Tuesday, August 4, 2015

"PLCB Modernization" means "PLCB higher prices"

Another installment in our ongoing series of revelations about why "modernization" is a scam.

We always hear about how the "PLCB Modernization" plans will make so much more for the state! But what they won't tell you is that they all work by taking more money out of your pocket. Here is one of sneaky little things they want to do that will cost you more. You don't see much about this item, as the PLCB has buried it pretty well. Well-hidden or not, it is one of their many ideas that will cost you, the consumer.
 
Because it's the PLCB way!
In the liquor industry there are specials that are offered called SPAs  or Special Purchase Allowances. By current law these SPAs have to be passed on to the consumer (that's you!), which is why you see  those sale tags on the shelves. The PLCB isn't making any less, as none of that reduction comes out of their pocket; they are just passing on the SPA.

However, the PLCB doesn't want to do that anymore. In sworn testimony, the PLCB said "With flexible pricing, the Board would be in a position to retain, and ultimately remit to the Commonwealth, some of the savings afforded by the Board's suppliers" In plain English? 'We aren't satisfied with making the exact same amount on sale items, we want to make more and have the citizens save less.' (I did a post last year about "flexible or variable pricing" if you want to review that.) In a worst case scenario, which is without a doubt what the PLCB will do, they could get an SBA, adjust the pricing upward and pocket 80-90% of the savings that were supposed to be yours.

Now, in the free market, a store will leverage those SPAs by not only using the reduction in their cost but by also cutting their margin to lower the price even further in order to attract customers away from other businesses. That is why sale prices elsewhere are more of a bargain than the sale prices in PA. The PLCB doesn't want to do that, though, because they need more money to cover their ever-expanding operating costs.

In 82 years, we have never seen anything done to change the liquor code to save you money. Benefiting the consumer is not what the Almighty Liquor Code is for, after all, unless it's about free drinks while playing slots. They have no problem with that.

It is time to END IT, not mend it. Get the state out of the alcohol business and into regulation where it belongs.






For parts 1-4 of this series see :
Part I,
Part II
Part III
Part IV 

Friday, July 31, 2015

Why can't the PLCB put out financials in a reasonable amount of time? Real business does.

The fiscal year ended on June 30th, and with it, the PLCB year. Here we are, about a month later, and not a peep from the PLCB about how they did.

A real business would have been filing quarterly reports, but I guess we citizens, the so-called 'owners' of this public nightmare, aren't important enough to rate that consideration. It isn't like some clerk is Harrisburg is sitting there with a pull-down adding machine waiting for the mail to be delivered. This is the age of computers. The day after the fiscal year ends, they know what they made within a few tenths of a percent, they know what they spent, and they know what is owed to them. So where is it?
PLCB - Moving at the speed of early 20th century business.
I'm not asking for audited results, just for the normal BS they put out in September last year: gross sales, sales net of taxes, taxes collected, what they spent, operating income. I can understand if it doesn't match the audited amounts done months down the road: things change a bit. But unless there is a major accounting screw-up, or costs that they try to hide (remember the $33+ million in computer system overruns), the number will be close enough to give the public an idea of what is going on. Just why does that take 2 months? Could it be because privatization is in play?

Here are my predictions for this past fiscal year:

The PLCB had record sales again. No surprise there with a police enforced monopoly, a growing population and things costing more over time: what else would you expect?

There should be some crowing about record amounts of taxes turned in, but how is that a surprise when sales go up? Tax payments are done by tens of thousands of businesses, but the PLCB is the only one that puts out a press release saying that they did their job. Congratulations, guys.

The PLCB will not have record Net Operating Income or what they call "profits". It went down last year and I'm betting it will go down again this year. You gotta wonder how they can have record sales all the time, but rarely record profits (or 'unwasted use tax', as I like to call it).

Store, Warehouse, and Transportation Costs went up 8% last year and i say they will be up by at least the same amount this year.

Administrative, Alcohol Education, and Support Costs went up 9% last year and they will go up again by 8-10%. Don't even think that was because of the education part, since the total was even more in 2011. Went down after Rep. Turzai started pointing it out and then went back up to what it was. It's going to go up again.

So there you have it.  We'll have to wait and see how well my prognostication did whenever the PLCB can figure out how to work those computers.

