EXPERT WITNESS REPORT OF:
Pamela S. Erickson, M.A.
President/CEO
Public Action Management, PLC
September 30, 2011
Maxwell’s Pic-Pac, Inc., et al., v. Robert Vance, et al.
CIVIL ACTION NUMBER: 3:11–CV-18-H
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
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Scope of Opinions and Disclosures
This report represents my opinion regarding the impact of permitting the sale of wine and
distilled spirits in grocery stores and stores selling gasoline and lubricating oil in Kentucky. This opinion
is based on: (i) seven years liquor regulatory law enforcement experience as Executive Director of the
Oregon Liquor Control Commission and business experience operating and managing the State’s distilled
spirits business including 240 retail stores and a wholesale operation; (ii) fifteen years experience in
efforts to reduce underage drinking through regulation, media advocacy and public education; (iii) four
years experience developing and managing a national educational program designed to foster a
“Healthy Alcohol Marketplace” by explaining how regulations work to further public health and safety;
(iv) a detailed review of relevant research, historical documents and reports I have written in the area of
alcohol regulation; and, (v) a review of documents of record and deposition testimony from the present
lawsuit between Maxwell’s Pic-Pac, Inc. et al. and Robert Vance, et al.
Endnotes reporting source information used to generate this report are shown in Appendix B.
Qualifications
As an expert witness, I offer experience and knowledge in the areas of law enforcement, the
operation of alcohol regulatory systems, the alcohol industry, and research about the effects of alcohol
regulation and deregulation. A full description of my qualifications can be found in Appendix A.
Law Enforcement: I began my career in law enforcement and criminal justice research. I served
as a deputy sheriff in Multnomah County (Portland, Oregon), worked on a landmark study of
Policewomen on Patrol in the District of Columbia, administered criminal justice grants and contracts for
the U.S. Department of Justice and worked for seven years at the Oregon Law Enforcement Council
where I administered grants and produced statistical analyses and reports.
Research: I have a B.A. in political science and an M.A. in government. Each of those degrees
involved learning about research technique and statistical analysis. I worked in Washington D.C. for the
Urban Institute’s research staff to evaluate the performance of 100 police women compared to 100
police men who did uniform patrol work. This was a comprehensive study employing survey research
and structured observation. I worked briefly for the U.S. Department of Justice to administer criminal
justice grants and contracts and subsequently worked for the State of Oregon’s Oregon Law
Enforcement Council for seven years in the areas of comprehensive criminal justice planning, research
and statistical analysis. As a prevention advocate working to reduce underage drinking, I became
knowledgeable of the body of research on the topic of underage drinking.
Alcohol business: Oregon is a control state which means it owns and operates the distilled
spirits business. As Executive Director of the Oregon Liquor Control Commission, I was tasked with
directing and managing that business. The business included a wholesale operation with a large
warehouse, a distribution operation using common carriers, and a retail business using private contract
agents for 240 liquor stores statewide. Under my direction, the business developed a business plan to
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modernize and upgrade all facilities. I maintain my expertise in the alcohol business by daily review of
news articles and on-line newsletters.
Regulation: I spent seven years as the Executive Director of the Oregon Liquor Control
Commission. This involved licensing approximately 10,000 retail and wholesale businesses and issuing
permits to well over 20,000 alcohol servers. I was tasked with enforcing all alcohol regulations with a
staff of approximately 40 liquor inspectors. I increased my understanding of alcohol regulation once I
left the liquor commission and joined a non-profit to help reduce underage drinking. In that position, I
became acquainted with the large body of research concerning what is effective in alcohol regulation.
Since then, I formed a new business which is currently dedicated to enhancing knowledge and
understanding of alcohol regulation and how it works to foster public health and safety. I formed a
national education program which includes a monthly newsletter, several reports, and a website. I
frequently speak at national conferences and have given expert testimony in several states and to a
Congressional committee.
Publications within the past 10 years: “The Danger of Alcohol Deregulation, The United Kingdom
Experience,” “The High Cost of Cheap Alcohol,” and “2011 Issue Briefs for States.” Since 2008, I have
produced an on-line newsletter. At the present time, it is issued monthly to an email list of over 2,600
addressees nation-wide. I have produced PowerPoint presentations for testimony and speeches as well
as written testimony to the U. S. House of Representatives, Judiciary Committee, Subcommittee on
Courts and Competition. All reports, newsletter editions, and some PowerPoint presentations are
available free of charge at www.healthyalcoholmarket.com.
Exhibits Used:
The publications/endnotes listed in Appendix B plus the following substantive reports of my
creation constitute the exhibits that were used as general background and which help summarize or
support my opinions: “The Danger of Alcohol Deregulation, the United Kingdom Experience”
(September 2009); “2011 Issue Briefs for States“ (February 2011); and “The High Cost of Cheap Alcohol”
(April 2011). Copies of exhibits will be made available as appropriate. I reserve the right to supplement
this report to include additional exhibits to support additional opinions, if any.
Other cases in the last four years where I testified as an expert witness: None. See Appendix A.
Compensation to be paid for the study and testimony in the case: I will be paid at the rate of $250 per
hour with a retainer of $2,500 to begin work.
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Statement of Opinions and Data/Sources of Support
My opinion is that eliminating the challenged statutory and regulatory provisions, namely KRS
243.230(5) and 804 KAR 4:270, will seriously weaken Kentucky’s alcohol regulatory system. Pulling a
single regulation out of Kentucky’s regulatory system will create a domino effect and result in increased
social problems due to alcohol. This will occur by making all forms of alcohol more available; by
increasing the availability of more dangerous, higher alcohol content products; by lessening controls
provided by clerks; by decreasing the deterrent effect of liquor store age restrictions; by increasing the
promotions which use price to induce high volume purchase; and, by decreasing the ability of law
enforcement to maintain its current level of enforcement.
