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)

Monday, August 1, 2016

The Case Of The Missing Wine

How stupid do the PCLBureaucrats think we are?
As stupid as they are, apparently.

On July 19th I put up a post called Insider Trading, about a missing case of $3,000 a bottle wine, and how it didn't show up on any inventory the PLCB had available to the public. The PLCB explanation was that they deleted all the codes while it was in transit being "hand carried" (because of the heat) to their Ardmore store for sale.

Really? The people who have stackouts of wine sitting the windows of their stores, in the summer sun, suddenly care about heat? Remember, these are the folks who stored wine in the summer in uncooled trailers because they couldn't control inventory.(1) The same people who have been cited by the Attorney General because the auditors: "received little response from management to demonstrate its follow up and resolution to ensure that store inventories are properly accounted for."(2) 

Deleting the codes while the wine is "hand-carried" isn't just a lie, it's a stupid, ridiculous whopper of a lie. Here's why.

1. Items are not dropped from inventory when they are transported. Not once, not ever; you lose the ability to properly account for things if you do.
2. Since the Chateau Ausone 2003 has not been on the inventory since at least June 20th (3) and probably earlier, the PLCB expects us to believe that it took 40 or more days to be "hand-carried" from wherever it was (they didn't say) to Ardmore?
3. Doesn't it seem ridiculous that an extreme luxury product was off-book, not available for sale, for at least 40 days because they were too incompetent to have a listing the public could find?

And on the subject of selling $3,000 a bottle wine... While the Ardmore store is #11 in overall sales, I would have put it in the Philly store on Chestnut Street, or West Chester: you know where the money is. Which begs the question of why it wasn't there to begin with, and why a whole case went to just one store and not split out to three or four. What retailer with 600 locations would do that? Only one: the one that doesn't have to worry about what anyone thinks and is immune from any and all decisions that a real business has to take into account.
Here it is listed on 7-30 but it isn't in the online inventory
To make things even more interesting and proving the PLCB is lying to the public, the Chateau Margaux 2000 (Code #18864, list priced at $2,499.99, on sale for $1,499.99), which was on the inventory on July 28th disappeared on July 30th...but was still listed on the FWGS website. Is it in transit too, being hand-carried by somebody on a leisurely stroll, like the Chateau Ausone? Why is it still listed on FWGS if, as the PLCB says, they remove things when they are in transit? Not even the PLCB can have it both ways.
9:30PM 7-31. Only some PLCB cube rat knows how to decipher this.

So here it is, 9AM on the first day of the big sale and after over 40 days of being hand carried the Chateau Ausone 2003 somehow did make it to the Ardmore store and the public can find it online. Of course, inventory should be able to be found online in almost real time. No such luck with the Chateau Margaux 2000. It was for sale and found just a few days ago but now it has disappeared into the bowels of PLCB incompetence. When and where it may ever be seen again who knows, certainly not the public.

Just another example of how the PLCB does not benefit the citizens. Lying, graft, nepotism, kickbacks, and who know what else?


(1) From the Auditor General report.
  • Pittsburgh: Inventory jumped from 300,000 cases to 575,000 cases in 2010, exceeding storage capacity. PLCB management decided to put 72,277 cases of excess merchandise in 57 non-temperature controlled trailers.
  • Philadelphia: Inventory reached 763,470 cases. 20,240 cases were moved to non-temperature controlled trailers.
(2) Auditor General report pg 35. Not online but I have a copy I can send if you want to see it.

(3) PLCB inventory for April 21 shows it listed, inventory for June 20th does not have it. It disappeared somewhere between those dates and didn't show up again until July 30. Again, I have copies of the inventory reports since they are not online any longer...and isn't that a surprise?

Monday, July 25, 2016

New Positions, Old Positions

The PLCB says, over and over, they want to run like a business. I did a comparison of how they attempt to go about that in my "Run Like A Business - Really?" post at the beginning of this year.

One of the things businesses do, one of the most important things, is hiring personnel to do the work and run the operations. The PLCB way is not so much to hire qualified people in 99% of those occasions, as it is to prefer the policy of promoting from within. In general, though, those people know nothing about how real retail is run, because all they know is the Socialist Monopoly PLCB retail model, which has little to do being "run like a business." Governor Wolf continues the tradition of hiring hacks, people with no liquor retail experience, with his latest addition to the board.

