Pennsylvania isn't even a good liquor control state Pt. 2

In the first part of this story, we showed that even the other control states didn't think much of the PLCB, pretty much shutting them out of the "best practices" awards at the NABCA convention (National Alcohol Beverage Control Association; yes, it's real). Maybe it's because Pennsylvania doesn't even pay attention to what other control states are doing.

Imagine you are a slow, lumbering dinosaur from the Prohibitioneaous Era, just doing your own thing, not really paying any attention to what the world around you is doing; why should you, you've got the world to yourself! About 40 years ago, you get this itch. It isn't so bad, so you just ignore it, but it gets a little worse each year. Finally you decide to see what it is, and you plod over to the dinosaur doctors at Stateways (where all the dinosaurs go!). They tell you that you need to paint yourself different colors, and maybe put some State Approved plants around where you hang out to hide your huge bulk and ungainliness. Maybe change your name from Huge Lizard to Fine Green Friendly Lizard so that people might forget how big dumb and slow you are. That should help, they say. and also you should pay some attention to what the other lizards are doing and not just wander off and do whatever you want to any more.

I'm a dinosaur too!

But you're the biggest dinosaur in the land, and nobody can tell you how to do things! You've been doing the same thing forever, and in your mind it has worked just fine. (Remember that dinosaurs have little tiny brains for their size). So while the other dinosaurs finally figure out what all those bothersome little ants want (the customers), you continue as you were, because you know best. And you never see the comet.

And so it goes with the PLCB.  For example, the other control states (why can't we be more like New Hampshire?) finally figured out what the new hot brands of vodka are, ones that the people want to try, and put out a list. Now I can't imagine how long it takes a bunch of bureaucrats to figure out what is "hot" compared to the free market (maybe they chipped in and got a subscription to Market Watch), but they did and published it in the March 10th issue of the control state magazine (18 readers and dropping!).

You won't be surprised to learn that the PLCB has ONE of the five hot brands listed. Is it something new and unusual that their buyers discovered? Of course not. It is Elyx, a high-end variant of Absolut, and while it's admittedly excellent and quite different...it's garnered a ton of press, and is a variant of the largest selling imported vodka in the PLCB inventory. I bet that took some real effort on the part of the PLCB to pick it out.

The PLCB knows whats hot!

If you are curious, the "hot" vodkas picked out by the control states (except PA) are:
1. Goral Vodka Master.
2. Absolut Elyx Vodka
3. Bombora Vodka
4. Black Death Vodka
5. Danzka Vodka

Remember how the goal of the PLCB is to be better than Utah?  Utah carries two of these. Want to guess how many are available in the private stores across the Delaware river?

When Macy's doesn't have the color you want: you go to another store.
When Boscov's doesn't have the style you want: you go to another store.
When Giant doesn't have the meat you want: you go to another store.
When Mattress King doesn't have the mattress you want at the price you want to pay: you go to another store.
When the PLCB doesn't have what you want...you have to (illegally) go to another state!

Private business, private retail, is how America shops for everything else. When will Pennsylvania see booze normality?

Beer in Supermarkets: the Down Side

Giant Market plans to sell beer at their Stone Mill Plaza store in Lancaster County!

Weis Market opens beer cafe in Mechanicsburg!

Yeah, really, beer in Da Grocery Store in Da Commonwealth!!!!

Is this great? Or is it pathetic?

I asked that question seven years ago, when I first bought a beer at a Pennsylvania supermarket. It's high time that the question was asked again, because things are accelerating. We're seeing more and more big supermarkets adding "beer cafes" and selling sixpacks, and there are going to be consequences; we need to look ahead at what may happen and consider action to head it off.

It's a simple problem. It's great that Pennsylvania supermarkets have figured out a way to sell beer, a workaround that involves sacrificing part of their building to create a "cafe" where people could have a beer if they really wanted to (but mostly don't, with a few cool exceptions where the idea's been embraced) and buying a tavern license, which can be wicked expensive (check by county; hello, Chester!). But clearly the big chain supermarkets -- Giant, Wegmans, Weis, Whole Foods, Giant Eagle -- have found that the profit is worth the cost, because it seems like a month doesn't go by without another opening.