The challenged law is a key element in a system of alcohol control that is highly complex and
includes a series of checks and balances designed to achieve a balanced market, one which prevents
sales practices that lead to social problems. The evidence in support of this opinion requires a brief
history of alcohol regulation, a comprehensive explanation of the system and how it works to reduce
problems, a more detailed explanation of how KRS 243.230-(5) and 804 KAR 4:270 work in concert with
Kentucky’s regulatory system and a description of modern alcohol marketplace problems that pose
additional problems if regulations are weakened.
1. In my opinion, based on a review of national and Kentucky historical documents, Kentucky’s
alcohol regulatory system, like most states, is based on a well-researched study published in 1933
which aimed to limit alcohol consumption and foster moderation. A key element of that study
was a recommendation to make products of lower alcohol content widely available through sale
in grocery or convenience stores and “stronger” products less available through a limited number
of “package” or liquor stores with a more controlled sales environment. From the outset,
Kentucky adopted the principle of tighter control over products of high alcohol content in an
effort to control excessive consumption and promote public safety. Kentucky has maintained this
principle as a method of alcohol control ever since.
Prohibition was an extreme solution. But so were the problems it was trying to alleviate. As
Historian W.J. Rorabaugh reminds us, “For generations, Americans had been heavy drinkers, and by
1900 saloons were identified with political corruption, prostitution, gambling, crime, poverty and
family destruction.” (1) Prior to Prohibition alcohol was sold in a free-market scenario with little
regulation. National manufacturers controlled the industry and owned retail saloons—called “tied
houses”—where almost all alcohol was consumed. To compete, each national company saturated
neighborhoods with multiple outlets which were often located near factories to attract workers.
Aggressive promotions encouraged high volume consumption and money was used to dissuade
politicians from crack-downs. Prohibition did reduce alcohol consumption and many of the public
disorder problems. But, it didn’t stop drinking and created a new problem of considerable
lawlessness. Prohibition became very unpopular, was poorly enforced and spawned a major
organized crime industry that was often violent and unruly.
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Passage and ratification of the 21st Amendment to the U.S. Constitution, ended Prohibition and,
in Section 2 of the Amendment, gave the task of regulating and controlling alcohol to the states. It
was a recognition that a federal solution with “one size fits all” wasn’t very workable and that when
alcohol problems occur they primarily impact local communities. But, states had no real experience
with such regulation. As a result, all of our states, to one degree or another, relied upon the
recommendations of a major study financed by John D. Rockefeller, Jr., a prominent entrepreneur of
the day. This study was published as a book entitled, Toward Liquor Control, authored by Raymond
B. Fosdick and Albert L. Scott. (2) For the study, the authors examined how alcohol was regulated in
all Canadian provinces and several countries in Europe (Norway, Sweden, England, Holland, Russia,
and Finland). (An extensive discussion of the history and original purpose for design of the alcohol
regulatory systems can be found in Wendell J.Manuel dba Jungle Lounge & Restaurant, et al v. State
of Louisiana, Office of Alcohol and Tobacco Control, et al.)
Fosdick and Scott recommended that states adopt an alcohol control system, not just one or
two regulations. They offered two plans—a system where the state maintained ownership of
alcohol sales and a system where licensed businesses sold the products. They understood that
social problems are complex and a system of control must involve a set of regulations which work
together. Each of the two plans proposed regulations for manufacturers, wholesalers and retailers.
As they noted, “…the objective is the same under both plans, namely to place the sale of liquor
under a series of restrictions devised to curtail excessive consumption.” (2, p. 51)
It should be noted that several states followed a third path for a number of years. That was
to simply remain “dry.” However, all states have now abandoned that policy, Mississippi being the
last to change in 1966. Thirty-three states do permit local communities to vote to be “dry” (prohibit
all alcohol sales) or “moist” (prohibit some alcohol sales). Kentucky has that provision and as of
August 2011, 32 counties are wet, 39 are dry and 22 are moist (with a wet city located within its
boundaries) and the remaining counties are dry with various exceptions for restaurants, golf course,
wineries and historic sites. (3)
After Prohibition, the states had a truly unique opportunity. Each state could design a
regulatory system that could shape the alcohol marketplace in a way that fostered moderation in
consumption. Fosdick and Scott were particularly concerned with the retail aspect: “Virtually all the
individual and social evils of the liquor traffic arise from an inadequately regulated and
overstimulated retail sale.” (2, p. 42) Lest we think this couldn’t happen in modern times, we only
need recall our recent experience with an “inadequately regulated and overstimulated” mortgage
market or look across the Atlantic at the United Kingdom’s current alcohol epidemic which occurred
after 50 years of deregulation.
With regard to retail regulation, one of Fosdick and Scott’s key recommendations was to
make products of high alcohol content less available: “The sale of stronger drinks should be
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regulated under a program which so far as is practicable, discourages consumption with increasing
strictness as the alcoholic content increases.” (2, p. 20) Most states adopted some kind of “package
store” system which embodied that idea.
In 18 states, the package stores were a part of a state monopoly where products of higher
alcohol content were sold in “state stores.” The remaining states developed licensed liquor store
systems which specialize in the sale of alcohol. Such liquor or “package” stores are usually subject
to tighter controls over how products are sold. Most have curtailed hours of sale and some are not
open on Sunday or holidays. The locations are often limited by population or by local control. Age
restrictions usually exist to prohibit minors from being present in such stores and clerks usually have
to be 21 and have a clean criminal record. This allows the stores to focus on alcohol sales within
regulatory boundaries. Staff are trained and/or become skilled through experience to assess age,
check identification, and identify intoxicated individuals to whom they may not sell. Many states
prohibit liquor stores from selling other products. By limiting other types of products for sale, it is
more difficult to use temporary price reductions or “loss leaders” to induce high volume sales.
