Tuesday, January 10, 2017

This will only hurt a little bit, we're just flexible pricing.

On January 1st, the PLCB raised the price of 341 bottles of Booker's Bourbon from $59 to $99.99, a 66% increase. Bottles that they already had in stock on the shelves across the state. Bottles that they had already bought and paid for at a lower price. This was in anticipation of the published March or April price increase by Jim Beam on NEW product.

However, Beam didn't increase the price to $99.99 due to consumer pressure and outrage, They decided that an increase to $69.99 would be enough at the moment, and changed their minds before the actual price increase took effect. So how come the PLCB price went to $99.99 anyway? (Update: the PLCB has belatedly lowered the price to $69.99...but you are still paying more for bottles they bought at a lower price.)

The PLCB excuse was that they raised the price for Booker’s to $99.99 on January 1 “at the request of the vendor,” according to PLCB spokesman Shawn Kelly. I'd like to see that in writing. Remember: Beam gets no benefit from an immediate price increase, so what the PLCB is saying is that Beam told them, 'Hey, fine. Screw your citizens by raising the price across the board, limiting sales and competitive pricing of our product so you can make more money in your little monopoly.'

There are two factors at work here, a desperate desire to maximize 'profit,' and lack of any consumer protection and overwatch. The PLCB used to brag about how they controlled price increases, saying that industry instituted more increases then they had, but now increases are seen as a way to make more money for the state by gouging the consumer.

How does that work? Say Bottle "A" sold on the shelf for $25 before "Flexible Pricing;" the PLCB paid about $14.50 for it before all the taxes, fees, markups and rounding they add. Now, with "flexible pricing," the bureaucrats decide to negotiate to try and save themselves some of that money. (Negotiating is something they could have been doing all along when it would have benefited the consumer, but they chose not to. But now it benefits the PLCB, so full speed ahead, boys!)

Back to the example. The PLCB knows that another state's monopoly system only pays around $12.30 for the same bottle. They've known for decades that other states pay less, and decided not to do anything about it. There was a conscious decision that having a lower price yet selling more product to increase overall sales was not something the PLCB wanted to do. Too much work selling that extra amount of product for that sales increase, apparently. Yet, keeping the same price, selling the same amount, and gouging the consumer by not passing any savings along when producers offered deals was decided to be perfectly acceptable.

The PLCB now manages to get $1.50 shaved off of the wholesale price. To make sure that the same amount of taxes are collected, they increase the markup from what used to be a standard 30% to nearly 47% to reach the same point to apply the 18% Johnstown Flood Tax. The consumer sees NONE of the price reduction from the agency's "buying power." The state doesn't collect any more taxes, but the PLCB gets to say they are making more money, and they cover their ballooning operating expenses for another few years. Remember: the amount the state gets by having the PLCB in the middle is less than they would get if taxes were raised by the same amount. The cost to the consumer is the same. In other words, we get to pay more to keep the PLCB jobs program afloat.

Here's another example of the "benefit" of flexible pricing: sale items. The PLCB itself doesn't put anything on sale, other than closeouts (of items they can't be bothered to sell), and out of season items ,like the Christmas gift packs that are on sale now. Everything else that you see a sale tag on is a reduction from the producer. Formerly, the PLCB had to pass on those reductions to the consumer; that was the law (and a good law to keep a monopoly in check). What they can do now is "recapture" some of that savings that was supposed to go to you, the consumer, through the magic of "flexible pricing."

Here's how that works. Suppose a distillery offers a $5.00 off special to the PLCB. Used to be that the PLCB approved the sale, printed up sale tags, and the citizens got to pay closer to what some other places charge. But under the new "modernization" law, "flexible pricing" allows the PLCB to decide that they don't want the citizens to have $5.00 off, that $3.00 off is good enough ("Good enough" should be their agency-wide motto), so they take the full $5.00 discount from the producer, print up sale tags for $3.00 off, and they keep the other $2.00 - such a deal! Doesn't that make you feel good about "modernization"? Don't you wonder what rat hole your two bucks is going down?

