Monday, April 20, 2015

What modernization can do.


Modernization may improve this:





But it will never get you to this.



Thursday, April 16, 2015

Wine & the Modern (non-PLCB) World

More "Modernization": direct wine shipments in the Commonwealth! Pretty exciting stuff...kind of. On a closer inspection, what the PLCB and their Democratic supporters in the Legislature are proposing ain't all that exciting, and it certainly won't make the money Governor Wolf thinks it will.

In the first place, this isn't really "modernization," or some great plan, but more like forced compliance. The Supreme Court passed down the Granholm Decision 10 years ago, which basically said that states have to treat in-state and out-of-state wineries the same. Yet here we are, 10 years later, and Pennsylvania still hasn't complied. Without an enforceable law in place, you could argue that makes shipping wine into the state legal anyway. I'm not a lawyer, but the couple I've talked to about this have agreed. Of course, you would have to declare it and pay taxes (using the non-existent forms the PLCB doesn't provide) to fully comply with the law. It's only been a decade, so I'm sure they'll have those forms ready by 2020 or so.

When the Legislature finally gets around to complying with Granholm, they'll have to make a choice on how to handle direct shipping. One option is to just not do it at all, make shipping wine completely illegal, but that's probably not how things will go. Then there are two types of direct shipping states: "reciprocal" and "permit."

Reciprocal states say, 'We'll accept your wines if you accept ours.' It's quick, easy, good for the consumer, no fuss, no muss. Permit states require that shipping wineries may have to sign up, pay fees, collect taxes, file forms with sales data (like who they shipped to and how much), limit availability, and be subject to audit of their books to make sure every cent is squeezed out that they can get.

If there's an easy way to do it, and a hard way...you guessed it, the permit state model is what the PLCB and the Legislature are proposing, only more so. They want ALL of that permit state intrusion, plus the wine has to be put in special packaging that isn't required by any other state. You can see how popular this will be with out of state wineries. I'm sure that they'll flock to the PLCB, overwhelming them with permit requests, like the 55 currently signed up (in only 10 years!).  Who knows? It may even get to 100!

So what does direct shipment of wine as proposed actually do for you? Not much, but it does keep power in the hands of the PLCB, by making you go through them. However, you still won't get what you want, the way you want it, because if the PLCB can get it by SLO, you won't be allowed to order it direct. If the winery doesn't agree to all of the above terms, you are completely SOL. This, to keep an entire department employed that would otherwise be mostly gone if you could order things yourself. Another fine use of your tax dollars. (Don't even try to say the PLCB doesn't use tax dollars. Every penny they take in is a use tax, if it weren't, you would be allowed to "use" it someplace else. Like ordering wine direct from a producer.)

So there you have it, the system that some people think will increase sales $325 million above what they do now with those 55 wineries who are currently signed up. Why shouldn't it? It has all the convenience and consumer friendliness we have come to expect from the state stores these past 80 years.

We are not safer, we are not better served and we are not satisfied. The government should regulate, not retail. Move Pennsylvania back to normal.

Don't mend it: end it.

Tuesday, April 14, 2015

UFCW Wine & Spirits Council trying to hide from the truth.

The union that represents the State Store clerks, the UFCW, likes to use its puppet organization, the PA Wine and Spirits Council, to show all sorts of "proof" that the PLCB is doing a great job. Unfortunately for them, all of their information is either old, no longer true, or both. Let's look at some of the points they bring up. 

1. The UFCW says - The U.S. Centers for Disease Control (CDC) Task Force on Community Preventive Services announced its decision and rationale for recommending against further privatization of alcohol sales.
The real truth is - The statement is true but the science used to justify it was debunked as reported in Forbes.

2.
The UFCW says - This document reports that in 2007 Pennsylvania had the lowest rate in the nation of death by alcohol-induced causes.

The real truth is - Since that point in time alcohol-induced deaths in PA have gone up 31% (page 78) and the state is not the lowest in the country. New Jersey and Maryland on our borders beat PA along with other states, even the famously booze-drenched state of Louisiana. Looks like there may be some problems with that 2007 study.