In my opinion, America’s alcohol regulatory system has been a success. We learned from
Prohibition that an extreme solution won’t eradicate problems with alcohol. What we’ve learned
since then is that we can minimize problems. Our regulatory system has been successful in changing
Americans’ drinking habits from primarily consuming distilled spirits which was the common drink
during Prohibition to primarily consuming beer. That pattern persists today. In addition, per capita
consumption remained at moderate levels until regulations were liberalized in the 1970’s and
1980’s. (4) But, the problems of highway deaths lead to the creation of Mothers Against Drunk
Driving and other groups that fought to toughen alcohol laws once again. Consumption and
problems eventually declined. Today most Americans who drink do so in moderation. Thus, we
have found that we can continue to modify our systems, but if things go array we can make a course
correction.
I find that our system stacks up well versus other countries. The United Kingdom is a prime
example of what can happen when alcohol is deregulated. (5) In the early 1900’s, that country had
managed to quell severe alcohol problems with a comprehensive tax and license system. In 1933,
this was one of the models used by Fosdick and Scott to develop their recommendations. But, over
50-60 years, the United Kingdom deregulated alcohol to the point where all forms of alcohol are
sold 24 hours a day, seven days a week. Their market is dominated by large retailers who
aggressively promote cheap alcohol in an overstimulated market. As alcohol was gradually
deregulated in the UK, problems increased. Their rates of underage drinking are approximately
twice ours and their hospital admissions for liver disease and acute intoxication have doubled in just
ten years. They have one of the highest rates of alcohol consumption in the world. In contrast, the
US ranks 27th compared to a list of 43 countries… well below such countries as France, Spain and
Germany. (6)
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A review of Kentucky’s legislative history supports my opinion that KRS 243.230(5) and 804
KAR 4:270 represent a key element of the alcohol regulatory system adopted from the beginning. In
1933, Governor Laffoon appointed the “Kentucky Liquor Control Committee” and charged them to
study the “conditions resulting from the repeal of the Eighteenth Amendment and recommending
legislation to meet those conditions.” (7) This was a particularly difficult task as the Seventh
Amendment to the Kentucky Constitution (Ky. Const. Section. 226a) prohibited the “manufacture,
sale or transportation of spirituous, vinous, malt or other intoxicating liquors, except for
sacramental, medicinal, scientific or mechanical purposes…” Further, a state law, known as the
Rash-Gullion Act, provided for enforcement of the Seventh Amendment. The Committee was
divided on how to handle this dilemma and, thus, produced two sets of statutory proposals.
Nevertheless, they were united on the idea that distilled spirits was the most serious problem and
needed to be more tightly regulated. And both took the tact of considering beer and light wine as
“non-intoxicating.”
The majority report “Conclusion” section notes that the committee “has addressed itself to
what it considered the central problem, that is, the consumption of liquor for beverage purposes.”
(7, p. 11) Legislation proposed by the majority focused on permitting liquor consumption in clubs,
hotels and restaurants which the Committee thought would help reduce excessive drinking, “To do
this it is necessary to bring the supply of liquor out into the daylight, where it can be properly
restricted and watched and policed and taxed.” (7, p. 5) Off premise would be allowed in places
where other business was conducted.
The minority adopted the approach of considering beer up to 4% alcohol and wine up to
14% non-intoxicating and provided a regulatory scheme for manufacture and sale of those products.
All other alcohol products would have been illegal under that scheme given the prohibitions in the
Seventh Amendment. The idea of limiting sale of light alcohol beverages to grocery stores and drug
stores is part of the minority report legislation. These were the only places one could obtain an offpremise permit. (7, p. 43) The minority report also clearly states the purpose of legislation. After
acknowledging that legislation will not cure or prevent all the problems of alcohol, “Legislation,
however may mitigate them and should be for the benefit of society, not in the interest of those
who pursue the traffic. Temperance should be promoted wherever possible by removing the
temptation to over-indulgence. The use of beverage, such as beer and wine of lesser alcoholic
content, than ardent spirits should be encouraged. To this end, light wines and beer should be
defined as non-intoxicating.” (7, p.13)
In 1934, the Kentucky legislature repealed the Rash-Gullion Act and passed an alcoholic
control act as a stop gap measure until the Constitutional Amendment could be repealed, which
occurred in 1935. Finally, in 1938, an Alcoholic Beverage Control Law was passed that continued the
principle of not permitting high alcohol content beverages to be sold in grocery stores or gas
stations.(8) Those places were reserved for the sale of light alcohol products. 1938 Ky. Acts Article
II, Section 54-(8) states “No Retailer Package License or Retail Drink License shall be issued for any
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premises used as or in connection with the operation of a grocery store or filling stations. ‘Grocery
Store’ shall be construed to mean any business enterprise in which a substantial part of the
commercial transaction consists of selling at retail products commonly classified as staple groceries.
‘Filling Station’ shall be construed to mean any business enterprise in which a substantial part of the
commercial transactions consists of selling gasoline and lubricating oil at retail.” (8)
As this history reveals, Kentucky chose the license system of alcohol regulation along with
allowing local communities to prohibit some or all alcohol sales. For retail sales, two basic licenses
are offered: a generic malt beverage license and a distilled spirits and wine license for package
liquor stores. While malt beverage licenses are readily available, a quota system exists for package
store licenses. The reference in the statute to places with a substantial business in “staple
groceries” is merely a practical way to define grocery/convenience stores. Since the idea is to make
“light beverages” more available, licensing grocery stores for this purpose is a very practical way to
ensure that most communities have access to these beverages. The prohibition for gas stations as
places to sell spirits and wine is a common practice among states operating both as a deterrent to
drinking and driving and to limit availability.
In my opinion, Kentucky’s alcohol control system is highly effective in its objective to
mitigate problems. Kentucky has some of the lowest rates of consumption, binge drinking, drunk
driving and alcohol dependency in the nation. Nationally, 52% of those over 12 report drinking in
the past 30 days. That compares with 39% in Kentucky. Likewise rates of binge drinking (24% U.S. v.
20% Kentucky), underage drinking (27% U.S. v. 24% Kentucky) and underage binge drinking (18%
U.S. v. 16% Kentucky) are all lower than the U.S. average based on estimates for 2009. Kentucky ties
with Utah for the lowest rate of alcohol dependence and abuse. (9) Mothers Against Drunk Driving
ranks Kentucky second best in the nation with regard to drunk driving prevention/reduction. (10)
This is a sterling record that protects children, saves lives and jobs and reduces costs for the
Kentucky taxpayer.
