Testimony in Support of SB 168: “Alcoholic beverage control; food-to-beverage ratio.”
Testimony from:
Robert Melvin, Senior Manager, State Government Affairs for the Northeast Region, R Street Institute
Testimony in Support of SB 168: “Alcoholic beverage control; food-to-beverage ratio.”
January 18, 2024
Virginia Senate Committee on Rehabilitation and Social Services, ABC Subcommittee
Chairman Rouse and members of the committee,
My name is Robert Melvin, and I am the senior manager of state government affairs for the Northeast region with the R Street Institute. The R Street Institute is a nonprofit, nonpartisan public policy research organization. Our mission is to engage in policy research and outreach to promote free markets and limited, effective government in many areas. Our work includes analysis and promotion of sensible alcohol policies that consider consumer choice, free enterprise, and public safety. We are also one of the only independent think tanks in the country that analyzes alcohol laws and regulations. This is why we have a particular interest in SB 168.
SB 168 would reduce the current 45 percent food-to-beverage ratio for restaurant and caterer’s licensees to 35 percent for Virginia Alcoholic Beverage Control Authority (VABC) licensees with monthly food sales of between $4,000 and $10,000; and restaurant and catering license holders with monthly food sales of at least $10,000 would no longer be subject to the food-to-beverage ratio requirement whatsoever, and for good reason.
Under current state law, restaurants that sell mixed beverages, like cocktails, must have a minimum of 45 percent of their sales from food or nonalcoholic beverages.[1] Under this ratio, alcohol should constitute no more than 55 percent of sales. Restaurants must meet this ratio annually in order to comply with the law, and infractions can result in civil penalties, as well as license suspension or revocation.[2] Unfortunately, restaurants can unwittingly violate the law for transgressions such as failing to meet monthly sales or the ratio requirements, reporting incorrect information, or delayed submission of their reports. By no fault of their own and due to factors outside of their control, they can fall out of compliance.
Since Virginia has state owned liquor stores the price of liquor in Virginia is controlled in many ways by the government. When there is a state budget shortfall, the Virginia Alcoholic Beverage Control Authority (VABC) will increase prices to plug that budget gap. When these liquor prices increase in that situation, restaurants are forced to raise prices on food to ensure they continue to meet the food-to-beverage ratio.[3] As a result, customers face higher prices when dining out as a result of these price increases on alcohol. Rolling back the food-to-beverage requirement would help ensure restaurants are not forced into raising prices on diners simply to try and meet an arbitrary state standard.
Additionally, by lifting the food-to-beverage ratio, consumers could see an uptick in establishments that specialize in higher end craft cocktails like cocktail speakeasies, whisky bars, and music clubs. These businesses currently are few and far between in Virginia because it’s not feasible to meet the food-to-beverage ratio if you are selling whisky, like The Macallan M, which goes for about $2000 a glass.[4]
Restaurants stand to benefit from this proposal as they will no longer be subject to an arbitrary requirement that requires extensive bookkeeping comparing alcohol to food sales, and proving compliance or face penalties. Also, since beer and wine aren’t subject to the food-to-beverage ratio, it would also bring more consistency for these establishments with respect to the treatment of the alcoholic beverages that are sold.
As you consider SB 168, I ask that you consider the benefits of this legislation. It will help restrain costs of dining out, open customers up to more craft cocktail establishments, and ease some of the challenging record-keeping requirements for restaurants. For these reasons, I strongly urge your support of SB 168.
Thank you,
Robert Melvin
Senior Manager, Government Affairs for the Northeast Region
R Street Institute
[1] Code of Virginia, § 4.1-206.3. (Effective until July 1, 2024) Retail licenses, Last Accessed January 17, 2024: https://law.lis.virginia.gov/vacode/title4.1/chapter2/section4.1-206.3/
[2] Crystal Stump, ABC Consulting, “Online Food-Beverage Ratio,” January 24, 2021: https://vaabc.com/blog/online-food-beverage-ratio/
[3] Michael Martz, Richmond Times Dispatch, “ABC Raises Liquor Prices,” November 18, 2014: https://richmond.com/abc-raises-liquor-prices/article_706f27b2-6eaf-5d40-9be2-807b72ccb022.html
[4] Ned Oliver, Virginia Mercury, “A $2,000 Glass of Whisky, a State Law Banning Bars and a Years-Long Fight Lawmakers Can’t Seem to Untangle,” August 23, 2018: https://www.virginiamercury.com/2018/08/23/a-2000-glass-of-whiskey-a-state-law-banning-bars-and-a-years-long-fight-lawmakers-cant-seem-to-untangle/
Nathan Cushing, RVA News, “Behind ABC’s Food-To-Alcohol Ratio,” February 17, 2014: https://rvanews.com/features/behind-abcs-food-to-alcohol-ratio/108958