Until then - keep buying out of state. It's the patriotic thing to do.

Tuesday, July 28, 2015

The PLCB screwed up Pappy Van Winkle last year (and will do it again this year)

Stacey Kreideman, the PLCB's Minister of Propaganda, said last year that the most "fair" way for the agency to sell their allotment of relatively rare and highly desired Pappy Van Winkle whiskeys was to put them up for sale all at once, online, in mid-morning, with no warning but an email to say "We got 'em, time to buy!"

Calling the results a disaster wouldn't be too far off. The day was so screwed up, with crashing servers and clogged websites, that the PLCB had to apologize. They apologized for not realizing that if you put a high demand item out all at once, and tell everybody at the same time -- by email and Twitter -- system volume is going to spike on your rickety-assed commercial site. In this case, about 20 times the norm, which was 18 times more than they could handle. Customer comments sounded like this:

@PAWineSpirits @pappyvanwinkle what a joke. You couldn't even log on or load the page. How unfair. Most people didn't even have a shot. -- Shannon Barr on Twitter.

@PAWineSpirits you completely botched that sale. The time for PLCB is over. --  from @jxalexander.

The PLCB has decided to do something different this year. Rumor has it there will be a lottery system for the Van Winkle and Antique Collection allotments. Will that be more fair than the most fair way to do it?

I don't have any details, but I do have some suggestions on how it should be done. For starters, I would put the lottery commission in charge of the lottery. Take it out of the PLCB's trembling hands completely. Who knows how to run a lottery better than the folks that run a lottery? Certainly not the PLCB.

Allow customers one week to sign up; say, between the day after Thanksgiving though the next Thursday.

Everyone who signs up has to provide all their required information -- ID, shipping -- along with a credit card number that will automatically be charged if their number is selected. That way no one wastes time trying to enter information on a system that's crashing.

Have a separate lottery for each product, all 11 of them but all on one form, just check the ones you want. Filling out your name, address and credit card info 11 times is something the PLCB would make you do. Limit quantities to one bottle of each item and limit entries to one per person. If we're going to be stuck buying only from the State Stores, make it fair: accept only PA addresses for billing and delivery.

Send out lottery numbers via email with a verification code so if there are any problems or questions the code can be used to confirm the entry. Once selection time is closed, run the numbers until all matches have been made...post the winning numbers on the website and send out the product.

Done.


Have fun with that. Myself, I've been dealing with the same guy at the same store -- out of state -- for about a decade. I pay list price and generally have it a month or more before PA puts it on sale. In business, relationships are everything. It rewards customer loyalty, not forcing them to buy only what the state provides. A lesson the PLCB can't, by its very nature, ever learn.

Friday, July 24, 2015

PLCB to change name

It could happen this way. Maybe. 

In an unexpected move to comply with Pennsylvania "sunshine" laws and federal Truth In Advertising regulations, the PLCB (Pennsylvania Liquor Control Board) has voted to change its name. The two names considered will be left up to the public to choose (see below).

The two names under consideration underwent millions of dollars of testing (paid to a New York consulting group, the same people who came up with the hugely...unnoticed TableLeaf and FWAGS). They anticipate the changeover should only take about 50 years, to allow the use of all the old PLCB letterhead and a website update.

Board member "Skip" Byron explained that the change would take even longer if the stores were privatized. "Probably close to two hundred years. Another reason we shouldn't even think of privatizing - wasting all that paper."

He then laid out the main reason for the name change: misdirection. "The PLCB has gotten a well-deserved bad reputation," he said, "so the further we distance ourselves from that name, the better off we think we'll be. If we choose the right name, people will probably forget all about us being a monopoly. Does anybody still remember that "Fine Wine and Good Spirits Stores" are really State Stores?"

At this point, the PLCB's Minister of Propaganda (Stacey "Why'd I Take This Impossible Job" Kriedeman) pulled him away from the mike, and was overheard asking Byron if he were trying to ruin the whole $3 million rebranding program, requiring even more new signs.

Board chairman Tim Holden had this to say. "For many years the citizens have been asking the PLCB to change. We have heard your voices and have made the biggest change in PLCB history! This is bigger than wine kiosks or TableLeaf or special sections in the back of the store for PA products or anything we have ever done!" He disappeared behind the podium when Kriedeman tackled him, a large Hannibal Lector-type muzzle in her hands.