2.
In my opinion, U.S. alcohol control systems—including Kentucky’s system—are effective in
reducing consumption and attendant problems by limiting availability, curtailing promotions,
controlling dangerous products, balancing prices, and restricting sales to minors/intoxicated
persons. It is important to recognize that these regulations work together to achieve their
aims. Support for this opinion comes from scientific research including the World Health
Organization which recommends that alcohol strategies “…have the greatest potential to be
effective when prior scientific evidence is utilized and multiple policies are implemented in a
systematic way. Complementary system strategies that seek to restructure the total drinking
environment are more likely to be effective than single strategies.” (11, p. 12)
To understand how alcohol regulation works it is important to realize that several
common business practices—perfectly legitimate for other commodities—can create social
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problems. For example, it is a common business practice to focus sales efforts on your “best
customers”, i.e. those who buy the most of your product. Unfortunately for alcohol, those who
buy the most alcohol include underage drinkers, alcohol abusers and alcoholics. For that
reason, common methods to enlarge the “best customer” category are to be discouraged. Such
common inducements include temporary price reductions to promote high volume purchase,
discounts for frequent purchasers, and marketing to new generations of customers (youth).
Alcohol regulations focus on the “Four P’s of Marketing—Price, Place, Product and Promotion.”
They also have special regulations for high risk groups, particularly underage youth and
intoxicated persons. A review of each element is warranted along with any evidence of
effectiveness.

Price: Study after study has confirmed that price is an exceptionally strong control over alcohol
consumption and problems. Alexander C. Wagenaar, Professor at the University of Florida
College of Medicine, is a prominent scholar on this subject. After reviewing 112 studies,
Wagenaar stated, “Our meta-analysis cumulated information from all the published scientific
research on this topic over the past half century, and results clearly show increasing the price of
alcohol will result in significant reductions in many of the undesirable outcomes associated
with drinking." (12) Alcohol control systems keep prices from becoming too cheap by levying
taxes, instituting price policies which curtail price competition. Such policies include a
requirement that wholesalers sell at the same price to all retailers, prohibiting “sale below cost”
or prohibiting volume discounts. Kentucky levies both an excise and sales tax on alcohol and
prohibits alcohol sales below cost. All of these measures keep prices from increasing
consumption.

Place: The availability of alcohol is reduced by limiting the number of alcohol outlets and the
hours and days of sale. Recently, the Centers for Disease Control and Prevention’s Task Force
on Community Preventive Services recommended “the use of regulatory authority (e.g.,
through licensing and zoning) to limit alcohol outlet density on the basis of sufficient
evidence of a positive association between outlet density and excessive alcohol
consumption and related harms.” (13)
Kentucky’s alcohol control system relies heavily on
limiting availability. This is done by allowing communities to prohibit or severely limit alcohol
sales; by a quota on the number of package store outlets; and, by limiting the hours of sale.

Product: Most states, including Kentucky, recognize that some alcohol products are more
dangerous than others due to their higher alcohol content. Some ban the most dangerous
products such as 190 proof grain alcohol. Most states, including Kentucky, require higher
alcohol content products to be sold in “package” or liquor stores with greater restrictions. In
other countries, it is common to tax high alcohol content products at a higher rate. The strategy
of making products of higher alcohol content less available is recommended as an effective
strategy by an international collection of scholars in the book, Alcohol No Ordinary
Commodity, Research and Public Policy. (14, p. 249)
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
Promotions: Many states ban promotions such as selling below cost, using coupons for alcohol
or reducing prices for high volume purchase. All of these practices lower the price. As noted
above, pricing studies indicate that lower prices induce increased consumption. According to
the World Health Organization, “These kinds of studies strongly indicate that heavy and
dependent drinkers are at least as responsive to alcohol price increases as are more moderate
consumers, and furthermore, that price increases via excise duties on alcohol beverages have
a particular effect in reducing youthful drinking.” (11, p. 7)
3. In my opinion, elimination of KRS 243.230(5) and 804 KAR 4:270 would increase the
availability and decrease controls over a more dangerous product. This will likely create
more social problems for Kentucky. Of particular concern is underage drinking because
youth are increasingly switching to a preference for spirits.
A review of the strength of different alcohol products helps illustrate the common sense
notion that greater controls are needed for products that are potentially more dangerous.
According to the National Institute on Alcohol Abuse and Alcoholism (15), these are the typical
alcohol content measures of beer, wine and hard liquor products based on “standard drink size”
equivalents:
Beer (12 oz)
Malt Liquor (8-9 oz)
Table wine (5 oz)
Fortified wine (3-4 oz)
Liqueur (2-3 oz)
Brandy (1.5 oz)
Hard Liquor (1.5 oz)
5%
7%
12%
17%
24%
40%
40%
While the most common beer products are sold in 12 oz, single serving sizes, other
products are not. Therefore, it is easy to misjudge the amount of consumption and more
difficult for an individual to manage his or her drinking. There is evidence that products are
often “over-poured,” which means the drinker thinks they are consuming one standard drink
when they are getting more. This idea was tested in Scotland where a sample of the population
was asked to pour their “usual drink of wine, and then spirit, into a glass.” Among drinkers, the
mean amount of alcohol poured for “one drink” was 1.92 and for spirits it was 2.3 standard UK
drink units. (16)
While 1.5 oz of spirits is considered a standard drink, as a liquor regulator I became
keenly aware of the popularity of multi-shot drinks. For example, one of the common drinks is a
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Long Island Iced Tea. This is served in a single drink container but typically has 3-5 shots. This
means someone is drinking the equivalent of 3-5 standard drinks. Often bars that were cited for
patron violence or disturbances were serving multi-shot drinks late into the night at decreased
prices. We typically required that they stop selling these drinks until they were able to assure us
that the premise was under control. Ultimately, we banned these kinds of drink specials after
midnight when most of the problems occurred.