Who runs the "business"? The Board seems to have abdicated that responsibility, reserving to itself the job of rubber-stamping license applications (and reading letters from the Governor), testifying to the Legislature about how wonderful things are (despite how they look), and hiring people to actually run the "business." People like Joe "Da CEO" Conti and John Metzger and whoever Metzger's replacement will be when he retires at the end of September.. Nice work, boys.

Now we have the new made-up position of COO (Chief Operation Officer), which you usually find in businesses with more than one thing going on. Maybe he is in charge of the liquor testing lounge too. Just another $120+K slot that didn't exist before this year, filled by another born and bred PLCB insider, the former Director of Retail Operations Charles Mooney.

Besides getting paid every two weeks, just what has Mooney done? Not much so far, that we can see. But that's not surprising, considering that he was the guy who took years to replace Renovo's store, a year to move the Mountaintop store 50 feet (give or take), and pulled the State Stores out of downtown Lewisburg and Lock Haven against the wishes of the community, the local Representative, and their state Senator. You can read some other consumer friendly (I'm kidding) things he's had his hands in here. I don't expect much to change in the new position. Charlie's replacement is another brainwashed 30 year PLCB vet, Carl Jolly, so you know there won't be any innovation happening, just like during Charlie's tenure. Same old, same old, that's the way we've always done it here at the good old State Store System.

I'm not sure how this is going to work. In a real business, all the "Chief" officers are higher up the food chain than Directors. But at the PLCB we now have a COO and have had CIO (Chief Information Officer), both ostensibly under the Executive Director, at least according to the PLCB's own wire diagram in their Fiscal Year In Review (page 9 if you are following along). Just like every business you've never seen.

It is a typical PLCB answer to a PLCB problem. Throw money (or in this case, Mooney) at it and see if that fixes it. Adding more bureaucrats to an already top-heavy, incompetent organization is not the fix that is needed. Neither is keeping and promoting the old guard who only know the PLCB way. PLCB lifers have no real business experience, because the PLCB isn't a real business.

But if the PLCB is intent on creating high-paying positions that they don't have anybody qualified to fill, I'll offer these suggestions so they can fully mimic what a real business does.

CXO - Chief experience officer - A chief experience officer is the officer responsible for the overall user experience (UX) of an organization. This executive is ultimately responsible for the strategy and user interface design to connect the consumer to the organization's products and services, and may further oversee marketing communications, community relations, internal relations and HR relations. This would then supply someone convenient to blame for the millions of customers who have and continue to have poor experiences with the PLCB. Very handy for the Board to deflect criticism; this should be someone especially expendable.

CFO - Chief Financial Officer - This person manages the corporation’s financial risk.  They deal with data analysis, financial planning and record keeping. Being $240 million in the hole might require somebody to blame, so who better than the CFO?

CHRO - Chief Human Resources Officer - With all the new hires, the PLCB will need to be open longer hours and Sundays, and deliver products. That's gonna take a CHRO to combat the likely 40% turnover rate for new employees (and to blame for it).

CMO - Chief Marketing Officer - Somebody has to be in charge of the new, exciting coupons (and take the blame for their inevitable failure to meet revenue expectations).

CRO - Chief Revenue Officer - You really need this guy to explain to the unions and other PLCB supporters (and maybe even the Democrats in the Legislature) that "revenue" is not "profit". 

CSO - Chief Strategy Officer - Somebody has to be the point of focus to fight every pro-consumer initiative, every threat to the status quo, and any changes that weren't approved by Gifford Pinchot himself. (This position is unique in that it doesn't accept blame, it creates it. Very useful.)
How a real dysfunctional business works. Maybe the PLCB's not that far off...
Of course, all of these people need to report to a CEO, which they haven't had since Conti smeared crap all over title like an incontinent monkey, so you can add that salary to the total. You should be able to waste at least a few million on these folks and their staff  in addition to your new COO position. To make sure you expend the maximum amount, remember to only hire people with no experience in real life retail or liquor — just like was done over the past 80 years.

The only way the liquor and wine business in this state will ever "run like a business" if it is a business. Even better: lots of businesses.

Privatize. Accept nothing less.