Why is that a problem? A few things. First, Pennsylvania has a "quota system" for liquor licenses: one per 3,000 people in a county. It's essentially a broken system, as it's never really kept up with population shifts, and there are a ton of "grandfathered" licenses in counties that have lost population, and there are a number of exceptions (The Almighty Liquor Code has a silly number of kinds of licenses), but essentially, there are no new tavern licenses being issued. If you want a liquor license, you have to buy one on the open market, because the Legislature foolishly made them transferable and salable. I say "foolishly" because when a liquor license -- a piece of paper issued by the State with no intrinsic value except what the State-enforced "quota system" has given it -- is sold in Chester County, for instance, for $270,000, the State gets next to nothing. Even though the full value of that license only exists because of State law. Yeah, I call that foolish.

That's a problem, because every time a supermarket simply wants to sell beer, it buys up another of these limited licenses, which then become more scarce, and therefore more expensive if you want to buy one to open an actual bar, tavern, brewpub (you need a license to sell anything other than your own beer or Pennsylvania wines at a brewpub), or restaurant. As licenses get more expensive, you get more chain restaurants and fewer independent operators opening (because they don't have the deep pockets); you get more nuisance bars (because they have to sell more booze to make their loan payment), and you get more high-end places with expensive booze (which isn't bad in and of itself, but if the ratio is unbalanced, people have fewer choices).

Another part of the problem is that it creates two tiers of grocery stores: the ones with beer and the ones without. I recognize that some grocery stores don't want to sell beer; especially in rural Pennsylvania, where there are some family-owned places that simply don't hold with alcohol at all. Fine, no reason to force stores to sell beer, but there are stores that would like to and simply can't afford the ridiculous unnecessary expense of buying a tavern license and tying up a substantial amount of retail space and equipment in a "cafe" with separate beer cashiers.

This was brought up at the McIlhinney Hearings in 2013, by a representative from Redner's Warehouse Markets, and Senator McIlhinney's response was essentially 'that's nice, but that ain't gonna happen.' Since then, there have been attempts to come up with a separate license for grocery store sales (of course, another type of license is exactly what we need!), none of which went anywhere. Given the tenacious opposition of the beer distributors to any expansion of grocery store beer sales (and the likely opposition of the already-licensed groceries), I doubt this will fly, and...

That is going to mean we'll have this half-assed workaround forever. The stores that got a liquor license won't be happy with anything that devalues that major investment, so they'll be fighting it. And Pennsylvanians are pathetically grateful for anything that even looks like buying beer in grocery stores (and having a liquor license actually puts the stores one tiny step away from selling wine, as there's already been a push to allow taverns to sell "to-go" bottles of wine), so if we think we have it, we're not going to push for it; we're just going to go to the stores that sell beer. That means that more and more supermarkets are going to go after tavern licenses, which is going to accelerate the scarcity issue (more chains and more nuisance bars!), and put even more pressure on the family-owned supermarkets to sell or close.

Well, hello, unintended consequences!

More crappy nuisance bars. Friendly neighborhood bars will sell their licenses at top dollar while they can, and the families will retire. And we get further away from a REAL solution to the problem.

This is yet another fine mess the PLCB and the Legislature have gotten us into, with the help of the MBDA and the behind-the-scenes maneuvering of Bucks County beer mogul (and SEPTA Board and Turnpike Commission member; and did you know he also owns 4% of the Sands Casino?) Pat Deon. Please note that I do NOT blame the supermarkets; they're just playing the hand that was dealt to them, and playing it well.

The only solution to Pennsylvania's alcohol beverage sales quagmire is going to be an all-alcohol solution, some grand bargain that fixes everything. More on that to come.

Dangerous Things

We citizens of the Commonwealth are lied to every day by the PLCB, its associated unions, and seemingly every Democrat in the Legislature about how we need The State Stores to protect us from ourselves. That alcohol is the one drug that requires not only regulation by the state but state employees to sell it to us. Never mind that the alcohol in beer is exactly the same...but for some reason that can be sold by private businesses, or that the alcohol in a drink is exactly the same, and that can be sold by private businesses too (although they do want them to have their special PLCB training (which is of dubious value)).

What about all the different legal drugs? Why is it that pharmacies aren't run by the state and pharmacists state employees? Prescription drugs, by definition, need to regulated, but it seems that private business can handle that. There were almost a third more prescriptions filled in Pennsylvania in 2014 than all the bottles and boxes of wine and liquor of all sizes sold by the PLCB. Remember that these are drugs that the Federal government says are too unsafe to be sold without control, yet every state sells them through private businesses. Hard to explain why they aren't under state control, given the booze idiocy we put up with in Pennsylvania.

