups. Heineman said he quickly estimated that he lost about $80,000 to $100,000 each year.
Heineman agreed that the price of mark-ups contributed to his decision to close Grapeseed, noting that the higher prices made it difficult to compete against nearby restaurants in Washington, D.C., and other areas that did not face the same mark-ups when buying alcohol. Grapeseed opened in 1999 and became a community favorite for pairing food with wine. The restaurant will close July 29.
“When we’re sitting here in close proximity to Washington, D.C., you know, we’re competitive with people 3 miles away who get their beer, wine and liquor 25 to 40 percent cheaper,” he said. “I couldn’t mark myself up as much as my accountant would like and therefore I lost sales. That’s what it comes down to.”
In the letter, Berliner wrote that the added revenue could have enabled Heineman to “make the physical improvements” he thought were necessary “to remain viable.” Berliner had told Heineman he would be making the letter public.
County spokesman Patrick Lacefield disputed Heineman’s claims about potential revenue losses in an email Wednesday. He noted that Grapeseed’s total alcohol purchases from the DLC in fiscal 2015, 2016 and 2017 were $108,506; $82,086; and $78,971.
“It would seem impossible to ‘lose’ $80,000 – $100,000 a year in markups per year if you are not even ordering that amount to begin with,” Lacefield wrote in an email to Bethesda Beat.
He later added that the revenue loss assertions are “carrying on a narrative that the facts and figures don’t back up.”
Speaking at the press conference, Berliner said the loss of revenue faced by restaurants due to product mark-ups is different from other issues facing the DLC, such as lack of deliveries on holidays or the recently disclosed theft of $22,000 worth of alcohol from department trucks. Other restaurants that might consider opening in the county decide not to because they don’t want to deal with lower profits resulting from prices charged by the DLC, he said.
“So to me this is sort of the canary in the mineshaft saying, ‘Houston, there is a problem here,’ ” Berliner said. “But this to me is really the heart of the issue—it is how it takes away from the bottom line of our small businesses in Montgomery County.”
Editor’s Note: This story was updated to include a response from Patrick Lacefield on behalf of the Department of Liquor Control.