Wednesday, May 10, 2017

PA House Democrats keep up the scare on privatization

As the State Store System trembles from the freshening breeze of competition from the likes of Wegmans and Giant and Giant Eagle (and remember, they're still chained by the cafe rule, and wine only, and the Four-Bottle Folly, and state-regulated pricing), and new salvos of booze freedom launch from an increasingly bold House GOP caucus, the House Democrats are in full spin mode in defense of the archaic PLCB monopoly. They're trying to convince the people of Pennsylvania that it is better to have a government retail monopoly than a free market for booze, a pure case of the mindwarp that is Wolfonomics.

For example, let's comment on a press release they put out on April 24th.

"Liquor sales in PA should be about consumer convenience and small businesses, not big profits for a few huge corporations."

Pennsylvania House Democratic Caucus    April 24, 2017 | 6:01 PM

Republicans in the Pennsylvania House of Representatives are scheduled to move several liquor privatization bills this week. They all have one thing in common: Pennsylvania consumers aren't demanding any of them and the Pennsylvania Senate is unlikely to consider them.

Of course the Senate will consider them, they may not act on them all but the four bills will be consolidated into some package...unless McIlhinney kills them. What party is he affiliated with again? Is he one of your guys?  

Consumers Are Happy With Modernization! Forward!
Consumers are happy with the modernization and convenience changes made last year to Pennsylvania's liquor laws -- there is no widespread public support for comprehensive privatization for privatization's sake. 

After 82 years of nanny state idiocy why wouldn't consumers be happy about changes? But are we satisfied? Since every scientific poll of the past 40+ years shows the public doesn't want the State Store System, probably not! 

Those guys? Only in it for the money!
There are only a few groups pushing to rush forward with more liquor changes so soon after last year's consumer-friendly improvements — the chain grocery stores; big-box retailers and mega-wholesalers that want to corner the market at the expense of consumers and small, family-owned businesses; and the newspaper publishers who want to reap millions of dollars in advertising sales. 
Of course stores (except the State Stores) want to gain customers by providing what they want, where they want it, be it Walmart or a local wine store (which you may have seen in other states). Just what small family-owned liquor stores are there in Pennsylvania that the Democrats are talking about? They don't exist, and unless things change, they won't. Not because of big box stores, but because the Almighty Liquor Code doesn't allow it, and the House Democrats are just fine with that. And they're still banging away at the news media. For years the Democrats and Windy Wendy Young have been saying newspapers only back privatization (and practically every Pennsylvania newspaper does, by the way) because they will reap a small fortune due to alcohol advertising. Just where is that happening? Looking at the papers in New York City: not a one has an eighth of a sheet worth of liquor ads. Even if there were more here in Pennsylvania, it would show that stores are competing with each other for your business, which can only be good for the consumer. 
By pushing expanded alcohol sales, the state risks jeopardizing public safety in many counties and municipalities, reducing revenues for the Pennsylvania budget, and killing thousands of family-sustaining jobs in every community in the state.
Really? Yet the PLCB has been pushing to expand sales for years - why is that good but real growth bad? Of the last two places that fully privatized in the past 25 years, both have lower rates of DUI, underage DUI, DUI fatality, and underage DUI fatality than the Commonwealth currently does. In fact, four of the six border states have better records. One that doesn't is Ohio (also a control state!), the other is Delaware. Maybe it's the PLCB that is jeopardizing public safety by focusing on increasing sales instead of regulating alcohol sales and abuse. The conflict of interest is real!
Jobs? The current system is limiting jobs in favor of the monopoly. Full privatization has tripled jobs in the industry where it has happened. It has increased convenience and consumer satisfaction, because there aren't some unqualified bureaucrats deciding what the entire state is allowed to buy. 
Creating thousands more wine and liquor retailers will saturate the market in many counties and municipalities.
Just to get to the national average Pennsylvania would have to add 2,000 stores. Like any other product there can only be as many stores as the market will bear (and local zoning and ordinances will allow). Imagine local communities deciding what is best for them, not Harrisburg. 
Access to a wide variety of wine and liquor selections in well-lit, clean and safe state stores will be replaced by a limited choice of major-brand items relegated to one or two aisles in chain grocery stores and big-box retailers like Costco and Wal-Mart. 
Why would a grocery store stock the same amount of products as a stand-alone liquor store?  Compare a State Store to a liquor store. Go look at a Total Wine, a BevMo, a Super Buy Rite, a Binny's or any of the real liquor superstores and compare it to a "Premium Collection" State Store. The private stores will have more variety ACTUALLY ON THE SHELF then the PLCB stocks in their entire system. Privatization can bring a wide variety of stores, specialty stores, warehouse size stores, local stores, convenient stores instead of the same one size fits all State Store. 
Wine and liquor in Pennsylvania's state stores are priced competitively. Prices for consumers in states where wine and liquor were recently privatized have gone up, not down.
With the largest border bleed in the country, there are probably a large number of citizens who disagree that the selection, service, and prices are competitive. As far as the ONE state that has fully privatized, one can expect that an additional 27% in fees and taxes that were imposed at the time of privatization may have had an effect on prices. However, prices didn't go up 27% which shows that the free market is much more efficient than a monopoly. Besides, with the knowledge of hindsight we don't have to do things exactly the same — wrong — way. 
Combined markups and taxes in Pennsylvania for wine and liquor are comparable to and, in many cases lower than, those in privatized states.
The first true statement in this entire release, but with variable pricing causing the markup to go up, it may not be true for long. As the 2nd largest retailer of wine and spirits, the real question isn't whether your prices are competitive; it's 'Why aren't they better across the board than MD, DE or NJ?'

