Friday, September 23, 2016

Good ol' boys instead of real businessmen

In their continuing effort to change as little as possible (unless forced to by the threat of privatization), the PLCB appointed a bureaucrat lifer with no real world business experience to...ahem...lead them for the next two years (or until Wolf leaves office, whichever comes first). Charles Mooney, newly appointed as the PLCB's COO in July has been named the new Executive Director ("please don't call it CEO, we had one of those"), replacing John Metzger. With 37 years at the PLCB, you know he doesn't have an original idea in him; they've all leaked away years ago.

While the press release makes it sound like he was responsible for all improvement in the last decade, he was also around to agree with the wine kiosk debacle. Perhaps he will claim credit for the year it took to move the Mountaintop store 50 feet and the five years it took to put a store back in Renovo. He should also claim going against the wishes of the citizens in Lewisburg and Lock Haven.

In reality, as recently as 2013 be wasn't even listed as a Director in the PLCB Annual Report for 2012-2013. In fact, the only reason he even was promoted in FY 2013-2014 was that Jim Short (Director of Marketing and Merchandising) was found guilty of taking bribes. Dale Horst (Director of Retail Operations) moved over to that position (even though he had zero experience in marketing), and that left his position open. Just one more chance to get qualified people in the agency, ignored by the puppets on the Board. I guess they needed a "Yes" man instead of a business man.

Now that the PLCB has some breathing room thanks to McIlhinney's Mistake, the "Four Bottle Folly", the PLCB can go back to doing what they do best: as little as possible.

They certainly won't make things more convenient for the consumer (756 stores in 1973, 603 now, a 25% reduction); not using their buying power to keep prices down (as reported here and here). What they will be doing is using "variable pricing" to actually raise prices (as I noted here and here), and generally screwing the populace in order to keep themselves afloat (remember, they still owe almost $240 million and who do you think has to pay for that?)

A PLCB insider who hasn't done anything that isn't 50 years behind what the private sector has been doing is not an improvement. Privatize and rid ourselves of this fiasco of a business and fake business people.

Monday, September 19, 2016

Why the PLCB should follow the law, not "interpret" it

If the PLCB were a private citizen, it would most likely be in jail. It does things that the people — through their representatives in the legislature — never approved. It willingly and repeatedly violates the law, and consistently goes against one of the very foundations of English and American law: "Everything which is not forbidden is allowed." Also stated as "no crime without law," this is an essential freedom of the ordinary citizen. The PLCB, on the other hand, seems to work on the opposite idea, that "all that is not expressly permitted is forbidden." Sorta like North Korea.

Are they making broad interpretations of the laws for the benefit of the citizens? Good intentions are not an excuse for breaking the law. Never have been. The laws are for everybody, they don't say "except for when the PLCB wants to save us from ourselves" anywhere.  Let's take a look at some of the legal and common sense violations they are a party to.

Just this past week Giovanni's Pizza & Pasta, in Dormont, PA was trying to comply with all the written legal requirements so that they could deliver wine. But the PLCB isn't interested in just the legal requirements; their requirements have to be met as well. What are those requirements? They won't say. "That's a matter that is under review for consideration by our attorneys and our board. There's nothing in Act 39 that says it's illegal, but Act 39 did impose certain conditions that need to be met. We don't have a determination on that matter yet." - Elizabeth Brassell, director of communications for the Pennsylvania Liquor Control Board (emphasis added).

I'm sure we all remember the magic 12 pack case where they "interpreted" that a "case or original container" could mean a 12-pack, even though a case had been a case (and an "original container" had been ONE original container, not a pack of  12 of them) for as long as anyone could remember. How many times in the past 80 years had they refused to consider that?  More than we will ever know.

Why was the new interpretation suddenly different? No one knows. Of course there are the infamous Wine Kiosks that were never checked to see if they complied with federal law, The PLCB just didn't bother and really didn't seem to care in that case. Even after they were called out on it they still didn't check.

While moot now, state law did say that only 25% of State Stores could be open on Sunday. Since they don't care what the law says, the PLCB was about 18 stores over the limit when Act 39 took place, allowing more stores to open. They obviously didn't care about a legal limit that was written to apply specifically to them!