PLCB apologists will point out that private business can and does do the same thing. Sure, they can, but there is one thing that keeps that in check: competition from other businesses. If you decide to keep that extra $2.00, but your competition down the street (remember, private liquor sales means a "alcohol on every street corner") doesn't, and guess who will have more sales? But pass on some of that wholesale price reduction to your customers, and who will have more repeat business?

This is the heart of it. The total lack of competition in Pennsylvania is why we pay more, why we have less convenience, why we have less selection, and why we don't have the same protection from price gouging the free market provides. Don't like what the State Store System has, at the price they charge? Screw you, you have no choice. But if you're in a free state, and you don't like what Bob's Liquor has at the price they charge? You can just go somewhere else where the selection or prices are better.

This lack of choice will always make the citizens serve the needs of the PLCB  instead of them serving the needs of the citizens.

Tuesday, January 3, 2017

New Year Wishes

I wish the PLCB would stop bragging about going from 601 stores to 608...when they used to have 760.

I wish the PLCB was less focused on hiring "good ol' boys" who know their cockamamie 'system'...instead of people who actually know liquor and liquor retail.

I wish the State Stores were even more convenient than when there were 760 stores.

I  wish that sometime, before the end of the decade, all the State Stores at least had the same name.

I wish that "wine specialists" were actually required to have formal, industry-recognized credentials before they were called "wine specialists."

I wish the people who select wine for the entire state had to have even better credentials than the "wine specialists."

I wish there was somebody at the PLCB who really knew whisk(e)y, above what they read in the labels and importer sell-sheets.

I wish that the Legislature understood that "flexible pricing" is PLCB-speak for "gouging the consumer."

I wish that the Legislature would stop mucking around with beer sales and simply let everybody with a license sell any size or quantity.

I wish that if we couldn't do that, at least the Legislature were smart enough to realize that not every gas station and grocery store wants to be a restaurant, and come up with a purely take-out license.

I wish that if we still have to keep the licenses as they are, we could at least go back to the older, higher quota of licenses per county, so that independent, Pennsylvania-owned small businesses had a better chance of getting one.

I wish that the BLCE was funded at the same level as 2000 so that all these new places could be checked for compliance...including the State Stores, which never are.

I wish that the FBI, once they complete their investigation of PLCB leadership, will come down like the Hammer of God on all involved.

I wish that the PLCB knew something about marketing to realize the exact same selection doesn't have to be sold at every single store from Center City Philly to beautiful downtown Snow Shoe, and that specialization in retail works for a reason.

I wish that the PLCB knew something about math and economics before they made decisions.

I wish the PLCB had people with real world experience make those decisions.

I wish that the PLCB and the Legislature would take a road trip across the Delaware and see what a real "superstore" looks like.

Most of all, I wish that we end this farce of "acting like a business" and let real business handle this business, and leave the PLCB free to do what government agencies are supposed to do: handle regulation and enforcement.

When something doesn't work, or work well, for 83 years, you don't "modernize" it.

Privatization fixes all of the above. Let's stop trimming around the edges and get it done.

Tuesday, December 27, 2016

We can't do wine (but we can't do whiskey, either!)

We recently did our annual look at how the PLCB did supplying the state with the top ten picks from Wine Spectator. But whiskey drinkers get screwed just as badly by the PLCB's inability to pick the best. Whisky Advocate is rolling out their best-of picks for the year; let's see how well the PLCB did in picking the hottest segment of the spirits industry.
If we don't have it then you don't need it.

Craft Whiskey of the Year 
Bainbridge Yama American Single Grain Barley Mizunara Japanese Oak Cask -- Not in PA, no SLO 

American Whiskey of the Year 
Booker’s Rye -- On-line only - Sold Out  

Canadian Whiskey of the Year 
Crown Royal Cornerstone Blend -- In Stock! Wow!