The bills being considered this week will substantially increase the number of businesses selling wine and liquor but provide no additional money for alcohol control or law enforcement. There are already too few officers monitoring Pennsylvania's 30,000 licensed establishment. Do we really want to add even more locations to already-saturated markets? 

Most of the additional businesses that would be selling wine and liquor are already licensed by the board and are already checked by the BLCE. While there are 30,000 licenses of various types, only 19,000 are active and the state itself is adding 1,200 to that total. Again PA is below the national average, so the idea that we are "over saturated" is disingenuous at best. 
Many Pennsylvania municipalities are already struggling with the crime and expense caused by nuisance bars. We need to find solutions to those problems before we add even more licensed locations.
As already pointed out, the state is adding more licensed locations. Three of the four current bills are not adding any locations but expanding what can be sold. Maybe if the communities didn't have to wait for the PLCB to act, they could better control what happens in their towns. 
The U.S. Centers for Disease Control and Prevention has determined that liquor privatization leads to increased excessive consumption. Pennsylvania has not examined how vastly expanding access to wine and spirits -- and oversaturating the market in several counties and municipalities -- will impact public health and safety. 
The study mentioned also had consumption increasing by over 40%, which has not happened in any state, and overall the research data has been debunked by the premier body for statistical analysis. The CDC report was so bad that Forbes did an article about it. 
Moving toward full privatization of wine and liquor sales in Pennsylvania would replace skilled jobs that provide financial security for thousands of families with a much smaller number of minimum-wage cashier jobs that don't protect public safety, improve customer service, or support families. 

Currently State Stores are never checked for age compliance by the BLCE, but every licensed establishment is. A number of private stores selling beer and wine have 100% carding policy; the State Stores do not. Everybody that serves alcohol in a licensed establishment has to be RAMP certified; State Store clerks do not. 
Being a clerk in a liquor store is not a skilled job, but as already mentioned, employment in the industry tripled the the last places that fully privatized. Not a guarantee it will happen here but a good indicator. Keep screwing around with these "ass-backwards" measures (as Senator McIlhinney pungently put it) that only complicate the mess further, and things probably won't go as well.
This blind leap toward full privatization of wine and liquor sales comes without an examination of the public health and safety impacts, no evaluation of whether Pennsylvania consumers believe full privatization is necessary or desirable in the wake of recent consumer-friendly improvements, and with no accounting of what privatization will cost Pennsylvania workers and taxpayers. 
The citizens have never wanted the State Stores. In poll after poll, privatization or private retail has always won out. After over 40 years of the same result, do you really think the citizens will change their minds? The recent improvements simply show that full privatization is desirable. People want convenience that the PLCB can't provide. They want better pricing that the stores can't give them because they have to buy from the PLCB. They want the selection they see at stores on our borders - stores that stock more than the entire state has on the shelf.
Pennsylvania should be working to benefit and protect consumers and small businesses, not rigging the system to put one of the state's most important and lucrative assets in the pocket of a few huge corporations.
Since there are no small liquor store businesses now it seems that you are already rigging the system against them. Privatization can fix that. Who will get licenses and what type are up to you in the legislature. If you say only stores of 10,000 sq.ft., then guess what...only chains and big box stores will get licenses. If you allow specialty wine or liquor only licenses then you will see entrepreneurs opening that kind of shop or restaurant - something that PA doesn't have now.
The one size fits all thinking of the PLCB can't and shouldn't be applied. 
This isn't 1934 anymore. It's time to move forward, toward a license and regulation model that the majority of states use. Get out of retail and wholesale so the free market can do what it does best. Provide products based on the wants and needs of the consumer, not on what is allowed by the government.