3. The UFCW says - "Control states have significantly lower rates of youth drinking and binge drinking, as well as lower rates of alcohol-impaired driving deaths, than license states.” Using a study from 2006 they go on to quote "In states with a retail monopoly over spirits or wine and spirits, an average of 14.5% fewer high school students reported drinking alcohol in the past 30 days and 16.7% fewer reported binge drinking in the past 30 days than high school students in non-monopoly states"

The real truth is - Not in Pennsylvania.  According to the PLCB's own Act 85 report (page 9) "...lifetime alcohol use was higher in Pennsylvania for the eighth grade (7.3% higher in Pennsylvania compared to the national MTF rates), 10th grade (9.4% higher in Pennsylvania compared to the nation) and 12th grade (6.0% higher in Pennsylvania)." 30 day use is shown as higher for Pennsylvania high school student too.A look at nationwide drinking rates by SAMHSA doesn't paint a rosy picture either. Binge drinking for adults places PA in a tie for 31st in the country, and of the border states, only New York  does worse -- five do better.

4. The UFCW says - "Increased availability of alcohol is generally associated with increases in
consumption. States that license alcohol retailers generally have higher alcohol density, greater physical availability, longer and later hours of sale, all of which are factors that contribute to the increased availability of alcoholic beverages."

The real truth is - Wendell is trying out for the Captain Obvious role, telling us that more stores and longer hours contribute to the increased availability of alcohol. No kidding, that's why the State Stores suck! But the idea that more stores/outlets will drive higher consumption is an old policy projection that has been debunked; see the next point.


5. The UFCW says  - Using a report based on the experience in Sweden, "According to the projections, scenario 1 (just stores privatized) yields a consumption increase of 17% (1.4 litres/capita), which in turn would cause an additional 770 deaths" or "The corresponding figures for scenario 2 (stores privatized and wine in grocery stores) are a consumption increase of 37.4% (3.1 litres/capita) leading to an additional annual toll of 2000 deaths." This does not agree with another report listed further down the page that is also from Sweden that comes up with a different result..

The real truth is  - The facts do not match the projections. Washington State, for instance, didn't have a 37.4% increase in consumption or even a 17% increase when they privatized the state liquor stores recently. DUI fatalities have decreased since privatization and are below Pennsylvania's rate. The report is real, but just like the CDC report debunked above that said consumption would go up over 40%, it doesn't match any reality. More junk alcohol science.

6. The UFCW says - Using a report on wine consumption from 1968 to 1991 that came out in 1995, the conclusion is that sales increased dramatically in five states that 'privatized.' "After controlling for both nationwide and state-specific trends, we found significant increases in wine sales after privatization of 42% in Alabama, 150% in Idaho, 137% in Maine, 75% in Montana and 15% in New Hampshire. The increases in liters of pure ethanol per year in the form of wine were 621,000 in Alabama, 432,000 in Idaho, 364,000 in Maine, 363,000 in Montana and 171,000 in New Hampshire."

The real truth is - Privatization of the selling of wine did increase sales in those states: up to the level of the national average. Wine sales in general more than doubled overall in the US over the same period. In fact...Pennsylvania has seen that same proportional increase, without privatization. Yet.


We could go on, but... Let's address the real issue: control vs. regulation. There are many points that should be taken into account as guidelines, regarding store density, age carding, single serve take out, etc. but they all have to do with REGULATION, not whether the state should be the sole retailer, trying to sell and control as much product as possible.

While there are definitely significant problems associated with drinking too much, those problems are not confined to states with private alcohol sales. Despite decades of "control," and one of the lowest "alcohol outlet densities" on the planet, Pennsylvania does no better than the national average for most measures of alcohol-related harm, and is worse on some. This plainly shows the current system doesn't work very well. The majority of risks can be managed by regulation and enforcement, just as they are now in other states.

It's a simple prospect. If you don't want to be like Camden, then regulate and zone store density, as most states have done. If you want to lower DUI, then perhaps the state should concentrate on prevention and education instead of Mother's Day vodka sales.

Pennsylvanians already consume more alcohol per capita than New York, Maryland, Ohio, and West Virginia, so our vaunted "control" and current regulations, actually, our whole system doesn't seem to be working. Our system is broken, and the best and only real fix if to get the state out of selling a retail product and back to regulation like most normal states. We can't move forward dragging the dead carcass of Prohibition with us. Especially since they don't really want to come along for that ride.