Irish Whiskey of the Year 
Redbreast Lustau Edition -- Not in PA, no SLO

Japanese Whiskey of the Year 
Yochi Single Malt -- SLO only

World Whiskey of the Year 
Amrut Spectrum -- Not in PA, no SLO

Blended/Blended Malt Whiskey of the Year 
Ghosted Reserve 21 year Old -- Not in PA, no SLO

Speyside Single Malt Whiskey of the Year  
Glenrothes Vintage Reserve -- Not in PA, no SLO 
(To me, as a Scotch drinker, it is unbelievable that the PLCB doesn't carry this.)

Islay Single Malt Whiskey of the Year 
Lagavulin 25 year old -- Not in PA, no SLO

Highland Single Malt Whiskey of the Year 
Brora 38 year old -- Not in PA, no SLO

Lowland/Campbeltown Whiskey of the Year 
Ailsa Bay -- Not in PA, no SLO 

So what do we end up with? One whiskey in stock, and actually on the shelf. Another that was online only, and one that you might be able to get SLO. Three for eleven is nothing to brag about -- especially for the PLCB's oft-touted vast buying power -- and further proof the bureaucrats in Harrisburg aren't very good at selecting what the entire state has to choose from. The PLCB claims to be "world class;" that might be true, as long as that world isn't the one of private retail.

When something doesn't work, or doesn't work well, and hasn't for 83 years, you replace it.  Pretty simple, really.

Wednesday, December 21, 2016

A Christmas Gift for the PLCB

I don't often do things for free, and I don't do much at all to help the PLCB. But in the spirit of Christmas, here is my gift to them. I'm giving it to them early, so maybe they can get a head start on using it. I'm not optimistic about that, but you never know.

One shining example of beneficial government regulation is the Pennsylvania Department of Agriculture registration for all baked goods (widely defined as any food that has been cooked in any way). They are good and sensible health regulations for those foods. That is why you see "Reg. Penna. Dept. Agr." on so many products. If you sell it in Pennsylvania, it must comply with the rules we have here.
HARK!  I bring you higher variable prices!
If the PLCB is going to pick our pockets with "variable pricing," they could try to make it up by applying the same kind of forward thinking the Department of Agriculture did in 1933 to protect the citizens. How about if the PLCB required labeling for the amount of added sugar in wine and liquor? There are some wines that have the same amount of sugar per serving as Mountain Dew (Barefoot Moscato is one), and of course the flavored whiskeys and rums almost all have large amounts of sugar.

By requiring sugar content labeling, the PLCB could finally help improve, in some small but significant way, the health of the citizens. It's not completely new, either: both the LCBO (the Liquor Control Board of Ontario, the largest purchaser of wine and spirits in the world), and the Quebec SAQ (their liquor board) require the sugar content be made available on their websites already, so every major vintner, along with thousands of smaller ones have the information ready to go.

The PLCB could and should go further by mandating sugar content be listed on the label. Like anything governmental, it doesn't have to be immediate, say one year to get the sugar content info on the website, and then four years before it HAS to be listed on the label.

So if the PLCB really wants to be a world-class leader, wants to benefit the citizens, wants to help combat poor health, and wants to do something for the first time in 83 years that actually is helpful to their owners (that's us!), they should jump on this bandwagon wholeheartedly. I know it will be a hard pill to swallow, taking an idea from me, but guys: you can always claim it was "under consideration" for the past few years. I won't tell.

Friday, December 16, 2016

Why the PLCB will never be anything but 2nd class

Business, not some funny-money state-owned monopoly business but real business, is driven by being able to supply consumer wants and needs before your competition. Being first to market with innovative marketing and products, seeing a demand and then filling it before somebody else does. That's how business succeeds.

Here in Pennsylvania, we get none of that from the PLCB; we get wine kiosks. They were innovative only in the sense that some bizzaro administrator convinced a board of political donor lawyers with no business acumen, that people really want to blow into a tube and pirouette in front of a camera just to get a bottle of Barefoot. Lesson learned: not all innovation is good.

The PLCB, by its very nature, can only follow. The board, with no experience in the industry, follows the recommendations of the PLCB directors...who in turn also have no real experience in the industry. It's a classic case of the blind leading the blind.