How about the ever-changing beer at gas stations gymnastics? "You can't sell beer at the same location where you sell gas, period, that's the law! Well, unless the property is actually next door. Oh, and they can't have an interior connection...unless we say it's OK, in which case, that's fine, for that one licensee, not for anyone else."

That's contrary to what the Liquor Code explicitly says: "No license shall be transferred to any place or property upon which is located as a business the sale of liquid fuels and oil." But according to the PLCB, if you have a business that sells gas and you build another store next to it, and then attach them together (and they are owned by the same company), it isn't a continuation of the original gas selling business. If not, then why do they have an interior connection? Common sense was never a PLCB strong point.

One of my favorites in the "Do as I say not as I do" category is that a licensee of one class can't provide anything of value to another class of licensee. So as a distributor you couldn't help a restaurant with how to display their beer selection for example. However, the PLCB has outside representatives that come in all the time to set up advertising displays in their stores, and hires outside companies to do the sets* in the stores too. But then there are no requirements for State Stores either. We shouldn't expect them to know how to stock shelves and sell things - should we?

Maybe if the PLCB just regulated and didn't run a half-assed retail booze monopoly, they would be able to do at least one thing well. I doubt it, but I'd like to find out.


* A 'set' is where every bottle goes and in what order they should be on the shelves. These are the people that decided to not have the 1.5L sizes next to the standard 750ML sizes of the same wine but to group all the 1.5L bottles together.  The same ones that destroyed the standard "top shelf" setup that liquor had been using for almost 100 years.  Of course, no place except PA state stores do this.

Wednesday, September 7, 2016

PLCB financials 2016. How'd I do?

In a surprise move showing more competence than....well...then they ever have before, the PLCB released its unaudited financials only 60 days after the end of the fiscal year. Sure beats the 122 days it took last year. I don't know if this is a trend or perhaps an outlier. (It's probably got something to do with no privatization bills currently under consideration in the Legislature. -- Lew)

As always they sent out a press release saying how great it was that a police-enforced monopoly that doesn't allow any competition, with a rising population and increasing prices, had record sales. I always like it when they claim how much they "return" to communities. Communities that would get the fees on their terms and their schedule if the PLCB wasn't mandated to act as the middle man.
And of course the big self-congratulations: "Hey, we collected taxes and turned it in!" Just like thousands of businesses do every year, only they DON'T send out press releases saying LOOK AT ME LOOK AT ME!!

Speaking of press releases, this one said to go to to see the unaudited numbers.  You had to look hard because the link did't take you there! It wasn't found under the financials tab or in annual reports, but in the board meeting minutes. To their credit, they did move it to an easier place to find it when I mentioned it to them. Now if I could only get them to spell Jack Daniel's right...

So what did this really tell us, minus the hype? The big thing I got out of it was that total liabilities went up over $105 million in one jump and for all the crowing about record sales, the $238.7 million they were in the hole last year only went down by about $550,000. That's right: $550 thousand. Chicken feed. And inventory went up 9.4% again, even though the marvelous bailment was supposed to reduce it! It has gone up $70 million in four years, and if it jumps that much again next year, it will be higher than it was before bailment.

Well, how did I do on the predictions?  Let's see.

1. The normal amount of squawking about "record sales and profits" when that isn't going to happen. Collecting taxes is not making a profit even in PLCB Bizarro business world. Of course with a police enforced monopoly, rising prices, and more citizens,  why wouldn't there be record sales? A private system would generate even more sales.
This was really a gimme because we all know they were going to do that. Nailed it!

2. "Record amounts of taxes collected" will be big in PLCB world, but again, with a police-enforced monopoly, rising prices, and more citizens why wouldn't there be?
Again, who are they trying to impress?

3. I predict that "Net Operating Income" will decrease for the third year in a row, even with "record sales."
OK, I'm eating crow on this one.  Surprisingly it went up about 19%.