We have learned that customer voting on the name choice will commence on Veteran's Day, according to a confidential source (board member Michael Negra, but he asked us not to tell). "We won't be here to count them up -- it's another holiday -- but it doesn't matter, since you can vote as often as you want. Our IT department couldn't figure out how to limit the chronic alcohol users to one vote each." We had more questions, but Mr. Negra sprinted off when he saw Kriedeman running toward him.

She paused a moment to catch her breath, and we asked her if this was one of the more difficult assignments she has had with the PLCB. "You better believe it," she said. "It is near impossible to keep track of these three, and then having to say all those inane things trying to put some spin on what they blurt out...Stop taking notes. You can't print that."

Print what?

"You can't print what I just said"

Why not?

"Because if you do, you'll never buy a bottle in this state again!  I'll see to that!"

I don't buy anything in PA now.

"Then nobody you know, your friends, family, anybody with your last name will never get anything if you print that!"

Not a problem. I'll do a podcast instead; I have it all on tape.

She walked off, muttering.

The two proposed names?

Pennsylvania We'll Do And Say Anything To Keep Our Jobs Board
(PWDASATKOJB - kinda rolls off the tongue, doesn't it?)

Pennsylvania Let's Only Do A Little Or Nothing Group
(PLOD ALONG - now that has a nice Pennsylvania Dutch ring to it.)


I think I'll vote a few dozen times for PLOD ALONG, it has that nice tie to history and yet is moving slowly forward. You to can vote for PLOD ALONG...or you can contact your legislators and tell them it is past time to get the state out of the liquor business.

Monday, July 20, 2015

Read Orwell, understand the PLCB


We all know some of the Orwellian things the PLCB does.* One can see Big Brother gone rampant in ideas like wine kiosks, or after 80 years wanting to get the "right people" (by getting out from under those pesky Civil Service rules). The Ministry of Love is all too apparent in the BLCE with anonymous tips to the beer registry control section. Then there is the Ministry of Truth, hard at work trying to put a positive spin on everything no matter how banal or counter-intuitive it is.

Of course, there is the PLCB's greatest fear...rats. People in the system who are not happy with the rewriting of history (Kiosks were innovative!) who talk to people like me. They send the Thought Police out in the guise of Business Managers to stalk them, and when they are found they are "reintegrated" before their release and ultimate execution - or so they wish. Firing is the best they can do. If a person somehow survives, the powers that be know that his heart is now filled with love for the Party PLCB, and will gladly make any statement to protect them.

They even have their own catchy little phrases:

MONOPOLY IS COMPETITION

CONTROL IS FREEDOM

IGNORANCE IS STRENGTH

LESS CONVENIENCE IS MORE

COMPETITION RAISES PRICES

TAXES ARE PROFIT

It didn't start with Wolf and the Ministry of Truth, of course. Recall Governor " Old Major" Pinchot saying they have to rebel against the evils of the Twenty-first Amendment and run the state their way, making liquor as difficult to procure as possible.** He knows FDR is a drunk and not doing a good job of running things. The three Drys in the state put together a plan where the people live under PLCBism. Where all clerks are equal (except for those that are more equal than others) and they will be looked upon with admiration for the job they do.

One pig man is appointed to lead the people from chronic alcohol use (more than one drink a month), having proclaimed all power over wine and liquor. He uses his private PLCB army to control those who don't believe his power, and crush them. Life at the Pennsylvania Farm gets worse and worse. They don't play well with other states, and punish the animals citizens for wanting better things. They don't want improvement, but control. "Boxer" Newman was a great believer in improving the lot of the citizens, working with great zeal toward the prosperity of the Farm with careful Selections. But the 
PLCB sees the threat to their control, and sends "Boxer" Newman to his untimely fate as "Napoleon" Conti takes over and begins his plan to build a windmill kiosk at great expense and labor by all. 