In recognition that wine and spirits are products of higher alcohol content and, thus,
potentially more dangerous, Kentucky has several additional controls for package store
licensees. Those under 21 are generally not permitted to be in the store at all and clerks must
be at least 20 years old. Grocery stores and gasoline stations do not have age restrictions for
patrons. KRS 244.087 does allow an underage clerk to handle beer but not to actually make the
sale. Local communities may adopt more restrictive closing hours for package stores than are
permitted by state statute. There are quotas for package store licenses that limit availability,
but not for malt beverage licenses. In my opinion, these controls and limits have contributed to
Kentucky’s success in achieving low rates of consumption and binge drinking. And, they act as a
deterrent to underage sales. In my capacity as director of a control state system, I managed 240
liquor stores. I don’t recall ever seeing an underage person in a store. I have seen youth in
grocery stores and quite frequently in convenience stores. These later locations present a
substantial vulnerability to underage sales.
There is now evidence that the underage drinker has switched from a preference for
beer to a preference for spirits. In 2010, an analysis was performed using 2007 data from the
national Youth Risk Behavior Survey in eight states. They found that “Liquor was the strongly
preferred alcoholic beverage of choice (43.8%), followed by beer (19.2%) and malt beverages
(17.4%). (17) In a comprehensive study of teen culture, funded by The Century Council, the
authors found that “Teens tend to drink whatever alcohol is available. Their preference is
liquor, particularly vodka, because it can be mixed with juice and has its effect more quickly.”
(18, p. iii) As the CDC’s Community Guide website reports, “People aged 12 to 20 years drink
11% of all alcohol consumed in the United States. More than 90% of this alcohol is consumed in
the form of binge drinks.”
In my opinion, allowing wine and spirits in grocery stores and gasoline stations will
increase problems with underage drinking and adult consumption. These places lack the
controls on outlet density, hours of sale and patron and clerk age restrictions. Distilled spirits
would become substantially more available just at a time when youth are switching their
preference to spirits. Compliance check programs sometimes show that liquor stores and
convenience stores sell to an underage decoy at the same rates. However, these compliance
checks do not test the deterrent effect. They test the performance of the licensed
establishment in their duty to avoid sales to minors. My experience as a liquor regulator who
conducted many compliance checks is that store performance is contingent on management
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training and supervision of clerks as well as frequency of compliance checks. Licensees with the
best performance have clear company policies about sales to minors, train their employees well,
regularly reinforce the policies and conduct internal tests to ensure clerks do their jobs properly.
While youth often get alcohol from non-commercial sources, it is exceptionally important that
our licensees do not sell to minors. It cuts off a source of supply and it sends the message to our
youth that we care about them and are serious about reducing underage drinking.
It should be noted that the clerk’s job is not easy. They must be able to judge age and
identification of age, recognize alcohol products, review and analyze identification and
sometimes withstand intimidation from aggressive customers. There is an increasing array of
alcohol products that are not packaged in the traditional way such as alcohol energy drinks,
alcohol tea drinks, sparkling sake, and wine in soft packages. Many clerks have mistaken these
drinks for non-alcohol products. To dramatically increase the types of alcohol products in
poorly controlled grocery and gasoline station environments will make that job much more
difficult.
Finally, there is the issue of self-service check-outs. In my opinion, self-service stations
are not practical for selling alcohol. Most modern supermarkets use self-service and rely on a
protocol that requires a clerk to check ID when alcohol is sold. As two California studies reveal,
this protocol doesn’t always work (19). Clerks are often busy or distracted and youth have been
able to fool machines by swiping a package of soft drinks or similar non-alcohol product and
then substituting alcohol. Moreover, it seems unlikely that these systems can be used to
prevent sales to intoxicated persons which are illegal in most states. This really requires a
certain amount of close-up human interaction. Such interaction is not likely to occur in selfservice. Recently, the California legislature passed a bill to outlaw self-service alcohol sales. The
bill, currently awaiting the Governor’s signature, has a broad coalition of support including
MADD, police chiefs and faith community members.
4. In my opinion, modern retail market trends pose special problems for alcohol control and,
permitting the sale of wine and spirits in grocery and convenience stores associated with gasoline
stations will exacerbate problems.
Today’s grocery marketplace is extremely competitive and relies on high volume sales
for profits. Since the recent recession began, the market has become even more competitive
with shoppers now going to 2-3 stores to find the lowest prices. Of particular concern for
alcohol is the increasing dominance of the “big box” supermarket. These large grocers do not
make their profit on “mark-up.” According to the Food Marketing Institute (FMI), “The intense
competition among food retailers for the consumer dollar is best demonstrated by profit
margins that continue to be less than 2 cents on each dollar of sales.” (20) They explain that
supermarkets count on selling in high volume to survive: “To earn a dollar, supermarkets would
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rather sell a $1 item 100 times, making a penny on each sale, than 10 times with a dime markup.
Low markup to stimulate high volume is the fundamental principle of mass merchandising,
which the supermarket industry introduced to the marketplace in the 1930’s.” (20)
If grocery stores and gasoline stations were permitted to sell wine and spirits, the
availability of all forms of alcohol in poorly controlled environments would be dramatically
increased. In addition, it would likely create a market scenario where prices are reduced. Large
global grocery chains, such as Wal-Mart, Costco, Kroger, have significant purchasing power and
major advertising budgets. This would allow them to undercut others by using “loss leaders” or
sale just above cost and other promotional price mechanisms to bring shoppers in the door.
“Mom and pop” grocers may not have the wherewithal to create this benefit for themselves,
but no distinction in size is made by the Plaintiffs in this action. Given that price is the most
powerful driver of alcohol consumption, Kentucky’s consumption rates would likely rise. In
addition, some of the current package store licensees would likely fail as they could not
compete on price or promotion. Our alcohol regulatory systems were specifically designed to
prevent these kinds of sales tactics that would result in decreased prices and price wars.
