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.


Anonymous said...

"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."

~ The PLCB is 100% accurate with this statement because I have seen it in writing. Here is the statement:
"Due to liquid constraints, we need to take Bookers 750ml up to $99.99 ASAP."

Albert Brooks said...

So that quote is from Jim Beam eh? Nothing personal but you saying so isn't the same as having a verified copy.....in writing in my hands or at least a CTC.

Anonymous said...

Yes. I wrote it. It is 100% true. The quote was pulled from an email on 11/15/16 at 1:35pm. Thank you.

Anonymous said...

I think the end game here is that who cares what an anonymous blogger believes when no one believes anonymous bloggers?

Albert Brooks said...

Love to have a copy but it doesn't really matter because it was still the PLCB that raised the price on items they had already purchased at a lower price point.

For our other anonymous reader. Ironic that you posted anonymous - self fulfilling statement eh?