Monday, May 1, 2017

Are Your Prices Variable Enough?

Just how much is the PLCB screwing us with "variable pricing"?

A good question, and one that the PLCB doesn't really want to answer. There is no sunshine at PLCB HQ; their mission is to hide as much as possible, keeping as much information away from the citizens as they can. And why? It's not like they have any competition to worry about, no business secrets to keep: no one else is in their business, they've made sure of that. They do it for one reason: to keep the owners — that's you, and I, and the Legislature — ignorant of what they're really doing; of how they're desperately shuffling prices and margins around to try to look "profitable."

Would the wine kiosks have passed if the citizens, if the press, knew about them, knew that the PLCB had been advised against implementing their own people? Would Joe "Da CEO" Conti been brought back after having been found to have committed ethics violations if the citizens knew, and could do something about it?*(Correction: please see below.)  Maybe anti-competitive branding and placement wouldn't have taken place with citizen involvement. But that all did happen, mainly because the PLCB kept it all hidden away and secret, to the point of having records destroyed, to the point of appearing to have had secretive off-book meetings to make decisions that are supposed to be discussed in public.

Now they don't want you to know how much of a shaft you are getting on variable pricing, the one thing they wanted more than anything else from "modernization." Remember, the PLCB said that they couldn't negotiate prices for 82 years, even though there was nothing in the Almighty Liquor Code that prevented it, and then they said that they did negotiate on some things, but not most. ACT 39 changed that, and supposedly allowed the PLCB to do something they could have been doing all along...only now the game is rigged to benefit the PLCB and not the consumer. That sounds fair.

In the PLCB meeting minutes, you used to be able to see what new products were going to show up, and the cost for those products. Not anymore. The PLCB doesn't want you to know what they are paying and what they are going to charge,  because it will raise questions about why the consumer isn't seeing benefit from "variable pricing." They don't want you to know that they are making an extra $1.16 for every bottle of Jack Daniel's sold while you see no change** on the shelf.

Now, a real retailer wouldn't tell you this either. But the PLCB isn't a real business; they have a police-enforced monopoly to ensure their market share! A real business doesn't tell you this stuff, but their competition keeps them honest, and you can be sure that they're passing along savings to you; if they don't the competition will.

But the State Store System has no reason to benefit the consumer by lowering prices in order to increase market share or maintain their customer base. They don't have to worry about that, and there's nothing in the Almighty Liquor Code that says they do. Remember the founding principle of the PLCB, as stated by Governor Gifford Pinchot himself: “to discourage the purchase of alcoholic beverages by making it as inconvenient and expensive as possible.

So what does the PLCB tell us about the effects of variable pricing? The Chairman said that they will not raise prices across the board, but with having to dip into reserves to pay more into the general fund, and trying to prevent privatization by making it look like they contribute more than a piddling amount to the state (not including the taxes, which would still be collected in a private system!), and having to pay off $260 million in pension debt...what do you think they are going to do? Keep their sinking ship afloat in any way they can, or benefit the consumer?

Last year the PLCB charged an average of 45.36% above cost for every product sold.  For the first eight months of this year it has risen to 45.46%, and I guarantee that will continue to climb as time goes on. If you remember, the Democrat's modernization plans said that the PLCB will make an extra $75-100 million because of this alone. That would mean they'll have to raise the charge above cost to over 60% — such a deal!

The choice comes down to this. Do we want to continue to have limited selection, limited convenience, Harrisburg bureaucrats selecting the booze for the entire state, and anti-consumer pricing? Or do we want the freedom of choice that the private market brings?

Privatize - all of it. Retail and wholesale. Why wait one variably-priced month longer?

*Correction: Conti was ruled to have violated the state's ethics code about a year after he was brought back as an 'emergency consultant' and paid about $67,000 more of your booze dollars. Our error, which we own up to...unlike Joe The Ethics Violator, who is currently on the faculty of the Fels Institute of Government, and a lobbyist with Triad Strategies. Great places for a known ethics violator.

** Since the PLCB hides all of their purchase information now, the $1.16 is just my best guess, but it is an educated guess...and it is most likely more.