Drugs and alcohol are an apples to apples comparison. You can't explain why they are treated any differently on one side, because the other side is exactly the same. A logical fallacy has to exist: that fallacy is that we need State Stores and State Store employees to safely sell us wine and spirits. More proof is offered in that a strong majority of states have privately-owned retail alcohol sales, including every one of the states bordering the Commonwealth. Guess what: add them all up, and on a per capita basis, they do better in every alcohol harm statistic — DUI, underage DUI, binge drinking, underage binge drinking, and alcohol-related fatalities — than Pennsylvania. The "control" is not working.

How about guns? There is a saying that guns don't kill people; people kill people. Politics aside, it's at least partially true, since unless you beat somebody to death with your gun, you also need bullets. You can have all the guns you want, but without ammunition you probably aren't going to kill anything. However, while there are all sorts of regulations and controls on guns (though they are also sold by private businesses), there aren't many on ammunition. If you can buy cigarettes, you can buy bullets. Taking one drink won't kill anyone (despite what your D.A.R.E instructor may have said). One bullet can, yet you can go buy a whole box of bullets at Walmart. Is the state really looking out for our safety? 

The myths just keep exploding

So if we aren't safer having State Stores...why keep them? State revenue? How much is less safety and the worthless and patronizing annoyance of the State Stores worth? The entire non-tax contribution of the PLCB is 3/10ths of 1% of the budget. Chump change, a rounding error. So maybe it's the political patronage and nepotism. We have to deal with a system that is less convenient, has less selection, keeps us less safe, but still costs more, so some political hacks can have a nice state job? 

Or is it the entirety of the agency, a jobs program? If it's a jobs program, it's insignificant. The entire PLCB isn't even 1/10 of 1% of the state's full-time employment. You could fire every one of them, and the state unemployment rate wouldn't even quiver. If we're going to pay for a jobs program, how about we just add some jobs at PENNDOT?  We can pay for them by eliminating the Turnpike Commission and folding those jobs into PENNDOT. At least that will get something useful done.

I'm going to bet that it's union influence and a continuing stream of campaign money given to certain legislators (and directly to the parties) that keeps us from being normal. The State Store System clearly isn't better than privately-run stores, or other states would be moving toward it, and that certainly isn't happening. People want freedom of choice, and a monopoly can never provide that.

Private business is normal. 

Private sales are normal. 

Regulated business is normal. 

State-run retail is NOT normal.

Let's move toward normal.

Friday Night 7PM

What serves you better?

This Pennsylvania state store?

Or this grocery store in Texas?

How about this grocery store in Wisconsin?

Perhaps this one in Iowa!

 

This grocery in Springfield, Mo. is kinda nice too, and like the others, it's open Friday evenings!.

And somehow they get along with no separate entrances, no separate checkouts, and no government employees. This is NORMAL to most people. To be fair, the PLCB does have some liquor stores inside grocery stores (staffed by them, run by them). After over 30 years of trying to get the program accepted, there are fewer than 20 in the whole state, and they call that a success. Grocery stores know that having liquor and wine and beer sales is good for the bottom line. They also know that having a state store inside, that doesn't pay them as much rent as they make selling other things in the same space, isn't.

Maybe ANY local liquor store that would be open in a private system would work. Remember, the PLCB goal is to be better than Utah, not the other 48 states.

The PLCB will always fail the consumer compared to private business.

We need more state-paid cashiers

Here's a radical suggestion: we need more state-paid cashiers...to sell gasoline.

Why? Just think about it.

• Gasoline is dangerous, the root cause of  5,687,000 accidents. We need to have unionized state store clerks sell us this product.
• Gasoline is flammable. The public shouldn't be trusted to handle such an item. Only state clerks with non-industry recognized training should be allowed to dispense it.
• Admittedly, the sale of gasoline has no age limit, but only state clerks are able to determine if they should sell it to you.
• Gasoline prices are higher in Pennsylvania than surrounding states and state clerks are well-versed in explaining that kind of difference.
• Gasoline fits within the knowledge base of state retail clerks: there are only three types, plus diesel, to know about.

The service, knowledge, selection, and pricing
we've come to expect from state-run stores!

Once the Fine Fuels and Good Gas Stores are established, Pennsylvania consumers will experience a new type of automotive service, like no other place on earth!