When the citizens rebel against this idea, and years of other false promises and schemes, Napoleon aligns himself with powerful forces who like things as they are, to work against the citizens. The citizens notice the free sports outings, strip clubs, booze, golf trips, gifts, bribes, and nepotism at the top. They begin to demand the simple freedoms they see in other states. The PLCB, to counter this new threat to control, puts forth all of its power into "modernizing" its message, saying there will be prosperity for all, not just the "more equal," if they are just given one more chance. Of course, if given that chance, they'll hold onto power for decades to come. Spoiler alert: that's not a happy ending for the animals citizens.

It doesn't have to be that way.
No more lipstick on the PLCB pig!
No more doing things the pig's way!
No more false "modernization"!

END IT, DON'T MEND IT!


*A quick 1984 study guide is here if you need it.
** A quick Animal Farm study guide is here if you need it. 

Sunday, July 12, 2015

Play "Who's the Dummy - PLCB supporters edition"

So much happening lately.  First you have the Governor trying to rewrite two centuries of economic theory by proclaiming that competition would raise prices. Then he told us that privatization would raise prices if taxes were raised...because we all know private stores set their own taxes.
Plenty of stupid, but wait, there's more! Not to be outdone, the brain trust at the ISSU (Independent State Store Union) came up with this gem: "Limited competition negatively impacts convenience." (They called it a "disaster," too.) I gotta ask: if limited competition has a negative impact on convenience, what does NO competition -- like with the PLCB -- do?  Don't forget, this is the union of the managers. We're not nuts about the service level at the State Stores, but you almost have to cut the workers some slack if this is what they have to deal with every day.

Proving that the ISSU doesn't have a lock on stupid, the UFCW (United Food and Commercial Workers) comes up with this gem: privatization will cause a loss of selection and higher prices...and somehow, at the same time, increase drinking. Sounds like they've fully embraced Wolfonomics. As everyone knows, the Governor thinks -- all things being equal -- increased prices result in more sales. It's a cornerstone of Wolfonomics, the corollary to Wolf's dramatic new theory that competition leads to higher prices. Forbes presented a brilliant exposition of Wolfonomics recently: "Opponents Of Private Liquor Sales Claim State Monopolies Serve Customers Better." Take a moment to read it, it's quite good. (I'm talking to you, Governor Wolf.)

While there can be no excuse for such idiocy in a government office or organizational headquarters, it does bleed down to some of the common folk.  Internet newspaper comment columns are full of people who know the PLCB made $550 million in "profit" (some think they made $1 billion in profits!), apparently believing that taxes will disappear if sales are privatized, and that other taxes will automatically go up to make up for these mysteriously disappearing booze taxes. (Tip to you: the booze taxes aren't going anywhere. Not a chance.) There are self-styled economists who don't know that revenue isn't the same as profit, and that neither of them include taxes. There are folks who think that every privately employed liquor store salesperson is or will be on welfare, and that nobody will be hired even if the amount of stores double, triple, or even quadruple.


I especially love the ones who say they don't drink, and then proceed to tell us that the PLCB can get you anything you need...and you shouldn't complain, the implication (sometimes openly stated) being that if you do complain, you're an alcoholic. Or they tell us that the State Stores have the best prices in the country, or that we are safer because of the State Stores, when in fact we are barely mediocre in that respect.

Other favorites are this one woman who didn't want privatization because there wouldn't be any Mom & Pop stores so it was better to keep the PLCB...which has no Mom & Pop stores.  Kinda makes your brain hurt, don't it? One gentleman told me that Walmart will get all the licenses, all 14,000, because it is payback for supporting Republicans. (The facts are that the only free-spending "special interests" in this fight are the unions, and they just got their 'payback' from Wolf's veto. The retailers and the producers/importers are staying out of it, because they know the PLCB will retaliate if privatization doesn't pass.) Can't forget the guy who knew there are 18 states exactly like PA for alcohol sales. I don't think he gets out much. Nothing wrong with having an educated opinion, but you gotta laugh at some of these.

Of course, the real oddballs are in the legislature, but you can read about them everywhere.

Until the next time -- keep buying out of state!