4. Prediction: "Store, Warehouse, and Transportation Costs" have gone up for the last few years, albeit only 3% last year but I think it will be 5% this year. didn't go up 5%, it went up 8.9%!

5. "Administrative, Alcohol Education, and Support Costs went up over 29% last year and 9% the year before. They will go up again by 8-10% this year.
Of course, the PLCB didn't group these together this year, so I can't compare apples to apples. But Alcohol Education did go up, so even if the others stayed the same, the total went up. I wonder if the education budget is higher then the advertising budget this year? They don't list that, so one never knows. Education is what they should be doing anyway, so after cutting it so much last year, it is good to see it up again.
6. The PLCB finished out last year almost $240,000,000 in the hole. I don't think that is going to change too much so I'll say a slight increase in that number for this fiscal year.
The total change was a whopping $550K. Just what are they doing with these "record sales" anyway?

7. Not really a prediction but an observation. PLCB "profit" return to the General Fund will be less than it was in FY2008 - which has been true for every year since then. Just where does all that record sales money go?
Nailed this one too. 8 years of "record sales" and they still haven't matched 2008.

There you have it for another two months, until the "official" numbers come out and I probe a bit more in depth. What this is really telling you is that take away the taxes, the entire PLCB contribution is 3/10ths of 1% of the budget. What it doesn't tell you is that they are a drag on the economy; always have been, always will be.

Fix that. Privatize.

Wednesday, August 31, 2016

Why the Pittsburgh Water & Sewer Authority is better than the PLCB

A few reasons why the Pittsburgh Water and Sewer Authority, a purely public agency, is better than the so-called "publicly owned" PLCB.

1. They deliver 24/7/365.
2. You can get what they have on any holiday.
3. Nobody wants to replace them.
4. Run by people with real world experience, not political hacks.
5. Doesn't mind competition from privately-sold bottled drinks.
6. Not millions of dollars in debt.
7. Tens of thousands of places to get their product; in fact, they deliver to EVERY home.
8. They have never ran out of stock.
9. Never closes when a hurricane is 300 miles away.


10. Oh yeah, they have a Sommelier on staff and the PLCB doesn't.

Wednesday, August 24, 2016

Something to look forward to.

I don't know if you have ever watched a train wreck actually take place in front of you in real time, but it is something that you can't stop looking at. That's what it's like watching the anticipated PLCB profit projections coming from McIlhinney's Mistake, the "epic change" of a liquor bill. The big number is $149 million in increased revenue overall, but with zero dollars, none, nothing coming from the casinos that number is already down to $137 million. Of that, $25 million is going to come from Sunday sales and a whopping $75 million from "flexible pricing."

Now to get that $100 million that would mean, based on FY 2015's profit margin (1) of 5.988%, an increase in sales of about $1.67 BILLION (2). Not gonna happen.  Even if we use the exceptional FY 2014 profit margin (3) of  8.28% it would still be over $1.2 BILLION in increased sales. That ain't gonna happen either. Even if we count the increase in sales from all those places that will be allowed to sell wine it ain't gonna happen. So if the PLCB doesn't decrease expenses -- and when have they ever -- they have to increase sales. A lot.

What this means is that we may have been sold a bill of goods that is not based on any reality. Remember that no increases in staff or payroll are taken into account, at least, not that I've seen. Modernization proponents didn't say if they are or not in their proposals at the time.
PLCB Flexible Pricing model
Now dollar sales do not necessarily HAVE to go hand in hand with an increase in product sales. It follows the same trend, but isn't 1 to 1. With "flexible pricing" the PLCB can charge more for popular items and less for unpopular items in order to move stock. They could, all of a sudden, decide to play hardball and negotiate prices with vendors, which they have chosen not to do so far; see here, here and here. Only now they are going to keep the difference instead of passing it on as they had to do by law before (except they didn't do it, which kept prices higher, which cost you more, and increased sales totals for them).

