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.


Anonymous said...

Have you asked or have they given any reason for dropping pricing information from the approved minutes? Did they bring Conti back after he was cited for ethics violations? if so, in what capacity?

Lew Bryson said...

The Board gave the reason of competition; they don't want other buyers knowing what they're paying for the product. This rings false: they have no competitors in the state, of course, and as for competition outside the state -- if they're admitting it exists -- why would it matter, given their vaunted buying power?

But you're right: they did bring Conti back (as an "emergency consultant") about a year before the ethics violations were ruled on. I'll change that in the post. Thanks.

Lew Bryson said...

It's updated. Thanks again.

Albert Brooks said...

Of course the fact that Conti lied about the wine kiosks, hid the results from public view, tried to have evidence destroyed and was singled out in the AG investigation into the whole fiasco might have ben a good indicator he wasn't the best choice to come back as the head honcho even on a temporary basis.

Anonymous said...

Did they forget that they are a government agency and that their contracts/purchases are public record! There goes another piece of transparency. I wonder if they blocked access via the DGS contracts portal.

Albert Brooks said...

The liquor purchases are not under DGS purview.

Anonymous said...

Unless there has been a change in the code the LCB was granted a waiver by DGS to purchase alcohol on their own, however, the purchases are still public records and at one time could be found in the DGS contracts database.

Albert Brooks said...

I don't know when or if it changed but all I've ever seen on the DGS website is bags, shelving and IT services. I've not seen any liquor. Current contract archives go back to 01/16 with no liquor showing. Maybe if you go back far enough it was different - I can't say.