Wednesday, August 31, 2011

Some wholesaler stuff

I've been hearing a lot of -- well, a lot of crap from anti-privatization interests (which pretty much means PLCB bureaucrats, UFCW members, Democrat legislators, a couple social conservative Republican legislators,, actually, that's about it) about how the wholesaling's going to be terrible under privatization (and if HB11 stays the way it is, it may well be, but that can -- and better! -- change before it's voted on), and how big stores are going to crush mom and pops and leave us with no choice (like we have a lot now). 

This ignores, of course, what actually happens in states where private liquor sales are the norm -- like New Jersey, New York, Massachusetts -- and all kinds of stores thrive and the selection's just fine; real good, in fact, at many stores. Not all, but you don't have a great selection of groceries at every store that sells groceries, right? There's selection, there's specialization, there's price, and there's convenience to be considered.

Anyway, I was thinking about this when I saw this interview with Michael Binstein in Shanken News Daily [full disclosure: my major client, Malt Advocate, is owned by M.Shanken Communications...for what that's worth], the owner of the big Binny's chain of booze stores in Illinois. They have 25 stores, and the selection is tremendous; love going there when I'm in Chicagoland. 

I saw some pertinent stuff that I wanted to share.  Please notice: Binstein is bullish about expanding, not keeping a cap on his number of stores. He sees competition, and meets it (without the help of the state police). And he sees opportunity for wholesalers who want to work hard, and for small retailers. This is a smart guy, who knows the market, and is successful in it. Probably ought to give what he's saying some consideration.

This is not the whole interview.

SND: In the last four years, you’ve expanded from 19 stores to 25 stores, mostly through acquisition during a very difficult economy. Has your investment paid off? Binstein: The honest answer is that the investment is paying off. Time is the ultimate test, and one needs a certain amount of humility. But there’s not a single acquisition, store opening or expansion of our model that I would take back.
SND: How big a player are you in the greater Chicago market? Binstein: I’m told we’re the largest independent in the Midwest, and certainly the largest independent in Illinois.
SND: Who do you consider to be your biggest competitor in your market? Binstein: This is going to sound like a cliché, but I think anyone and everyone who holds a liquor license is competition, and there are tens of thousands of people who do. Convenience should not be underestimated. We may have the selection, we may have the best price, but with gasoline nearing $5 a gallon, people have to make tough decisions. Every player at every trade channel has a contribution to make. So there’s not a competitor that I minimize.
SND: Do you have any plans to expand to other states? Binstein: We’re keeping an open mind. We certainly have looked, and there are opportunities. But there are so many places within our market, so many communities and areas where we still think we could open a store. I think we’d like to finish Illinois before moving on.
SND: How are your relations currently with major suppliers?
Binstein: They can get very ideological—if not theological—about pricing. I think a bottle of wine, or liquor or beer, is like all commodities. It’s no different from selling soybeans, corn or wheat. It has a price, and it’s based on supply and demand, and it ebbs and flows in every market. Just as the corn, soybean or wheat broker or farmer can’t get too ideological or theological about what a bushel should cost, the same goes for our business. One of the oxymorons in our business is something called price integrity, when suppliers believe something should cost $20 or $30 and they don’t really care what the customer thinks it should cost. I think that’s a very myopic, unprogressive way of looking at business. This is not a very popular thing to say.
SND: How about wholesalers?
Binstein: There are bad retailers and there are bad wholesalers. There are lazy retailers and there are lazy wholesalers. I’ll leave it at that, but I will say that I think wholesalers have an opportunity, a very unique opportunity, to make themselves even more indispensable in this era of consolidation, because suppliers are looking for foster parents. Suppliers are no longer the primary caretakers of a brand. They may actually possess the birth certificate for the brand, but they need other people to nurture, raise and educate the brand. The suppliers have gotten away from brand-building, and now it falls more and more to the wholesaler and retailer to build those brands and fill that void.
SND: Are there still opportunities for small entrepreneurs in beverage alcohol retailing? Can a small, single-unit store survive and thrive in today’s climate?
Binstein: Absolutely. There’s never an opportunity to overcharge and under-deliver. As long as we’re not using code language to ask the question, “Is it still okay to work at outrageous margins and not give people the selection they deserve?” There should have never been that opportunity, and there isn’t that opportunity now. There’s room for the Davids and the Goliaths. And they both need each other.