Thursday, April 9, 2015

Gene Gene the wishing machine.

In an opinion piece in Thursday's Inquirer titled "Math supports modernization of liquor sales."Representative Gene DiGirolamo (R-Bucks) demonstrates how much he enjoys the taste of the UFCW kool-aid, supporting his bill for "modernization" of the State Store System. He decries the "hype" surrounding his bill; there is none, but he's clearly trying to generate some. His main aim is to keep the State Stores open by any means necessary, because he's strongly anti-alcohol, and just as strongly pro-union ...and pro-union campaign support.
Gene and his bestest buddy, UFCW prez Wendell W. Young IV
Representative DiGirolamo -- Gene -- offers his piece as a discussion. "Some critics have questioned these projections, and I welcome the debate - provided it is an honest and transparent discussion that extends beyond sound bites." 

Okay Gene; let's go to the math, with an appetizer of economics first. The basis of any "honest and transparent discussion" is that the PLCB is a legal monopoly -- so any sales or "profit" increases have much less to do with the service, selection, convenience, or pricing being offered than with the fact that the citizens can't go anywhere else legally. As prices increase and population increases, sales will increase; that doesn't mean the monopoly is doing a good job, or satisfying the consumer.

On to the math. DiGirolamo says that there have been great increases in LCB "profits" over the past five years, but FY 2010 itself was horrid. Operating income was down almost 32% from the year before and was the lowest since well before 1999.  In fact, looking at operating income over the past 15 years, it declined in 8 of those 15 years (including last year) on a year to year basis and the long term rate of growth of the past 15 years is only 3.3% annually. Since inflation over that same 15 year period was 37.5% (2.14% annual compound rate for 2000-2014) the real dollar growth was only 1.16% annualized and that is nothing to brag about.

Getting down to the details of your "proposal", we can see that most of it is built -- appropriately enough -- on moonshine. Here's the specific proposals Gene makes, and the monies he projects that they will reap.
  • Allowing more LCB stores to open on Sundays (currently only 25 percent can) and expanding the hours of operation on Sundays. Projected annual profit: $22.5 million.
To get an additional $22.5 million in profit means gross sales have to increase - using Gene's numbers of 6.92% profit margin - $325 million above what they currently are on Sundays, without taking sales away from any other day. This would somehow happen even though the PLCB said they would only be looking to open an additional 140-160 stores on Sunday, bringing the total to still less than half of the 605 stores they have open now. And the ones that are open on Sundays now are already the busiest ones. This seems far-fetched, if not outright misrepresentation.
  • Allowing the LCB to locate more stores inside or next to grocery stores, beer distributors, and other high-traffic areas. Projected annual profit: $25 million.
The "store in a store" program has been authorized for 40 years and in place since 1981; no further authorization is needed. Less than 20 stores are taking part (fewer than were willing to take on a wine kiosk), so the odds of that somehow greatly increasing aren't good (even less for it happening quickly, since the standard lease is for 10 years). Putting stores near grocery stores should have been a no-brainer for the last 80 years, a prime example of how the PLCB has failed the consumer all this time. Gene claims this will somehow increase profit by another $25 million on top of the claims for Sunday sales. That requires another $361 million increase in sales to get there. Gene, you said you wanted to keep the State Stores to control liquor sales; looks like you want to increase them! Total sales increase needed for "modernization" to work: $691 million.
  • Giving the LCB more flexibility in pricing, which would allow the agency to more quickly change prices to reflect market demand. Projected annual profit: $75 million
Be honest: you are saying the PLCB will be able to RAISE prices on popular items. That's the only kind of "change" that's going to happen, except for the occasional token lowering. That's not really going to help stanch over $300 million in border bleed or improve the notion that the state stores are competitive. How do I know that prices will go up?  If the PLCB is one of the largest purchasers of wine and spirits in the country, and are as effective negotiators as they claim to be, they should be getting the best prices on those purchases. To make any more "profit" above the 45.2% effective mark-up in place now, prices have to increase or costs have to decrease, and costs at the PLCB just don't go down. This is the keystone of Gene's "modernization" proposal; breaking the PLCB free of the regulated markup so they can raise prices. Everything else is window dressing.
  • Speeding up the state process for reviewing leases for the state's Fine Wine & Good Spirits stores. This is a critical piece of the puzzle because it will allow the agency to more quickly open new stores in more convenient areas. Projected annual profit: $25 million.
I have to admit: I have no idea how opening new stores faster (with no mention of actually increasing the total amount of stores) will generate that much more income.  If the state store isn't open in one spot, the people are forced to go to a different state store. Think of the 2 years it took in Mountaintop to open a new store. Do you suppose the population stopped drinking because the store wasn't opened? That restaurants and bars no longer ordered any product? Gene thinks that sales will increase another $361 million if they open stores faster. I have my doubts. Total sales increase needed for "modernization" to work: $1.05 billion. With a "b".
  • Allowing direct shipment of wine to Pennsylvania consumers while also permitting the LCB to ship products out of state. Projected annual profit: $25 million.
This one may actually make some money, but since no other state gets anywhere near 16% of their sales from direct shipments (another $361 million increase is needed) I'm not sure how realistic it is. Total sales increase needed for "modernization" to work: $1.37 billion.
  • Installing lottery ticket kiosks in the stores. Projected annual profit: $3 million.
They may make some money on this, but it's all going to be siphoned off from other businesses. If the PLCB makes some money and small businesses don't make as much...they're on their way to a new monopoly.
  • Allowing the LCB to join large purchasing consortiums to help lower the purchase price of wine and spirits. Projected annual profit: $10 million.
Besides the legality of this, other control states already have contracts in place, and all other control states except Utah allow private wine sales already, so this would be spirits only. That and the fact these consortiums don't exist yet may put a damper on the idea. And will the distillers give any additional price breaks? You can't stop selling Jim Beam because they wouldn't give you an additional nickel off the wholesale price. Again, I have serious doubts about this. 