If they do get lower prices, they can make more money because they will be spending less for product. Well, maybe. In the game of liquor chicken, who will blink first: the major suppliers or the retailer? Think of it this way, who gets the blame when something isn't on the shelf, no matter whose fault it is? The retailer. Who can least afford to aggravate the consumer: the PLCB, or Jim Beam? The PLCB is not dealing from a position of strength: the people want the product, they don't want the PLCB. Having new colors and plants in the store does not make up for having empty shelf space, especially when there is no benefit to the consumer because you want to keep that extra dollar.

Will all  this result in a large increase in sales and a large amount of money saved? Do cows fly? Bailment (not paying for products until they leave the warehouse) was supposed to save $100 million a year too, and that didn't happen. Now I realize that next year, when the financial numbers finally come out, it won't be for a whole year of this new fiasco and I'll have to adjust the totals based on historical values for July and the first two weeks of August, or just look at the second half of the year and extrapolate from there. No matter how you slice up the PLCB pig, you aren't going to find any bacon, only fat.

This is what happens when the PLCB increases sales over 50% in one year
Normal is what we want and there is no rest until we get it.


(1) The PLCB doesn't really make any profit, it just has left over Use Tax money it didn't waste on something. That said, FY 2015 Operating Income of  $111,520,313 divided by Sales Net of Taxes $1,862,269,904 gives you "profit margin" Note that Operating Income is before any required deductions.

(2) $100,000,000 divided by "profit margin" gives you the additional amount required to achieve the desired increase.

(3) Operating Income of $147,959,116, divided by Sales Net of Taxes: $1,786,501,686

Tuesday, August 16, 2016

What if the state ran the drugstores?

What if other things that the state regulates were done the same half-assed way they do alcohol?

For instance, how about a pharmacy? They're always telling us alcohol is a drug. Well, then, give the drugstore the PLCB treatment! No more soda, chips, greeting cards and lipstick: sorry, this is a DRUG STORE. Imagine if the "Pharmacist" only needed the same qualifications as the Beer Distributor or the State Store Manager. How would you like that? If they're all just drugs, why shouldn't the people who dispense them have the same requirements: mostly, a pulse, and some civil service points.

Flip it the other way, and imagine if a State Store Manager had to pass a state board to prove he is qualified, like a Pharmacist does. He'd have to stay current with all new products, and know that you don't put Elderflower liquor in a Greyhound (contrary to the advice you get on the FWAGS website). That he had to know the interaction of thousands of different products, and maybe have a minor in mixology and certifications in wine or spirits. So why don't they?

Why is it easier to buy a case of Nikolai than to get Tramadol, Anexsia, Humira, or even Viagra? (You gotta figure that Viagra is popular at the PLCB considering what they do to the consumer everyday.)  Is it because the PLCB really is only giving lip service to "control" and know that they really don't, really can't do a very good job of it? Maybe it is the money. Making it more difficult would cut into the meager amount that the PLCB turns in. I'm thinking that it is most likely job protection. They have this racket going and to do anything to jeopardize it would just be going against their grain.
Who does a better job of regulation? Private Pharmacies or the PLCB?
They certainly aren't working for us: 83 years for the "freedom" to buy four bottles of wine in less than 20% of all grocery stores, or to buy a sixpack at a cafe no one ever sits in. Hell, they won't even let you drink the sixpack you just bought at the cafe they have to provide. Makes sense only in the fog shrouded mind of "modernization" supporters.

You gotta ask yourself not when they will do better but IF they ever will do better. History is not on their side. Privatize and regulate like all the normal states do.

(This is day 46 with no financials yet.)

Monday, August 8, 2016

It's The Big Day! Er...isn't it?

It's August 8th, the day the "epic changes" take place in Pennsylvania booze law! So...what exactly did we get? We didn't get privatization, that's for sure; in fact, we more than likely got a reprieve in the life of the PLCB, Lets look at what people think and the reality of Act 39.

We're going to get wine in grocery stores! 
Sort of. The PLCB will start issuing licenses for that, supposedly today but odds are you won't see wine in your grocery store. Why? Because most stores won't qualify for the idiocy of separate entrances, cashiers, and 30 seat cafes, or they won't be able to afford to make those changes or to even buy a license. Less than 20% of grocery stores will.

But we still get direct wine shipping!