"Just give me something"

I was talking to a licensee (that's PLCB-speak for a bar owner) the other day about this whole thing. What do you guys think about the movements towards privatization, I asked her.*

"What kind of chances do you think it has?" she asked in response. "Is this really going to happen?" I said that I'd heard G. Terry Madonna, the Pennsylvania politics maven at Franklin & Marshall College (full disclosure: I am a proud F&M grad, class of 1981, and if you have high school age children, you should consider this excellent college.) discussing it; his opinion was that it was the best shot we'd had at privatization since Repeal...and he gave it a 40% shot. That was back in the spring, though, and things had moved forward since then; insiders tell me that the votes are there in the House, and the Senate's swinging our way (and there may yet be some action from a Marcellus Shale tax deal; a 'you vote for my bill, I'll vote for yours' kinda thing). So again, I said...what do the licensees think about this?

"I'll tell you," he* said, and paused. "The Tavern Owners don't know what to do. You know, it would be great; in other states, the Absolut rep would come to you and say, 'I got a deal on this week; you buy two cases, I give you this price,' and I could say, well, what can you give me if I buy four cases, and he'd say...ooookay, and he'd give me another price, and then, then I could pass that on to the customers, do a special that week." And, I said, not only that, they'd deliver it to you. "Right!" they both* said, beaming.

"But you know," he* continued, and got right in my face: "The prices we have to pay are crazy. We don't get a good discount. And the beer sales thing? [meaning the six-pack sale monopoly taverns currently have] We know the beer stores are going to get into wine and liquor sales if this goes private; they've got the money, they're already set up. We're going to lose a lot of takeout sales [we'd already guessed that wine and spirits in the distributors would mean sixpack sales there as well], I know that, but no one's putting anything for us in the privatization [bill]. Just give me something! Ease up some of the regulations, cut back on the fees; just give me something."

Why don't you say something, I asked. They* shook their heads, and she* said, "We don't know if it's going through." The implication was clear: no one wants to piss off the PLCB by being openly pro-privatization...and then face the bureaucrats if it fails.

My advice to the 'privateers' (as Hereditary Union President For Life Wendell W. Young IV has wittily tagged the pro-privatization forces): give them something. Put something in the bill that acknowledges licensees are getting a raw deal; level the playing field by putting no exclusivity on suppliers -- let licensees buy from whatever source they want -- or take off that ridiculous 'happy hour' restriction, or let all bars sell packaged goods (to-go wine, liquor, and beer) and don't tell them how they have to do it. You'll get a powerful ally...and be a giant step closer to getting privatization.

*Might have been a woman, might have been a guy, might have been a husband and wife; might have been around here, might have been up in Clinton County where I was vacationing...I ain't saying, for obvious reasons.

Tuesday, August 30, 2011

Auditor General: "The Board and the vendor lost credibility..."

I'm back from vacation...and apparently just in time! Auditor General Jack Wagner's audit of the wine kiosk fiasco -- sorry, program -- is out today, and it's pretty much unforgiving. Well, the man's an auditor; of course it's not forgiving, that's not his job, and this was a fiasco. Some pertinent stuff (the full report's here in PDF format; the AG's statement is here (added emphases are mine, of course)):
Wagner’s special performance audit...chronicled the problems that existed from the beginning of the ill-fated kiosk program. The six findings, are:
  • The board used kiosk technology that effectively controlled the purchase of alcohol (about the only positive statement in the whole report)
  • The board followed state procurement requirements, but the request for proposals did not enable fair and just competition
  • The board and the sole responding vendor negotiated the kiosk contract in ways more advantageous to the vendor than necessary
  • The board spent $1.12 million more than it took in over two fiscal years and has invoiced the vendor for the losses. But the vendor has not paid
  • The board and the vendor lost credibility when the kiosks malfunctioned,
  • The board overstated the convenience of the kiosks
Note that he says "effectively controlled the purchase of alcohol." Not "efficiently," or "nonintrusively." The same thing could have been "effected" by a live person standing at each kiosk -- which the malfunctions eventually also required -- and the statement would have still been true. But weak competition on an RFP, vendor-favorable negotiations (when the vendor is heavily invested in campaign contributions to a sitting governor), losing money on a supposedly cost-free project, operation failures during the busiest sales season of the year, and the total cluelessness on the definition of "convenience?"