• All Fine Fuels and Good Gas  Stores will look the same and carry the same products: gasoline, and diesel fuel, along with a small number of car magazines and small accessories, like those pine tree air fresheners. If you need oil or transmission fluid, you will be able to buy them somewhere else. You may be allowed to buy a lottery ticket there...someday.
• Specialty gasoline, like aviation gas or racing fuel, will only be sold where the state deems it necessary, which is not necessarily where it might be needed most.
• Premium gasoline will be available in a limited number of Premium Selection Fine Fuels and Good Gas locations.
• The Fine Fuels And Good Gas website will tell you where to go to get gas (but not how to get there or how far away it it is).
• There will be approximately 600 Fine Fuel and Good Gas Stores, a huge savings over the current number of gas stations in Pennsylvania (approximately 630,000). Overall operating costs will remain about the same (due to the higher staffing numbers and higher pay and benefits than in any other gas station in the world), but supply and real estate costs will be much lower (and paid for by the Oil City Flood Tax). 
• Unlike so-called "convenience stores" in other states, you will not be allowed to buy any soda, water, chips or any other snack at Fine Fuels and Good Gas Stores, as the temptation to drive away eating and sipping will be too much, and too dangerous. You'll have to drive somewhere else to get those. Remember - The state knows best what is good for you.
• Fine Fuels and Good Gas Stores will not be open before 9 a.m. or after 9 p.m. in most locations, nor on any holiday (except for the first day of deer season and Groundhog Day). Only one-quarter of the Fine Fuels and Good Gas Stores will be open on Sunday (no easily-consulted list will be available).
• Some Fine Fuels and Good Gas Stores in rural areas will only be open three days a week, and some counties will only have one store, so all Pennsylvanians are urged to plan ahead for your purchases (and keep emergency supplies in your trunk).
• You will not be allowed to buy gasoline in another state and bring it into Pennsylvania (non-refundable fuel-dumping sites will be built at all border crossings; once their tanks have been emptied, motorists may then pump the fuel back into their cars at Pennsylvania-approved prices).
• Self-service fuel pumps are strictly forbidden. There is a limited pilot program of fuel kiosks, a promising technology where you insert your license and credit cards into a card reader, prove you are sober by blowing into a breathalyzer, pirouetting in front of a built-in video camera and then confirm that you will not use the fuel in an illegal manner. All fuel kiosk customers will be monitored for compliance for 90 days.
• When fuel prices are lowered by the refineries, a full 10% of the savings will be passed on to consumers as lower pump prices within 120 days (at the discretion of the Pennsylvania Fuel Control Board)
• To keep operating costs down, the Pennsylvania Fuel Control Board promises to keep employee benefit costs at no more than 104% of salaries (the same as the State Liquor Stores), although how long that may be is not guaranteed.

The Pennsylvania Fuel Control Board will run this huge state enterprise; three men (yes, men) who have no experience with retail sales, fuel, gasoline, diesel, automobiles, tires, garages, or roads, which insures their total impartiality. The state will spend millions of dollars every few years trying to hide the fact they own and run all the Fine Fuels and Good Gas Stores. Fine Fuels and Good Gas Service workers will point out that there is reverse border bleed (out-of-state residents buying gas in Pennsylvania, mostly at a dozen or so border stations where the prices will be kept artificially low), proving that our system is better.

The Fuel Control Board has promised not to try and get the best prices for the citizens in trade for taking care of them for the next 80 years because the state knows best what is good for you.

Does this make any more sense than a state monopoly on wine and spirits sales? Do we really need this? Is the state better off because of the State Store Monopoly? Are YOU better off?

Privatize and move to NORMAL!

Did the PLCB lie in front of the House or the Senate?

Liquor Control Board members recently spoke to the House and the Senate, and appear to have made contradictory statements in the two sessions. Did they lie when they told the House Appropriations Committee that they can't negotiate prices with suppliers, or when they told the Senate Appropriations Committee that they can? It had to be one of them.

Make up your own mind; you can hear exactly what they said.

In front of the House Appropriations Committee at about 2:43 in, PLCB Chairman Tim Holden says they can't negotiate. See that here.

Then in front of the Senate Appropriations Committee, at about 1:23:46 in, Executive Director John Metzger, with the Chairman sitting right there, says they can.  See that here.

So if the Chairman is correct, that they can't, then the Board has been and is just the normal bunch of incompetents we have come to expect. If they can negotiate, then the Board doesn't care about the consumer and is too lazy to try and get a better price.