In my recent experience, the public understands the concern about making high alcoholcontent products more available. According to Steve Gross, State Relations Manager for The
Wine Institute, the last state to open their food stores to wine was Iowa in 1983. (21) Several
states have seen measures to add wine defeated including Colorado, Massachusetts, Tennessee,
New York, Kentucky and Kansas. Other states have faced privatization efforts which would put
wine and spirits in private stores including grocery stores. For several years, I worked as a
technical expert with the alcohol abuse prevention community in Washington State. Recently, a
ballot measure sponsored by Costco would have allowed any off-premise beer and wine
licensee to sell spirits. The measure was defeated in large part because the public feared that
increased outlets would lead to more underage drinking and other public safety problems. A
random sample survey conducted right after that defeat found Washington citizens quite
satisfied with their current system and felt that the number of liquor store outlets was about
right. Virginia and Pennsylvania had legislative privatization measures that did not get
anywhere.
5. In my opinion, Kentucky is well justified in having comprehensive controls over a product
which creates considerable harm and cost to the public.
Each year alcohol claims an estimated 79,000 lives in our country. It is the third leading lifestylerelated cause of death, meaning they could have been prevented. In 2005, 1.6 million
hospitalizations and 4 million emergency room visits occurred due to alcohol. (22) To put these
figures in perspective, slightly over 6,000 lives have been lost in the Iraq and Afghanistan wars
and an estimated 3,000 people die each year due to food borne illness. (22)
13
Alcohol is related to crime and other social problems. Alcohol was a factor in
19-37% of violent crimes during 1997-2008 and alcohol related crimes were more likely
to result in injury and involve intimates than other types of violence. (23) While underage
drinking has dropped in recent years, 27% of 12 graders reported being drunk in the past
30 days (24). Youth who drink regularly are more likely to experience a host of problems
including failing grades, criminal involvement, traffic crashes, unwanted sex and damage
to their developing brain. (22) Problems with alcohol touch many Americans. When asked
in a Gallup poll, “Has drinking ever been a cause of trouble in your family?” 31% said “Yes.” (25)
While Kentucky has lower rates of binge, heavy and underage drinking than the national
average, alcohol harm still costs Kentucky citizens dearly. According to the Pacific Institute for
Research and Evaluation, the cost of underage drinking in Kentucky alone was $752 million in
2007. This included medical, work lost and pain and suffering costs. There were substantial
harms related to traffic fatalities and injuries, violent and property crimes, teen pregnancies and
risky sexual acts. (26)
Conclusions: Based on my professional experience, study of relevant research, and review of
historical documents, I have reached the following conclusions:
1.
Kentucky’s decision to treat the retail sales of malt beverages differently from wine and spirits
was a very reasonable decision based on study of other countries’ experience. This strategy is
widely used throughout the United States and other countries and its effectiveness in curtailing
excessive drinking is confirmed by modern research.
2. Kentucky’s purpose in making malt beverage more available and wine/spirits less available was
to reduce excess consumption and foster moderation. Because excess consumption leads to
public health and safety problems this is an extremely important public policy goal. Kentucky
has not wavered in its dedication to this strategy and its public policy goal. This strategy in
concert with other regulatory provisions has been responsible for one of the best records of
alcohol control in the United States.
3. Removal of a key regulation, specifically KRS 234.230-(5) and 804 KAR 4:270, from a system of
alcohol control will create a domino effect that will likely lead to increased consumption, greater
underage drinking and further social problems due to alcohol.
4. There is no evidence that public convenience or public support compels a need to change KRS.
243.230-(5) and 804 KAR 4:270. A majority of Kentucky’s citizens do not drink alcohol and, thus,
do not require greater convenience. Those who do drink consume it at rates below the national
average suggesting that additional convenience is not worth the trade-offs in social problems.
5. Allowing grocery stores and gasoline stations to sell alcohol will increase availability particularly
for underage drinkers. The research shows that youth prefer distilled spirits due to the ability to
14
get intoxicated more quickly. When spirits are more available, that is the drink they will select.
It is unwise to risk additional harm to Kentucky’s youth by making dangerous products more
accessible.
These conclusions are based on the research and information I have reviewed. I reserve
the right to re-address and potentially change my conclusions in the event that additional
information is obtained or reviewed.
__________________________________________
Pamela S. Erickson
President/CEO Public Action Management, PLC
15
APPENDIX A
Witness Qualifications for:
Pamela S. Erickson
President/CEO
Public Action Management, PLC
P. O Box 4364
Scottsdale, Arizona 85261
(503) 936-0443
www.pamaction.com
www.healthyalcoholmarket.com
Experience:
2007 to present: President, Public Action Management, PLC
Business dedicated to addressing alcohol problems through public
education and public policy development. Projects include:




Designed and, currently manage, national educational campaign to
educate policy makers about alcohol marketplace regulation. Includes
monthly newsletter and website with extensive educational materials:
healthyalcoholmarket.com.
Produced and published three reports: “The Danger of Alcohol
Deregulation, the United Kingdom Experience,” “The High Cost of
Cheap Alcohol,” and “2012 Issue Briefs for States”
Frequent presentations to national conferences on regulation topics as
well as media
Work with over ten states on alcohol regulation including expert
testimony to legislative committees, public speaking, assisting with
customized educational pieces and work with local coalitions.
2003 to June 2007: Advocacy Director, Oregon Partnership
Oregon Partnership is a statewide non-profit dedicated to alcohol and
drug abuse prevention and referral.


Designed and directed “Face it Parents”, Oregon’s statewide media
campaign designed to reduce underage drinking.
Created Leadership for Alcohol Free Kids, a statewide task force that
developed recommendations for Governor Kulongoski. Governor
accepted and implemented many recommendations.
16



Developed program that changed national alcohol advertising and
retailing practices. Used a system of “Action Alerts”, a national email
network, and media relations to call attention to products that
encouraged teens to drink heavily. Several retailers, including Macy’s
and Kohl’s, removed products from their stores. Others dropped sale
of t-shirts encouraging underage drinking.