Buy more Baaaaaarefoot!
They can't lead on new trends, because nobody has told them what those trends are yet. They have to be offered products; they do not have the ability or knowledge to search out new things. Even once they are told, there are months of delay while products are submitted and maybe (or maybe not) approved. Does that sound like striving to fulfill consumer wants? Or being a sheep and following the herd?

The PLCB got an award from the control state "business association" (it is to laugh!) this year for being the second first place awardee for the licensee online order system; somebody beat them to it last year. Since there are only seventeen control states left to choose from, and the PLCB got skunked on every major award last year, well, it was their turn this year. But it isn't innovation when you're doing something after it has already been done.

The PLCB only has one goal; to keep the PLCB open. That's what "flexible pricing" is all about. It will allow the agency to keep the lion's share of any price reduction from producers, just to keep its bloated carcass afloat, and "prove" it is good for the state; a "cash cow" as the defenders say. In real business, cost reduction is usually applied to the item for sale to gain an advantage over competitors. No reason to do that here, because in Pennsylvania, there are no competitors. The PLCB says they won't take advantage of this but since there is NO oversight, NO required item reporting, and NO indication to the consumer in the board minutes...How will we know? Wait a year and see that the gross margin went up from 45.46% to 50% or 55%, and realize that every point of that came out of our pockets? What recourse does that give us?

A monopoly with no competition, no need to advertise, with a workforce over 40% part time, and it can't survive on a 45% markup? Walmart's gross margin is 38.2% and Target is 36.1% and they seem to make money just fine. And they have to compete not only with each other but with all the other stores out there. Sounds like the American way of shopping: multiple retailers offering the consumer a choice, trying to get their business by offering lower prices or added value or both. Does that even remotely sound like the State Store System?

Remember: the only way the State Stores can make that extra $50-70 million is if they take it from your pockets, by raising prices, and by not giving you what every other real business does — a choice.

When something doesn't work, or work that well, you replace it.  Pretty simple, really.


Tuesday, December 13, 2016

More bad wine news for the PLCB

StateWays is a control state magazine, put out by the NABCA (National Alcohol Beverage Control Association) for the 17 control states to pat themselves on the back for thinking they are doing such a good job running their police-enforced monopolies (which have a guaranteed zero chance of business failure; tough to lose when you write all the rules). They also put out a yearly best wines list, and it only seemed fair to compare the PLCB's performance to their colleagues, after seeing how badly they did compared to the wine pros at Wine Spectator

As a first look, here's how the PLCB did last year on the StateWays Best Wines of 2015 listing. The list doesn't note if their selections are available in control states or not, but a quick check of the top two in each category shows that the Pennsylvania State Stores:
  • Don't have the top 2 Malbecs
  • Don't have the top 2 Sauvignon Blancs
  • Do have the top Rosé, but only through SLO (minimum quantity 12 bottles!) and priced 7% higher than the magazine lists.
  • Do have the #2 Rosé...in five of the 603 stores, at only 9% higher than the magazine lists.
  • Don't have the top 2 American Cabernet Sauvignons
  • Do have the #1 Merlot, but as SLO only (minimum quantity 12 bottles!) at 71% higher ($50 ea) than the magazine price.
  • Don't have the #2 Merlot
So the PLCB stocks 1 in 10 (at 5 stores) and you can get two others if you want to pay more; sometimes a LOT more. (We're always told by the State Store Apologists that these SLO-only and allocation situations are set by the suppliers, not the PLCB. Really? Then why don't they set them for the other control states?)
This year StateWays decided just to make a straight list, not breaking it down by varietal. Let's see how the PLCB did for the top 10. Remember, these are wines selected by other control states, just like PA. The "Best Wines of 2016" list:

#10 - Valenciso Rioja Reserva 2009 ($42.95) -- Not in PA, No SLO

#9 -
Bouchard Père & Fils Beaune Clos de la Mousse 2011 ($65) -- Not in PA, No SLO

#8 - Ravenswood Teldeschi Vineyard Zinfandel 2013 ($37) -- Not in PA, No SLO

#7 -
Hamilton Russell Vineyards Chardonnay 2015 ($33) -- The PLCB manages to stock this one...in a whopping 3% of their stores, and look at that: at a price below list! Wow. The blind hog finds an acorn.