True, even though it took a decade for the state to comply with the U.S. Supreme Court Granholm ruling, although the PLCB could have easily issued an "opinion," like they did with 12 packs, or beer at gas stations, or having more than the legal amount of stores open on Sunday, or killing off delivery services, or any of the other things they did without legislative approval. The question is, how many wineries will pay the $250 fee? The answer is likely under 5% of wineries in the U.S. alone, and maybe 1% of all in the world.

Woo-hoo, we can drink all night at the Casino!

No. There are twelve casinos in Pennsylvania, that's true, but NONE, not one, have expressed any interest in paying the state $1,000,000 so they can serve you a cocktail between 2 AM and 6 AM. Shocking, right? 

But won't we have more places to have wine with dinner? 
True, if the mom & pop joint or single proprietor can afford the $30 grand, and they aren't in Philly, the city with the largest population and the most "E" licenses. Remember the lesson we all just learned again: All animals are equal, but some are more equal that others - just like giving special rules for the DNC. 

To explain: here's the actual listing by the PLCB:

If a municipality is "wet” for liquor (allows for the issuance or transfer of restaurant liquor licenses). Act 39 allows an eating place retail dispenser (E license) to convert its license to a restaurant liquor license (R license), without regard to the quota. The fee for such a conversion is for $30,000. However, the E license cannot be converted if there is currently a pending objection by Licensing or if the E license is located in Philadelphia.

Did you get that? No, did you? Let's find a lawyer...a drunk one.
Hey, if we like a bottle at a craft distillery, we can buy it and take it home! 
Maybe. While Act 39 permits distilleries to sell wine and malt or brewed beverages for on-premises consumption, provided that the wine and malt or brewed beverages are produced by licensed limited wineries and licensed also states that Act 39 prohibits distilleries from selling products or substantially similar products listed for sale by the PLCB, at a lower price than that charged by the PLCB  This includes sales to licensees.

So what would that be? Bourbon, Rye, Vodka, Gin, Cordials and just about everything else except for maybe White Dog and blended American Malt Whiskey. Makes perfect sense

We still have SLO for those special bottles!

Like the Craft Distillery above the answer is maybe.  The PLCB says "The PLCB is permitted to refuse to process, or prohibit the processing of, SLOs for items that are substantially similar to items that appear on its monthly price lists, or if the PLCB believes demand for the items warrants them being made available generally. The PLCB has the discretion to determine the amount and manner for which any such item will be made available." So if you are ordering a bottle of wine they can say - "We sell wine all the time and you don't need that one" Or because they are slow to catch on. "That bottle you  wanted is really popular and we'll have it in our stores in 6 months so you don't need it now" Even if it is on the SLO list THEY provide. Customer service like that is available only in PA.
The trade off is now they will cost a little less since the markup has gone from 30% to 10% if you are allowed to get it at all..

Aren't they finally going to deliver?
Not exactly. The PLCB will allow delivery, which is good if you need something next month and not next week. Here are the hoops you need to jump through. First, you have to have an importer's license or vendor's permit. Second, the PLCB has to approve of the product. Third, the item ordered must be at an "authorized place of storage." Fourth, you have to order and pay for the product in full before it is released. No credit here! Fifth, the product can then be delivered by a licensed carrier with the possibility of a delivery fee attached. Pretty easy, and definitely worth waiting for!!!!

Jeez. Can the craft Distilleries at least sell hard cider?!

Depends. If you are a holder of a Limited Distillery license, you CAN'T sell hard cider on-premise. However, if you are having a “alcoholic cider, liquor and food exposition” of Pennsylvania products either indoors or outdoors on your property - then you can. Makes perfect sense. Distillers are probably lining up for those now.

There's more, but you get the idea. McIlhinney's Mistake isn't all it's cracked up to be. That's because once again, it's what the Powers in Harrisburg will let us have, not what we -- or anyone in the industry -- wanted.  The easiest way to fix this and all the other inanity of the current and (future PLCB) system it to wipe it clean and start again.  

Privatize. It's simple...because it's really that simple.

(This is day 39 without PLCB financials)