Obtained grant funds to run two large media campaigns aimed at
reducing underage drinking. Developed media partnerships with radio
and TV companies that resulted in large pro-bono match for small
expenditures in advertising. Acted as media spokesperson on youth
substance abuse.
Developed statewide youth action program to engage youth to write
and voice radio and TV ads for media campaign. TV ad received
regional “Youth Emmy” award.
1996-2003: Executive Director, Oregon Liquor Control Commission,
Portland, OR
Oregon Liquor Control Commission is the state alcohol regulatory
agency for Oregon which includes a state controlled distilled spirits
wholesale and retail business.





Transformed antiquated bureaucracy into a high performing, results
oriented organization through strategic planning, stakeholder
involvement and team building.
Completely modernized the distilled spirits business. Developed
business plan with social responsibility and service ethic. Replaced all
warehouse equipment using manual forms to scanning technology
using bar codes. Upgraded retail stores by focusing on store
appearance, location and customer service. Added stores for first time
in 20 years.
Managed large agency of over 450 employees/contractors and a $250
million annual budget. Operation included 240 retail stores, a
wholesale distribution center, 10,000 liquor licensees, and 24,000
alcohol server permittees. Initiated complete review of enforcement
operations to focus on evidence-based practices including minor
decoy operations and other measures to reduce illegal sales of alcohol
to minors.
Created citizen/stakeholder task forces to propose major changes in
rules and laws.
Chaired Oregon Coalition to Reduce Underage Drinking, a Robert
Wood Johnson Foundation funded coalition dedicated to reduction of
underage drinking.
17
1991-1996: Planning Manager, METRO/Metropolitan
Exposition-Recreation Commission, Portland, OR
METRO is Portland’s regional government.




Produced business plan for four large facilities (convention center,
exposition center, stadium, basketball arena) Each plan used a
citizens’ committee to review and support business plan efforts
Conducted extensive financial analysis of each facility to find
additional revenue and areas for cost reduction.
Initiated Portland’s first sports marketing organization. Created a
citizens’ committee to shepherd its development into a non-profit
aimed at attracting major sporting events to the community. It has
since enjoyed many years of success.
Managed citizen committees to plan a convention center expansion
(now complete) and develop revenue sources for support of large
facilities, sports and art programs
1984-1991: Assistant Administrator (major department head)
Oregon Employment Division, Salem, OR
Oregon Employment Division is a state agency managing
Unemployment Insurance and statewide job placement.





Created new management structure for Administrative Hearings Unit
and restored its reputation for fairness. Invited to join faculty of
National Judicial College. Taught class on Administrative Law, High
Volume Proceedings.
Efficiently managed 25 lawyers who conducted 10,000 hearings per
year.
Directed Field Operations Division consisting of 30 local offices and
900 employees.
Created public-private partnerships to raise private dollars for Oregon
Youth Conservation Corps.
Did extensive public speaking to raise money for youth corps
environmental projects.
Positions prior to 1984:
Deputy Administrator Oregon State Wage and Hour Division
Deputy Administrator Oregon Criminal Justice Commission
Research Analyst, National Institute of Law Enforcement and
Criminal Justice, Washington, D.C.
Research Staff, The Urban Institute, Washington, D.C.
Deputy Sheriff, Multnomah County, Oregon
18
Education:


B.A. Portland State University, Political Science (With Honors)
M.A. Georgetown University, Government/Public Administration
(Honor Society)
Publications:
“The Danger of Alcohol Deregulation: The United Kingdom Experience”
(Published by the Center for Alcohol Policy, 2009).
“2011 Issue Briefs for States, Brief Explanations of Common Alcohol
Regulatory Issues Facing State and local Communities,” January, 2011.
“The High Cost of Cheap Alcohol,” April 2011.
“Campaign for a Healthy Alcohol Market Newsletter,” 27 editions,
September 2008 through September 2011 available at
www.healthyalcoholmarket.com.
“Police Women on Patrol”, with Peter Bloch and Deborah Anderson
(authored under former name of Pamela Gervais), The Urban Institute,
1973.
Presentations/Testimony:
1.
“Preserving a Healthy Alcohol Marketplace: Why can’t we sell alcohol like tires
and mayonnaise?” Basic presentation customized and presented to:
 Oregon prevention, enforcement and moderation groups-2008
 Washington prevention and moderation groups-2008
 NABCA Board of Directors, January 2009
 NABCA Legal Symposium, March 2009
 NCSLA Annual Conference, June 2009
 Indiana Legislative Committee, September 2009
 American Public Health Association Annual Conference, November
2009
 Wine and Spirits Wholesalers Association State Policy Conference,
Dec. 2009
 Tennessee Legislative Committee, December 2009
 Oregon Webinar for prevention specialists, April 2010
 Kansas Legislative Committee, March 2010
 Illinois Beer Distributors, Feb. 2010
 Montana Legislative Committee, April 2010
 National Leadership Conference, Enforcing Underage Drinking Laws,
August 2010
2. “The Danger of Alcohol Deregulation: The United Kingdom Experience,” Basic
presentation customized and presented to:




NBWA Annual Convention: September 2009
Western States NCSLA Conference: September 2009
Webinar for Arizona prevention specialists: October 2009
Center for Alcohol Policy Law Symposium, October 2009
19



Beer Industry League of Louisiana, July 2010
Center for Alcohol Policy, national webinar, November 2010
Alcohol Policy 15 (World alcohol policy conference), December 2010
3. “The High Cost of Cheap Alcohol,” Basic presentation customized and presented
to:


Western/Central States NCSLA, October 2010
National Leadership Conference, Enforcing Underage Drinking Laws,
August 2011
4. “The Important Role of Tied House Laws in Today’s Market,” NABCA
Administrators’ Conference, October 2010
5. “24/7 Openings: Panacea or Curse?” NABCA Legal Symposium, March 2011
6. “Lies, Damned Lies and Statistics…so what are they good for?” NCSLA Annual
Conference, June 2011
7. “How Control Systems Address Public Health Concerns,” Center for Alcohol
Policy Alcohol Law Conference, October 2011.