#6 - Dr. Konstantin Frank Rkatsiteli 2015 ($14.99) -- Not in PA, No SLO (The PLCB will try to pawn off last year's vintage for a buck over list price, though.)

#5 - Domaine Tournon Shiraz Lady’s Lane Vineyard 2012 ($60) -- Not in PA, No SLO

#4 -
Domaine Sigalas Santorini Assyrtiko 2015 ($27.99) -- Another surprise: the PLCB stocks this at 5% of their stores selling for $3 under list.

#3 - Castello Banfi Florus Muscadello 2012 ($30.99 per 500 ml) -- Not in PA, No SLO (You really have to be careful when searching for this: the PLCB decided to call it just "Banfi Florus" instead of "Castello Banfi Florus." Put the "Castello" in, or just "Florus" and you won't find it, no matter what "improvements" have been done to the PLCB search engine.)

#2 - Maison Ambroise Corton Charlemage Grand Cru 2007 ($185-250.00) -- Not in PA, No SLO 

#1 - Paul Hobbs Cabernet Sauvignon Las Piedras 2012 ($278) -- Not in PA, No SLO

Equaling their insipid performance from 2015, the PLCB can only come up with a total of two selections from this control state-approved wine list this year. Still, they aren't overcharging like they did last year......or at least not yet.

So not only can't the PLCB match what the professionals pick, they can't even match what is selected by other control states. I wonder if we beat Utah, since that is one of the goals of the PLCB.

When something doesn't work, or doesn't work well, you replace it.  Pretty simple, really.


Thursday, December 8, 2016

Can our bureaucrats pick wine? Let's see. (Part 3)

The third and last part of our yearly top 10 comparison of the PLCB's bureaucrat wine pickers to real professionals at Wine Spectator. If you missed Part 1 or Part 2, you can check them; quick recap is pretty simple — the PLCB has two of the top 9 on the shelf. One is available at 5% of their stores, the other at 10%. Not exactly stellar, but that's what the citizens in PA have come to expect. When you select for the entire state, you should be able to select the best...or you have failed. We've pretty much been living with failure in PA for 83 years.

So now it comes time to see if somehow, someway our bush-league Harrisburg cube rats managed to see the value and order the #1 wine.

Wine Spectator says:
Lewis Cabernet Sauvignon Napa Valley 2013 (MSRP: $90; cases bottled: 1,600)

Did the PLCB get it? Did they? 

Of course they didn't, are you kidding? Lewis Cabernet Sauvignon is not available here: not just this vintage, but any vintage, and no SLO either. Why would you expect otherwise? The PLCB has a history of failing to satisfy wine aficionados and the citizens in general so why would this year be any different?

But you can find it in private stores in other states, just the way you could here, if Pennsylvania were allowed to have private stores owned by people passionate about wine.

Now I understand that $90 wine isn't for everybody. In fact, that's one of the arguments the pro-PLCB types bring up: "Why do you need that $90 wine?" But when you are the only legal outlet, you have to provide for ALL wants and desires — within reason — just like the private market would. They may say, "No private store has all of these wines!" That may be correct but in the real world of retail you can go to another store that does. Anything less is failure, and we have been accepting failure for far too long.

So with a dismal record of 20%, the PLCB marches on to the beat of trying to survive at our expense, of not satisfying consumer needs, of being inconvenient and incompetent. Of being second rate, because they will never be able to lead.

I'll have some other PLCB wine info coming up and we'll see if they can come closer to the professionals...or if they remain the 1,000 monkeys typing away at 1,000 keyboards trying to replicate Shakespeare.

When something doesn't work or work well...you replace it.  Pretty simple really. Privatize.