Are either of those choices what we want to keep, and why have they lasted 82 years?

Solve the problem - Privatize and let real business handle business.

How PLCB buying power incompetence has cost you and me Billions

In my last post, PLCB "Buying Power" A Myth, (which you really should read first), I told you how for the past eighty-plus years the PLCB's incompetence in not negotiating or even trying to negotiate the best prices for Pennsylvania liquor prisoners should damn them for all eternity to the lowest circle of Hell, the one Dante reserved for people who betray those whom they should serve.

As always, we are going to provide some numbers to show what they've cost you. I'm going to use the largest selling whiskey in the state as an example, the standard 750 ml Jack Daniel's Old Number 7. (I thought I would use that because when the PLCB reads this (and they do), it might reinforce how to spell Jack Daniel's correctly, since they seem to have a problem with that.)

We are going to compare Pennsylvania prices with the state that has the 2nd highest liquor taxes in the country — Oregon, also a control state with uniform prices — and see who at least attempts to take care of their customers: the PLCB or the OLCC.

From the PLCB we know that (non-negotiated) cost +30% markup (required by law) + handling fee  (arbitrary) + 18% Johnstown Flood Tax (levied on the price) + rounding up (always up!) to nearest .49 or .99 (just because) = Retail Price. In this case, our bottle of JD has an initial cost of  $14.46. so putting that into our formula we come up with $14.46 + 30% ($4.34) + Handling fee ($1.20) + Flood Tax ($3.60) + Roundup ($.39) = Retail Price of $23.99.

Oregon doesn't give us their unit price so we have to work backwards from the retail price to figure out approximately what their cost price is. Oregon works on cost + 79.8% markup + $1.40 Handling fee + $.50 per bottle surcharge + roundup (to nearest .05). Oregon's shelf price for a 750 ml bottle of Jack Daniel's Number 7 is $24.95 or about $1 more than PA. Taking that $24.95 and working the formula backwards we subtract the roundup (which we'll call zero, because the price is already at $X.95, and we don't really know, except that it's not much). Next we subtract the surcharge of $.50, which gives us $24.45. Then we take out the handling fee of $1.40 to leave us with $23.05.  Taking out the 79.8% markup ($23.05/1.798) ends up with a cost price of $12.82 at most (it's unsure because of the unknown roundup, but it's less than a dime difference). Remember: PA is paying $14.46.

Hey, but Oregonians still pay more on the shelf, so Ha-ha! Only...how much is the PLCB's "non-negotiable" system of costing and pricing costing you, when you compare it to the unit price the OLCC is getting? Easy enough to find out. Put Oregon's cost into the PA formula. $12.82 +30% = $16.67; adding $1.20 gives you $17.87; drown it in the 18% Flood Tax, and that brings it to $21.08, then add the roundup…and you end up with $21.49, a $2.50 savings ON EACH BOTTLE, if only the PLCB did their job. PLCB incompetence in business cost PA consumers over $6.1 Million extra on Jack Daniel's alone last year.

You're getting screwed out of $2.50 every time you buy a bottle of Jack — remember, that's only one example — because the PLCB can't be bothered (or doesn't know how) to use their "massive volume leverage" to get the same price little Oregon does. Multiply that by how many millions of bottles they've sold since 1934, and that is how much they have cost the consumers of the state. An amount you have been paying extra for all these years because of PLCB ineptitude, laziness, and their "we don't give a shit, we're a monopoly" attitude. Far more than any so-called "profits" they have ever turned in.

Remember: this isn't a tax that's being levied on you that's going to benefit the Commonwealth, it's not a fee you're paying to the PLCB to pay for alcohol enforcement, it's not "profit" that gets sent to the general fund whether it's real or just hidden pension funds...it's money the PLCB doesn't know how to get from distillers, vintners, and importers. It's gone to line their pockets, exactly the people who the PLCB apologists rant and rave that privatization will somehow steal all your money to pay. Too late: they've already got it, had it for decades, thanks to the PLCB.

Is this the system you want to keep or do you want them to "modernize"? Because "modernization" and "flexible pricing" will just cost you more by statute instead of by PLCB incompetence; the only difference will be that the PLCB will waste the money on Increased Operating Costs to fuel the Boondoggle Machine. I say we privatize and let business people run businesses and end the PLCB screwing of the public.