Tuesday, July 19, 2016

Insider Trading?

We all know the PLCB doesn't do a very good job of selling the high end. One only has to look at the Screaming Eagle fiasco to see that. However, a by-product of their ineptitude is that sometimes... something really high end gets reduced to below regular market value so they can get it off the books. Such is the case (or maybe half case) with Chateau Ausone 2003 (PLCB inventory #18803). The PLCB price is $2999.99 as shown in the Board Agenda for July 20th on page 23. It also shows that the price is being reduced -- by $1700! -- to $1299.99, following Board approval. What a deal!

Have you seen this bottle? We're guessing not.
The only problem is that if you look up the wine by name or code doesn't exist in the PLCB inventory. Not in the product catalog online or on the FWAGS website. Don't take our word for it: try searching yourself: the code, the name, the appellation...nothing. (BTW, the other big sales on the page, even the Chateau Margaux 2000, a $1000 savings? They're all in the system. Just not the one really BIG savings.)

So where did they go, and how many were there? More importantly, who gets these bottles we ordinary citizens can't even see? Did the PLCB just "misplace" a few $3000 bottles, lose them in inventory? Or did somebody get the nod, and will be waiting at the right loading dock on August 1 to get one of the few real deals available in the State Store System? (Maybe they're saving them for their friends at the DNC.) This isn't the first time this has happened, and with a department brought up on graft it won't be the last. Will we ever know the truth? Probably not.


Almighty Liquor Code gets bent for the DNC

It's real and it's happening: the Democratic National Convention got the liquor code exemptions it wanted (and it's in place for any future "national event," which apparently must be a political convention). The details were reported by Angela Couloumbis in this morning's Inquirer

What's the upshot? Well, the DNC will pay $5,000 -- once -- to the PLCB, and then proceed to grant the exemptions to whatever premises it wants, licensed or unlicensed. (I'd link to the application, but hey, they just shut it down. Sorry. The DNC is saying they will put out a list of exempted premises by week's end.)

The exemptions include staying open later than 2 AM, and that's the one everyone's fixated on. It's been reported that the licensed areas (existing licensees, bars, plazas, whatever the DNC wants) can stay open till 4, but the law doesn't actually stipulate that; it's up to the Board, who apparently have delegated all that to the DNC, who have said '4 AM, please.' Pretty good spend of $5,000, really, to get licensing authority in Philly for four days.

And then there's this. (Quoting from the Inky story linked above, and as usual, emphasis is added.)
The reprieve also allows businesses to circumvent the costly requirement that all wine and liquor be purchased from the state-run wine and spirits stores, which automatically mark up products they sell and add various taxes.
Event organizers and others said much of the liquor used during conventions and other big events is donated. And during this year's Democratic convention, other states' delegations might want to host a reception featuring their hometown alcohol.
That's the one that hurts. It's a special exemption from having to get booze from the PLCB. They can bring it in without paying taxes, without paying the markup, without paying the bottle or handling fees, and of course, without having to deal with the ham-handed clowns at the PLCB. Because, you know: they want the stuff to actually be there when they need it. 

Why does it hurt? It's not the revenue, though God knows, we could use it, and the DNC's got plenty. It's the unvarnished unfairness of it. We have to put up with this antiquated, creaky, anti-customer monopoly 24/7/365...but when the politicians come to town, well, loosen up the laws for them, because they deserve a little normalcy, and we don't want them to go home and tell their friends how backwards and boneheaded and provincial Pennsylvania is compared to the modern liquor laws in, say, Indiana.

It also hurts because while the PLCB is crying that it's going to take MONTHS to deal with adding the permission for grocery stores with beer licenses to also sell up to four bottles of wine per transaction -- let me take a crack at it, it ain't THAT hard -- this shit got done in a matter of days. DAYS. And bringing in booze that's not coming through the PLCB certainly seems like a bigger deal. Unless it's for your buddies. 

This is the Legislature admitting that our liquor system sucks. And this is the Legislature admitting that they don't have the guts to put an end to it. Instead, they're nibbling around the edges, and hoping like hell that we'll take our miserable 4-bottles-of-wine-in-selected-stores and go away

Don't be a dumb animal. Don't put up with what we have. We ARE all equal, and we ALL deserve to be free of the State Store System. PRIVATIZE.