Look, read the statement, which covers most of this. Read the actual report, and pay particular attention to Section C, beginning on page 71, where the Board responds to the report. The AG's report takes that response and pretty much shreds it, saying over and over that the Board simply chose not to respond to some (the most awkward) of its findings.

But the message here? The wine kiosk program was a failure. Black and white, accountant-certified, this thing was a catastrophe. The break-even point -- as stated by the PLCB -- was 210 bottles a week per kiosk; only 3 out of 32 machines met that threshold; 17 -- over half! -- sold under 100 bottles a week. They simply didn't work: in the first three months of operation, "auditors determined that 1 out of every 21 transactions was problematic." That's leaving the general shadiness of the contract and the apparent lack of any escape hatch for the Board aside!

And the response from PJ Stapleton (who apparently may have been reading a different report)? "As it has done throughout this process, the Board will attempt to take whatever steps it can to maximize the possibility that the wine kiosk program will succeed."

PJ. Dude. It's over. Walmart blew you off. Wegmans blew you off. Where are you going to put these things? In Post Offices? In courthouses? Wait, wait, I know: how about in the State Stores! 

As I have said for a long time, the major problem at this agency -- beyond the tonedeaf attitude, beyond the terrible business model, beyond the insane insistence that the little stores out in the sticks carry thousands of SKUs when there's no demand for them, beyond the personnel system that doesn't properly reward product knowledge and sales competence, beyond all these serious problems -- is hubris. PJ and his Pals on the Board, Joe Da CEO, and their lieutenants have consistently responded to criticism with an attitude of 'you don't understand, what you call failure is innovation; what you call unethical is faithful to the letter of the law; what you call inconvenient is controlling the best interests of the people of the Commonwealth.' As if we are somehow too stupid to see that this is simply very bad management.

Let me lay this out in such straightforward terms that it can't be ignored.
  • The wine kiosks are a public relations and sales disaster that have indeed cost the Board credibility
  • The very real disaster of the PLCB's Oracle-based inventory system (subject of another audit) that wound up costing the Board hundreds of thousands in ruined wine (though they say it's fine, and what the hell do they care) and ad hoc storage fees in an absolute orgy of managerial ignorance
  • The "courtesy contract," which exposed the PLCB's total lack of basic sales skills and was awarded in a way that showed poor judgment and created the appearance of a conflict of interest, not to mention being an expense that was not worthwhile...according to the AG again (in...yeah, another special audit)
  • The embarrassing spectacle of over 20 workers at the PLCB's Philly warehouse being fired for undisclosed "financial irregularities" -- and they are still "undisclosed" 10 months after Joe Da CEO promised an investigation
  • The PLCB's large number of unprofitable stores -- in a police-enforced monopoly -- and questionable business models
  • The beer registration raid fiasco, where the PLCB's ineptly-kept beer registration database led to pathetically comic 'raids' by armed BLCE officers on three respectable Philly restaurants and one respectable Philly wholesaler, costing them thousands in lost time and sales (read it all here and here)
  • The terrible record on nuisance bars (sure, it's the BLCE doing the enforcement, but the PLCB does the administrative punishment, and it's soooooo sloooooowwww....)
That's just in three years. Three years! I mean, speaking pragmatically, PJ and Conti have been a godsend; they're making my job easier. But speaking as a PA taxpayer? When are they going to resign because of their incompetence?! These are major screwups, this is a terribly run agency that lurches from one disaster to another, reacting to the Legislature, arrogantly ignoring the Governor and lawyerly disagreeing with the black and white criticisms of the Auditor General. But who do they answer to? Apparently no one. Which is, in my mind, one of the biggest Reasons of all that they need to be completely restructured, and the retail monopoly taken away from them.