So, Representative, please explain to us how sales will increase at least 62% above what they are now and how good that will be for the state. Sales in Washington - including increased border bleed - are up less than 15% and they have twice as many stores, open all day Sunday, Direct Wine Shipping by permit (the same as you propose), grocery store sales, and one stop shopping that you don't even propose: even if you double that because Washington only privatized liquor, you are nowhere near the increases you say will happen. Plus, there is no mention of cost increases for staff, admin, transportation, utilities, increased pension, medical or any other costs associated with a 62% increase in sales.

Open invite to Rep. DiGirolamo: if you respond, I'll publish it, but if you don't, I'll take that to mean you really don't want to have the debate extend beyond your own sound bites.

Bare minimum is too much customer service for Pittsburgh state store

PLCB Employee Customer Service Briefing
According to a few sources the retail customers -- the taverns and restaurants -- who are forced to buy their booze at store #0247 (5956 Centre Ave, Ste 201, Pittsburgh) are being "coddled" too much.and have the gall to expect the same level of service that is given by free market (or what we call "regular" or "non-monopoly") stores or other vendors. Never mind that almost every other vendor a business has to deal with will deliver: the state stores don't. One would at least expect that all the time they save by not delivering could be put to use fixing any problems that may occur in licensee orders. Don't bet on it.

While telephone orders are still taken, most licensees use the computer automated system to place their orders, thus removing most chances for human error. Shortly, it will be mandated to be all computer driven by LOOP (Liquor Order Online Program if I remember correctly) so any mistakes from phone orders will be gone. But the licensee may still order the wrong thing, and the State Store may put the wrong product in the box, or order the wrong item from the vendor. Switching out a wrong item in the box is more of a pain than a problem, but when the wrong item is ordered, it may take weeks to straighten out.  It can be even more difficult because there are items offered to the licensees that are not available to the public, so they're not on the shelf somewhere else, where they could be pulled to correct the order.  (Yeah, that's right: the PLCB not only offers limited selection to you and I, they don't even offer us everything they have!)

Given the frustration waiting that long must create, sometimes the licensee involves the vendor, through the state store, to help out.  That seems to be too helpful for the manager at store 0247, so now "...employees are no longer allowed to call the vendor when they send the wrong product." That's according to Richard Swartz, a Pittsburgh bartender who's involved in this ridiculous pissing contest.