8. Congressional Testimony: “The Danger of Alcohol Deregulation: The United
Kingdom Experience”, oral and written testimony
 Written Statement of Pamela S. Erickson,
Chief Executive Officer, Public Action Management, Scottsdale, Arizona to the
Subcommittee on Courts and Competition Policy, Committee on the Judiciary
House of Representatives, US Congress, Hearing on: “Legal Issues Concerning
State Alcohol Regulation” March 18, 2010

Additional Statement Regarding Court Decisions Which Adversely
Impacts State’s Ability to Regulate Alcohol, By Pamela S. Erickson,
Chief Executive Officer, Public Action Management, Scottsdale, Arizona to the
Subcommittee on Courts and Competition Policy, Committee on the Judiciary
House of Representatives, US Congress Hearing on: “Legal Issues Concerning
State Alcohol Regulation” March 18, 2010
9. Affidavit of Pamela S. Erickson, In the United States District Court for the
Northern District of Illinois Eastern Division, Anheuser-Busch, Inc. et al., v.
Stephen B. Schnorf, et al., Case No: 10-CV-01601, May 2010.
20
APPENDIX B--ENDNOTES
(1) “The Origins of the Washington State Liquor Control Board, 1934”, By Rorabaugh,
W. J., Pacific Northwest Quarterly, Fall 2009.Guide to Community Preventive
Services.
(2) Toward Liquor Control, by Fosdick, R.D. and Scott, A.L, originally published in 1933,
reissued by Center for Alcohol Policy, 2011.
(3) Commonwealth of Kentucky, Department of Alcohol Beverage Control website
www.abc.ky.gov.
(4) Centers for Disease Control and Prevention, “Apparent Consumption in the US,
1850-2006.”
(5) “The Danger of Alcohol Deregulation: The United Kingdom Experience,” by Pamela
S. Erickson, www.healthyalcoholmarket.com.
(6) WHO Global Data Base, 2003.
(7) Kentucky Liquor Control Committee, “Report of the Liquor Control Committee
appointed by the Governor of the Commonwealth of Kentucky, Together with a
Minority Report and Drafts of Two Bills,” January 27, 1933
(8) 1938 Kentucky Acts, Article II, Section 54 (8)
(9) Source: SAMHSA, Center for Behavioral Health Statistics and Quality, NSDUH, 2008
and 2009.
(10)MADD state rankings are available at www.MADD.org
(11)“What are the most effective and cost-effective interventions in alcohol control?”
World Health Organization, February 2004
(12)“Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003
estimates from 112 studies,” by Alexander C. Wagenaar, Matthew J. Salois & Kelli A.
Komro; University of Florida, College of Medicine, Department of Epidemiology and
Health Policy Research, Gainesville, FL, USA.
(13)Preventing excessive alcohol consumption: regulation of alcohol outlet density.
www.thecommunityguide.org/alcohol/outletdensity.html
(14) “Alcohol, No Ordinary Commodity”, Second Edition, Thomas Babour et al,
(15) “Rethinking Drinking, Alcohol and your Health,” Research-based information from
the National Institutes of Health, U.S. Department of Health and Human Services,
available online at rethinkingdrinking. niaaa.nih.gov.
(16) ”Variation in the alcohol content of a ‘drink’ of wine and spirit poured by a sample
of the Scottish population,” by Jan S. Gill and Marie Donaghy, Health Education
Research, (2004) available on-line at her.oxfordjournals.org.
(17)”Competition and Profit,” Food Marketing Institute, Web site PDF
(18)“Alcoholic Beverage Preferences and Associated Drinking Patterns and Risk
Behaviors among High School Youth,” Michael B. Siegel et al, American Journal of
Preventive Medicine, April 2011.
(19)“Final Report, Understanding Teen Drinking Cultures in America,” David S. Anderson
et al, George Mason University, 2010.
(20)“Self-checkout: Is it Reliable for Selling Alcohol?” Community Economic
Development Clinic at the University of California, Los Angeles, Los Angeles Alliance
for a New Economy. And “Self-Checkout supermarket Lanes: A Potential Source of
21
Alcohol for Minors,” by John D. Clapp and Brandi Martell, San Diego State
University , Center for Alcohol and Drug Studies. Health Behaviors of Adults: United
States, 2005-2007, Centers for Disease Control and Prevention.
(21)“Should Wine be Sold in Supermarkets,” by Matthew Daneman, USA Today, March
2, 2009.
(22)Centers for Disease Control and Prevention website (www.cdc.gov/alcohol ),
“Alcohol and Public Health,” estimate of deaths uses the Alcohol –Related Disease
Impact (ARDI) tool from 2001-2005. Estimates of foodborne illness from website
article, “Estimates of Foodborne Illness in the United State.”
www.cdc.gov/foodborneburden/.
(23)“Alcohol and Crime: Data from 2002 to 2008”, by Michael R. Rand, William J. Sabol,
Ph.D., Michael Sinclair, Howard N. Snyder, Bureau of Justice Statistics
websitewww.bjs.ojp.usdoj.gov.
(24)"Marijuana use is rising; ecstasy use is beginning to rise; and alcohol use is declining
among U.S. teens." By Johnston, L. D., O'Malley, P. M., Bachman, J. G., &
Schulenberg, J. E. (December 14, 2010). University of Michigan News Service: Ann
Arbor, MI. Retrieved MM/DD/YYYY from http://www.monitoringthefuture.org
(25)Sourcebook of Criminal Justice Statistics Online,www.albany.edu/sourcebook/pdf
(26)“Underage Drinking in Kentucky, The Facts,” Produced by the Pacific Institute for
Research and Evaluation (PIRE) with funding from the Office of Juvenile Justice and
Delinquency Prevention (OJJDP) November 2009.
22