Monday, August 15, 2011

A Plea for Civility; a plea for truth

First, watch this video. (very sorry; it's no longer available. Glad I took the time to transcribe so much of it!) It's Joe "Da CEO" Conti wrapping up his testimony at last week's Liquor Control Committee hearings (which were, apparently, largely about Conti and Hereditary Union President For Life Wendell W. Young IV speaking for as long as they could...probably because they know that if you talk till lunch, most legislators will leave and not give any time to your opponents) with "a little bit of a challenge for civility to the proponents of the bill (HB11)."

He then quoted legislative press offices and "a think tank" -- which I assume is the Commonwealth Foundation -- making remarks about the PLCB and him that...well, they were things like "The PLCB doesn't care about the consumer; ineptitude, goofy, or systematic malfeasance," and "a state system that is broke, even Joe Conti realizes it," and "a state of perpetual tone-deafness...the PLCB should stop acting like coneheads and communists."

Okay, Joe's feelings are hurt. (Mine are too; he didn't say anything about some of the stuff I've said about the PLCB.) But he's clearly never been the target of a Tony Auth cartoon (looks like a conehead to me). This is the "rough and tumble of public life:" man up. I get hate mail all the time -- really, people actually bother -- and you don't see me crying about it, and certainly not to a legislative committee...oh, right. Conti is a former legislator (who didn't get re-elected because he was completely tone-deaf about the legislative pay increases a few years back), and he's looking for professional courtesy from former colleagues. Nice. If only we could all expect such courtesy.

But he blew it -- for me, at least, and I hope for anyone else with a spot of brain matter -- when he then immediately started spouting the UFCW party line about newspapers. See, the UFCW has seen that almost every newspaper across the state has editorialized in favor of privatization, often scathingly, and they needed a response. Their response: the newspapers are doing it for money, because of all the advertising bucks they'll make off private liquor stores. (Though the PLCB spends big bucks on advertising now, and the Inky runs full-page ads for cross-border liquor stores -- more proof of border bleed, Joe.)

So Conti's pleading for "civility," and the first thing he says after that "challenge" is this: "Now we understand many of the proponents are financiers of print media. I've met with most of them, they're very up-front about it, we get that. We understand that the think tank perhaps receives funding from these financiers..." And then he drops that, and goes off in a completely different direction of how "we welcome" this debate ("relish it," he also said). But he's slyly planted the stinking smear-seed that maybe the Commonwealth Foundation is just doing this for money, at the behest of "financiers" who are just doing it for money. Says that, and doesn't back it up, or have the guts to stick it home. Does he deserve civility?

And then he -- well, I was about to say "he lies," but let's be civil and say he once again clouds the issue by saying "If we disappear, your income tax has to go from 3.07 to 3.21 [percent]. You know that." What's he talking about? He's talking about The Johnstown Flood Emergency Tax and the 6% state sales tax that make up approximately 3/4 of the PLCB's "contribution" to the General Fund. And he's 'clouding the issue' by leaving you with the impression that if the PLCB is no longer the state's booze seller, no booze taxes will be collected, and the state will make up the difference with income tax. That's not lying, but it's the next best (worst?) thing.

He goes on to shamelessly wrap himself in the flag. Better get a kleenex ready. "We must be mindful when you walk by a playground, speak to a Rotary Club or a local Chamber, or when you visit a senior center, those Pennsylvanians are benefiting by the performance of this agency. And we get up every day, and we want to do a better job for the people of Pennsylvania. There's really no reason for the incivility we see." He's made selling vodka into an altruistic mission; amazing.

So right after saying there's no reason for incivility...he makes a threat!* Conti issues a challenge (he's got a whole pocketful, apparently) "Michael [Turzai] and Jonathan [Newman] and Matthew [Brouillette]" to debate the issues. "But let's keep it on point, because I'm warning you: if you get off point...[dramatic pause] I'm for the people of Pennsylvania. And anything that either purposely or inadvertantly diminishes our performance and diminishes our return, hits the pocketbook of the people of Pennsylvania, the innocent folks who may not be as emotionally invested in this as you, as the proponents are."