Ryan Eberlein, another licensee customer of store 0247, backs up what Richard said, "This is my store and I know this manager, and it's no joke." He added, "Also, let's understand the premise of this relationship... if the state accepts and sells the wrong product -- doing the only thing required of them, incorrectly -- we have to bring it to their attention and wait weeks to months to get it resolved." He continues, "Only a cartel can treat its customer with such disdain and disrespect. Only a monopoly can say basic customer service is too much."

Now in a normal state with normal liquor retail, Ryan could find a store that not only treats him better, but also helps resolve any problems he may have. Not to mention, they'd deliver, saving him time to do other things to help his business. Under the State Store System, he doesn't have that choice. All the stores are the same, all the products are the same, the lack of delivery is the same -- everything is decided by Harrisburg, where the only interest is for doing the minimum amount required to save their jobs, not to satisfy the consumer. Are there exceptions, clerks and bureaucrats who do try to stem this sluggish tide of indifference? Of course...and they are just that: exceptions.


We'd like to thank Ryan and Richard for speaking up, as the PLCB is well-known among licensees for practicing a petty and vindictive retaliation when their idiocy is pointed out. If that happens, we encourage them to report it. 

Monday, April 6, 2015

The Citizens Proclaim: April is Alcohol Monopoly Awareness Month

Commonwealth citizens — we, the people forced to shop at State Stores — issued the following statement today.

The Citizens want to remind all Pennsylvanians that April Is Alcohol Monopoly Awareness month.  All people of the state should take notice if anyone they know is suffering from any of the following symptoms.

You may have a monopoly problem if you:
  • Feel guilty or ashamed about about buying in a state store.
  • Lie to others or hide your out of state purchases.
  • Have friends or family members bring back cheaper items in their travels.
  • Need to go to real liquor stores in order to save money and feel better.
  • "Black out" or forget what you did while going to 3 different places in PA.
  • Regularly don't find what you want at the price you want in state stores.
"Monopoly is not usually caused by a few purchases. Like with any other money addiction, it is a Legislative disease that can affect any Representative," said the acting Secretary of Consumer Affairs. "Too often, stigma, laws and fines associated with monopoly will many times prevent individuals from seeking better shopping experiences elsewhere. We want to encourage individuals to seek help for their monopoly problem, to get the state back on track to something normal. This is a disease that requires privatization; and privatization works."

Underage drinking is also a concern. Research shows that kids on our borders are less likely to abuse alcohol even though they don't live in a monopoly state. That coupled with lower rates of DUI, DUI fatalities. and binge drinking in the non-monopoly border states make not living in a monopoly a better choice for most people.

Don't believe "control" is dangerous? Listen to the grand imperial wizard of booze monopoly explain it. "A very important part of the PLCB's mission is to promote more consumption among those 21 and older," said PLCB Chairman Tim Holden. "Can't hit that extra $185 million the Governor wants without vastly increasing sales. With the new super-modernized monopoly power, we can raise prices and put up stronger border prevention to make sure people only buy in PA."*   

Together we can prevent the monopoly from affecting another generation of Pennsylvanians, stop our citizens from being the laughingstock across the land, and finally get the price, selection, and service that has been denied to us for over 80 years. Contact your legislators and ask them to end the monopoly and move Pennsylvania back to normal...do it for yourselves, do it for the children.



The Citizens represent most of the 12 million people in the Commonwealth who work in the southeast, northeast and central, western and all parts of  Pennsylvania in supermarkets, drug stores, food processing plants, government services, manufacturing facilities, nursing homes, professional offices, and all businesses, except Pennsylvania's "Fine" Wine and "Good" Spirits Stores.


*No, Tim Holden didn't actually say that; this is satire. 

Monday, March 30, 2015

The difference is....

Pictures are worth a thousand words.

You will buy what we allow you to buy
The Pennsylvania State Store System. Broken beyond repair.


Come see 10,000+ choices actually on the shelves!
















What most of the country considers normal. We could have substituted any number of stores for Total Wine here: Spec's, Binny's, K&L, Federal, Liquor Barn, and on and on.

Something we read in a recent letter about the State Store System in a Pennsylvania newspaper really resonates. The writer pointed out the problems with the system, the proposed "modernization" non-solutions, and wound up with something brilliant.

End it, don't mend it.

We couldn't agree more.