Thursday, July 9, 2015

Wolfonomics: competition causes higher prices

Governor Wolf, the businessman who knows how to get things done, who can reach across the aisle and find common ground with the opposition, is not a stupid man. However, he must think we are.
For a guy that wrote about “Conflict and Organizational Accommodation" for his Ph.D. dissertation, he doesn't seem to be to very "accommodating." As reported in numerous newspapers, the Governor's "My Way Or The Highway" approach is blocking progress.
"That's MY way over there; the HIGHWAY is over there."
His interview in Keystone Q & A gave us a warning when they asked:"How much of the budget that you introduced do you hope to see as an end product?" and he answered "All of it. It actually is a holistic program not meant to be cherry picked," Which means he isn't willing to compromise, at least not in the way I understand the word. Of course, that is a flip-flop from his inaugural address, when he said, "We have to believe that none of us alone has all the answers—but that together, we can find an approach that works." I guess he forgot to add "except for the budget."

As a college-educated man he had to take a few business courses, like accounting or economics, at some point in his academic career. One of the things you learn in those classes is that monopolies are inherently anti-consumer due to:
  1. Higher prices than competitive markets
  2. Decline in consumer surplus
  3. Less incentives to be efficient.
They are so inherently anti-consumer that there are laws prohibiting them. Then there is that whole idea of centralized planning; that worked so well for the eastern bloc and Soviet Union. You remember that: where the government decides what you are allowed to buy, where you will buy it, and how much should be made available. Sorta like the PLCB. 

Centralized government planning is known for:
  1. Being poor at predicting future trends
  2. Having a lack of incentives when income is guaranteed
  3. Being inflexible, with difficulty responding to shortages and surpluses

What is really ironic about centralized planning is the theory that the government will be able to overcome market failure and achieve equality of distribution...thus preventing monopolies from emerging to exploit consumers. Pretty funny considering our home-grown Fossil of Prohibition, the Relic of Repeal, the State Store System.

The Governor's reasons for vetoing liquor privatization really call into question what he thinks of the citizens of the Commonwealth. As noted in the Washington Post's blog (how badly does a Democratic governor have to screw up to be called out by the Post?): "Pennsylvania’s governor doesn’t understand economics (or won’t admit the real reasons he vetoed ending state liquor monopoly)."

It's bad enough that the PLCB treats us like children, but now we have the Governor doing it too. The piece in the Post quotes the Reason blog: "Wolf and his fellow Democrats 'warned that prices would rise as private businesses sought profit.' In other words, private merchants will jack up prices because they want to make money—unlike the Pennsylvania Liquor Control Board (PLCB), which seeks only to raise revenue." Except competition -- as 200 years of economic theory and experience prove -- drives prices down. When Wolf ran his family business, Wolf Furniture, did Wolf raise the price of his cabinets to be more competitive? Or did he lower them? Is this the dawn of Wolfonomics?

The Governor specifically mentioned, "In the most recent case of another state that pursued the outright privatization of liquor sales, consumers saw higher prices and less selection.” He's clearly talking about Washington State. Their higher prices wouldn't have anything to do with the 27% in new fees that came with their privatization plan, would they? You know they would, we've told you that, time and time again, and backed it up with fact, not speculation. More Wolfonomics: apparently competition somehow causes higher taxes, not government!

And the notion that selection has decreased for Washington's citizens is simply absurd. The number of stores increased almost fivefold, and true superstores entered the market, stores with more products on the shelf then the entire state control system stocked. You can see the same thing in New Jersey at any Super Buy Rite, Total Wine, or Joe Canal's. There are stores like these all across the country, and there is no reason they won't be in PA too (despite what you may read in comments sections of news stories). The Commonwealth Foundation had a nice synopsis posted that you can read here.

It was the Pittsburgh Post-Gazette that put it best, though: "Since [Governor Wolf] is now the sole person standing in the way of this historic privatization, the governor has earned the right to have the state stores named in his honor." 

We agree. Welcome to:

Unchanged for 80 years!
I would ask the Governor to put his business hat on and take this simple test. If you wouldn't put a system like the State Stores into place today... why do you want to have it tomorrow?

We all know the answer. No one really wants this system except the people who directly (or indirectly...through campaign contributions or dues) benefit from it, but it is because of those people and their outsized influence that Wolfonomics had to come into being. We don't want it, and you know we don't, and as a business owner you can't really want it. Do the right thing, Governor.

End It, Don't Mend It.

(
Wolfonomics - a system of economic theory that reverses 200 years of thought by presupposing competition increases prices. Or "Everything you know is wrong"  Feel free to use it whenever the Governor talks economic policy.)