Conti calls for us all to be civil. Then he smears the intentions of the proponents of privatization, he deliberately misstates the results of privatization, he claims moral high ground (for an agency that performs retail sales?), and dramatically threatens his opponents. I don't owe Joe Conti anything. He's trying to set the terms of this debate to benefit the PLCB and himself. He says "financiers" perhaps fund the privatization proponents? He benefits directly from privatization not happening; he has a $150,000 a year job that will disappear if privatization goes through! Is it uncivil to bring that up?

What's civil in political discourse? No one's brought anyone's personal life into this (with the necessary exception of the husband-wife relationship between the winner of the PLCB's 'courtesy contract' and his wife, the PLCB regional manager), no one's made any personal threats, no one -- to the best of my knowledge -- has engaged in anything beyond a bit of name-calling. Does Conti ever watch Fox News or MSNBC (or Olbermann, wherever the hell he is now)? There is no need for excess civility; it's clearly an attempt to hobble the debate in favor of the PLCB and the status quo.

Meanwhile, Conti has other problems. It appears that earlier in the hearing he lied -- sorry, Stacey Witalec says Conti "misspoke," whatever -- about the PLCB's committee looking at the wine kiosks. That's in the Tribune-Review today. "In response to a question about that recommendation, Conti told the House Liquor Control Committee the report did not recommend against the LCB's plan." Oops, turns out not to be the case: "A review by LCB Chief Counsel Faith Diehl found the final report "recommends against going forward and does contain the word deficient," Witalec wrote in an e-mail.

Where's the civility in lying -- sorry, misspeaking, I keep getting that wrong -- to a state legislative committee made up of your former colleagues? 

*He also makes an amazingly inappropriate Blazing Saddles reference, but you'll have to watch the video, words don't do it justice. And remember the actual line that Conti bowdlerizes...amazing.

Sunday, August 14, 2011

PLCB Spirits Selection Sucks...just like we always said it did

I don't have numbers to support some of the things I thoroughly believe about the PLCB; one of those things is that the spirits selection sucks. Well, the whisky and cognac/armagnac selection in particular. But I didn't know for sure, I was basing it on what I'd seen in privately-owned liquor stores.

Nathan Lutchansky (PLCB Users Group blog) has the numbers, and it turns out we were right. Nathan got the numbers on how many different spirits the PLCB offers in a variety of categories (and actually different; not different sizes or gift packages of the same spirit), and compared it to four well-known destination stores: Astor, Binny's, Party Source, and BevMo. Take a look; it's an eye-opener.

The two most damning? Single malts: the PLCB offers a paltry 37, while the next smallest amount (BevMo) is 132, almost four times as many. The other? You won't believe it, but it's vodka. Add non-flavored and flavored together, and the PLCB offers 179, and we've often said they have too many...but in this group? They come in fourth out of five. They can't even do that right!

Hard numbers prove it: the selection at the PLCB sucks.

Friday, August 12, 2011

Wine Kiosk Debacle Footnote

The Commonwealth Foundation has posted the documents referred to in my previous Wine Kiosk post -- the ones where the PLCB's own internal evaluation committee advised against the wine kiosks -- here.

I don't really think any further comment is necessary.

State Stores Lose Money...and the PLCB's proud of it

In the Bizarro World of the PLCB, where crap selection and lackadaisical service make a store "world-class," apparently it is also a good thing to have 45 stores (out of 620-ish, about 7%) losing money! Is this all about the PLCB's touted "Serve The Rural Areas With Booze!" program (see below; sorry about the Chinese Communist Party-style title, it's almost irresistible with the PLCB)? Not completely, it seems like it's more about the PLCB's business incompetence. Check out this piece at the Pittsburgh Tribune-Review, which reports that "The LCB data obtained by the Tribune-Review show that the losing stores weren't all rural: Two stores in Brighton Heights and Downtown and one in Philadelphia were unprofitable in 2009-10."

But put aside how completely awful at business you have to be to not run a profit when you have a police-enforced monopoly. Joe "Da CEO" Conti says it's a good thing! Here he is in an AP story about yesterday's hearings:

Conti said a standard state store carries nearly 2,500 types of liquor and wine*, and that the board maintains stores in rural areas, even when they are not profitable, as a matter of fairness for consumers, which may not be the case under privatization.
"The bill cannot force a grocery store to bid for a license," said Dale Horst, the PLCB's director of retail operations. "If the PLCB can't make any money because the sales volume is simply not there, these areas may not be served at all."
Here's a thought: the number of stores in the state is set by the PLCB, not by law. They claim it's to cut down on drunkenness, on the ill effects of alcohol abuse. Really? Or is it because they've already got stores in all the areas that can make money using their horribly inefficient business model? Wouldn't it make more sense to go private, and allow the local grocery store to sell wine and sixpacks, and liquor if they want to, than to force a State Store to carry 2,500 different kinds of booze?

Check this assbackwards reasoning. They won't allow specialty stores in Philly and Pittsburgh to carry a large selection of wines and spirits, like the big stores right across the border, but they'll tell you that you can "easily" order from 30,000 selections (you know, odd sizes, and double-entered SLO/on-shelf items, but it's a lot, Joe Da CEO says so!) on their SLO system and have it delivered (to the store, not to YOUR house, that would be too easy). But then they turn around and force rural stores to carry a relatively broad selection of stuff -- and lose money on it! -- rather than pare it down to a reasonable selection...and let them order other stuff by SLO! I mean, if I lived in Snow Shoe, I suppose I'd be glad, but it's not like it makes sense.

Of course it doesn't. It's Bizarro State. Fix it. Privatize, boost the number of licenses, and kill the case law. Let the PLCB focus on enforcement. Fix the booze tax situation. Make booze law that serves the citizens instead of bureaucrats and business. Please.

*Compare that to the 13,000 SKUs of liquor, wine, and beer at the latest Total Wine to open in Florida. Or, if you'd rather, compare it to under 500 SKUs at almost any gas station or drug store in rural Maryland...which most rural Pennsylvanians would find incredibly convenient compared to having to drive an hour to get to a part-time State Store in one of the nine Pennsylvania counties that only have ONE State Store. Conti and Hereditary Union President For Life Wendell W. Young IV will tell you that lots of stores with a minimal selection is so much worse than one store in the 522 square miles of Adams County, or the one store in the 898 square miles of Clinton County, or one in the 405 square miles of Wyoming County...If only the Legislature would kill the case law, or change the ridiculously strict population limits on licenses, or...something. Something like privatization.     

TableLeaf: so much money for another bad idea

Back in 2009, we heard rumors that the PLCB was considering changing the name on the State Store System. They were spending a lot of money on it, too: $3.7 million, which may seem a bit exorbitant, considering you're talking about changing the name on a Police-Enforced Monopoly retail system. I mean, what were we going to our booze at the State Store 10 miles away instead? (Or, if you live in, say, Potter County, at the State Store 110 miles away?) What a waste: why does the State Store even bother? We are forbidden by law to buy booze anywhere else. What the hell do they care?

After spending the money (with a California-based firm, thanks so much, because Pennsylvania firms are all staffed by dopes, apparently), the best they could come up with was "Table Leaf." Which means...what, exactly? Anything to do with the best-selling vodka (Jacquin's Royale, very high-end), or the best-selling wine (Sutter Home White Zin, the plonker's choice)? No, not much to do with anything, and I was waiting to crucify them when they plastered that on the front.

Well, unfortunately, they came to their senses, and just call the State Stores "Fine Wine and Good Spirits." Dopey, right? Still, they'd spent all that money coming up with "Table Leaf," so they stuck it to another brilliant program: a house brand wine. They've recently rolled out TableLeaf Merlot, Cabernet Sauvignon, and Chardonnay. (Note that there seems to be some disagreement on whether it's "TableLeaf" or "Table Leaf." Typical.)

So...the PLCB loves its suppliers so much that they've decided to go into competition against them! They're not satisfied with swinging their ponderous regulatory and monopoly weight against beer retailers;* they're going to use it against winemakers too!

Think about it, say you're Cycles Gladiator Cabernet Sauvignon, a nice wine we've bought for BYO dinners. You're on the shelf at the State Store System for $9.99, a good price. So now, your retailer, wholesaler, and regulator suddenly throws in their own brand, in direct competition, at $8.99...oh, and by the way, it shows up as an alternative selection every time you look at a cabernet sauvignon on the PLCB website, and you know damned well every clerk knows about it when people ask for a cab. I'd feel hard done by, but what are you going to say? You going to complain to your regulator? Not likely.

Kinda good to see the PLCB acting like the dominating, monopolistic SOBs they actually are, you know? This is government directly undercutting private business by manipulating their law-granted, police-enforced monopoly status. Is this fair? Privatize!

*Remember Dominic Origlio's line from the beer registration fiasco hearings?  "I would be remiss without mentioning what I believe is the underlying cause of these regulatory and enforcement problems. Pennsylvania's beer industry is regulated by its competitor -- the Liquor Control Board, a state run corporation which sells wine and liquor."

Thursday, August 11, 2011

Wine Kiosks...what a beautiful debacle

The ridiculous Wine Kiosks have turned out to be a microcosm of the PLCB: corrupt, incompetent, inconvenient, bloated, and wildly unpopular with Pennsylvania citizens. They are, as I predicted, a public relations disaster for the PLCB.
  • The bidding process was suspect (a single-bid contract).
  • The company that made them, Simple Brands LLC (again...a "hi-tech" company with no website?), was suspect (company officers were mostly large Rendell donors, and the principal's main experience before was with neonized skeeball machines).
  • The contract was suspect (the PLCB kept saying the machines didn't cost them anything...except maintaining and supplying them, and the drone employees looking at videocamera feeds in Harrisburg, and then the drone employees sitting beside the malfunctioning behemoths).
  • The machines themselves were crap.
  • The whole concept was flawed from the beginning...and the PLCB knew it.

Eh? What was that last bit? Crazy, but true: jump to this story in today's Pittsburgh Post-Gazette and read about how the PLCB received a report from an internal committee prior to signing the wine kiosk contract, a report that strongly advised against going forward with the contract. For instance, the committee pegged the top problem: the kiosk idea simply sucked.
"The committee has a general concern that the proposed process for purchasing products via the kiosk machine is cumbersome and may meet with public criticism for not being 'user-friendly,'" according to the evaluation memo submitted by Matthew Bembenick, a middle manager who recently left his position with the LCB.
The committee had real problems with Simple Brands, the way they operated, and the contract they presented.
The memo also addressed concerns that Simple Brands continually changed its business plan "on the fly as the committee has broached operational issues and concerns." According to the memo, "The committee is concerned that the lack of a coherent business plan will open the [LCB] up to public criticism and could contribute to a potential project failure."
Smart people they had working at the PLCB...too bad they not only didn't listen to them, they completely disowned the report, and 'disappeared' it in Orwellian fashion:
The day after the committee submitted its recommendation, an attorney for the LCB instructed employees to hand over all hard copies of the report and to delete all electronic copies.
Now...spokesperson Stacey Witalec is quoted in the piece saying that it's normal to destroy electronic copies, it's to maintain the integrity of the original; no bits and pieces floating around. As an old records management type, I can understand that. But...hard copy? That's damage control, and when you do damage control before something even goes public? DING DING DING DING! That's a serious red flag. Hope the upcoming AG audit on the wine kiosks knows about this.

Meanwhile, the PLCB is fighting an endgame with Simple Brands that  looks a lot like a desperate search for an exit strategy that will allow them to can the wine kiosks with a statement that clears them of any blame (or stupidity) while pinning the failure on Simple Brands. Have a look. Simple Brands is exposed as the fly-by-night operation it always was; the PLCB is lashing out in an attempt to blame the failure of the kiosks on the company that they were warned was problematic. No one wants these misbegotten monsters, and is that a surprise to anyone?
The kiosks are clearly a failure; they were flawed from Day One, functioned below expectations, were despised by the very people they were meant to enthrall, and every party involved is racing away from the stench of their rotting demise. The Philadelphia Inquirer editorial staff put it so well last month.
With any luck, though, the Commonwealth's beleaguered wine-droid army will someday have one proud distinction: It will be regarded in retrospect as the LCB's Waterloo. Rarely before has any government agency so succinctly, thoroughly, and convincingly made the case for its own elimination.
With any luck, indeed.

Sunday, August 7, 2011

New poll: serious this time

With privatization actually in play, I've decided to do something different here. I've put up a poll that's actually serious, rather than just an attempt to raise consciousness through humor. Take a look at the upper right corner of the blog, you'll see the new poll on what concerns you have about privatization, either directly with HB11 or in general. You can vote for more than one issue; please feel free to do so, and please spread the word -- I'd love to see a big response on this one. If you have a concern that's not on the poll, feel free to make a comment on this post. Cheers!

Special note to UFCW and ISSU members: once your "talking points" arguments have been made once in the comments, I won't publish them again. The 'tax collection' and 'Walmart' arguments have been made; the 'no stores in small towns' red herring has been displayed. Make new points, or don't bother; no 'avalanches' here, thank you. Of course, that goes for already posted pro-privatization arguments as well; please read the comments before adding your own.

Is the PLCB on the ropes?

The efforts for privatization have gotten two major boosts recently (and yes, I am keeping track; it's just been really busy in my job, the money-making part of my booze-centered life -- my apologies for not keeping up here). One was related to the misbegotten wine kiosks (which I did predict would be a "public relations disaster for the PLCB", though that didn't take much brainpower), and I'll talk about that in a separate post; the other was a far-flying boomerang that came back and caught the PLCB in the back of the head.

Jonathan Newman, in favor of privatization
The boomerang, first: former PLCB Chairman Jonathan Newman, the Chairman for whom the original "Chairman's Selection" was named (because it was his program, and he picked the wines...ask PJ Stapleton how many of the "Chairman's Selections" he's selected), who brought the PLCB further into the 20th century (yes, while working in the 21st century, I know) than any other person, who was
Wine Enthusiast's 2003 Man of the Year because of his work at the PLCB, who resigned when Governor Rendell appointed* Joe Conti as "CEO" of the PLCB... Newman came out strongly in favor of privatization this past Tuesday. At a hastily-arranged press conference at The Wine School in Philadelphia, Newman was introduced by PA House Speaker Mike Turzai and stated his support for privatization of the State Stores. (Happily, "hastily-arranged" also meant that the speakers weren't harassed by scripted questions and chants from UFCW members and union president Wendell W. Young IV.)

I was there, and Newman sat me down at a table with Speaker Turzai, and we talked. Chances sound better than I'd been hoping; it looks like the votes are there for privatization in the House, the Senate is going to take more work. You may have heard that Senate Pro Tem Joe Scarnati questioned the need to privatize the State Stores right now. That came up, and while Turzai had nothing to say, others in the room nodded wisely when I brought up the Marcellus Swap Theory: is Scarnati signaling that he will support privatization if other legislators will support a Marcellus Shale tax/fee of some kind? I believe that's what's going on, and I say, that's a deal I'm willing to support.

I'm not nuts about Turzai's bill, and if some changes aren't made, I can't support it; I'm hopeful that it will get better. I did take the opportunity to ask if the bill takes away the Police-Enforced Monopoly. It does not, but Turzai said the Monopoly is not enforced (though he did admit that there are occasional instances when it is...usually having to do with personal issues with a local cop in a border town), and would not be enforced. I don't like that, I'd much rather see it formally done away with. That's one of the things I'll be pushing for. More to come on that, but about Newman...

The UFCW has, of course, already tried to tar Newman with doing this because of possible financial gain. First, Newman is doing this for the same reason we all are: the PLCB State Stores suck, and they've sucked more since Newman left. The PLCB has stepped in crap -- ethically, managerially -- so may times since Conti took over that it's hard not to link him to it. Second, if Newman stands to make some money off this -- he does have a wine wholesaling company -- well, so what? That's what private enterprise is all about! Of course he'll support it. Only the Union thinks making money is a problem. The Union thinks that the State should be collecting all profits, apparently. That is ridiculous, and one more reason we should privatize.

More soon. Things are rolling, and we've got to get loud in support -- and in making this a good bill.

*Rendell says he "hired" Conti, but that implies a regular hiring process applied to this $150,000 a year job, which it didn't -- which is why Newman resigned.