Tuesday, March 19, 2019

100 Days and Counting -- Oh, Will You Look At That!

As I write this, former PLCB member Michael Newsome has been off the PLCB board for 100 days. But...his resumé is still on the PLCB website. It must be so hard having to find a page (on your own site) and push the Delete button. Until they delete it, you can see it here. If they finally got to it, here is a snip showing it was still up as of 12:37 March 18, 2019.

I got tired of waiting, so I sent them an email, just a little nudge (sent it this afternoon, March 18). I wonder if they realize that Mr. Newsome isn't coming back. When you can't even keep track of one of the top three guys running your agency, how well do you think they are doing with inventory, product choice, or other personnel?

It's said that if you take care of the little things. the big things take care of themselves. If you can't take care of either...you can always work for the PLCB.

Well, it turns out that poking them with a stick works. After posting about this on our Facebook page and sending them an email, they finally decided to remove the information — without any explanation about why it took so long. They did say that the "hidden page" had been removed, but guys...it wasn't hidden, you'd just removed the link. Pretty much the same way it went the last time I poked them about a Web screw-up. I should be getting some of that Joe Conti emergency consultant money!

Monday, March 18, 2019

The PLCB has over $1.6 Billion in liabilities.....and wants to stay that way.

When your business has low debt, good cash flow, a decent profit margin, and service better than the competitors, you can expect somebody might want to buy it, so they can get the benefit of all those good things. And if you're in debt up to our eyes, have crappy management, legendarily bad customer service, your business doesn't look too good to the outside world, no matter how much demand there is for your product.

Yeah, we're talking about the PLCB. After 20+ years of "record profits," somehow they are more in debt now, than at any time in their history. Over $1.6 Billion in liabilities and a total position of $1.1 Billion in liabilities exceeding assets.

Why would any business want to be in that position? They wouldn't, unless they wanted to look like a bad investment to the outside world. If the PLCB was a real money making venture run by at least semi-competent people, then the private sector would have more interest because they know that:
  1. They can run a consumer industry far better than any bureaucrat.  
  2. They are inherently more efficient. 
  3. They wouldn't be saddled with over a billion dollars in debt right off the bat.
YEAH! My business model sucks!
But the PLCB doesn't really care how much or what kind of debt they have. There is no mandate that says they need to be current, no benefit for being efficient, no propaganda value in saying "Look, we decreased our debt!" instead of "We gave 30 million more to the General Fund!" Although this year the amount they "gave" to the General Fund actually decreased $30 million, but you aren't hearing them say anything about that.

Why aren't they worried about their debt? The PLCB has a backup plan and it is called the taxpayers. They can't default - we cover it. Have to pay out more than you take in? No problem, we got it. Can't raise those variable prices fast enough to keep up with rising admin costs? Just give less to the General Fund, the taxpayers will make up the difference!

Remember when the PLCB tried to leech itself onto the state debt with a bond against future earnings? (Don't worry: we do.) Make yourself as unattractive as possible by hanging a 20 year debt obligation to your nose, and the people in favor of privatization (i.e., the majority of the adult population) have one less tool to work with.

Giant leech.  Like the PLCB but more useful.
I'd ask you to stay alert for any hint of debt reduction from the PLCB. With all this money coming in from ACT 39 and variable pricing, it shouldn't be long before you'll hear it every day. That's right, and I have a bridge for sale too...


Monday, March 11, 2019

Jack Daniel's is what's wrong with the PLCB's "catalog"

I've been writing about this for years, and still the PLCB can't quite get the listings for their #1 selling whiskey correct. Just imagine the lack of effort they put into less important items! Or, more likely, probably nothing is considered important and they screw up everything equally.

I like writing about the PLCB's historic inability to get their inventory correct. If I ever need an illustrative example of how incompetent they are, I know I can rely on good old Jack. He never fails me.

And talk about non-responsive! After eight years of pointing out how incredibly stupid the PLCB is with just this one product, you would think they would tire of being beaten up and fix the situation. How many clerks, managers, directors and senior executives have passed through the PLCB in eight years?  All of them learning how to do things wrong, from the people before them who did it wrong, because that is how they learned it from generations of iron-assed bureaucrats, passed on like a broken piece of PLCB DNA.
I work for the PLCB!
Why do I bring this up? Because there are more Jack Daniel's mistakes.

This time we have one listing in the "bourbon" section. Hey, plenty of people argue that Jack can be considered a bourbon, so that isn't bad right off. Only the company doesn't think so, and labels it as "Tennessee whiskey." More importantly -- when you're searching for it -- all the other correct PLCB entries list it as "whiskey." There is the continuing error (going on a couple of years now) of one item listed as a "blended whiskey"  but Jack Daniel doesn't make a "blended whiskey." The confusion Jack Daniel's new rye creates in the PLCB is comical. One entry is correctly under "straight rye," and the other is not.

As they say, this ain't rocket surgery. The sad thing is, an error rate of almost 7% on just one brand family is pretty good when compared to how they've been doing...until you compare it to the inventory accuracy of all but the most poorly run of businesses. People would be fired for years of error rates that high; hell, they'd be shown the door for a few months of it. This is the poster child for "You had one job..."

But that is what you get when they don't have to care. Hang around, get seniority, get a 2% raise, salt away that pension, and wait for your 30.  Confucius said: "It matters not how slowly you go, as long as you do not stop" and it seems the PLCB has taken it to heart.  They certainly aren't moving very fast and they aren't stopping to fix the problem.

I suppose they may finally get this right, and I'll have to find another go to subject. I'll miss it, though. There are dozens of errors in the bourbon and rye categories, but nothing so consistent, so reliable, as how the PLCB manages to screw up JD.
Sounds like the PLCB to me.

Wednesday, March 6, 2019

It is to laugh

I don't do much on wine, but every once in a while the PLCB does something with wine to draw my attention. Today it was a document about their wine specialists in the stores.  It started out with "Each one of our highly trained Wine Specialists at Fine Wine & Good Spirits Premium Collection stores can help you find what you need or suggest something..."

There are 111 people listed as Retail Wine Specialists in the PLCB, along with a dozen Wine Specialty Coordinators. Up until mid-February, there was also a Specialty Wine Consultant, but the position is no longer listed; that one guy retired. I guess he took the secret knowledge with him. Most of the 111 are working as wine folks in the stores. I don't know what the 12 "Coordinators" do exactly. 

But I do know that not all the Retail Wine Specialists have even the most basic industry recognized certification, just the "PLCB" training, the kind that is recognized only by the PLCB.
These are real; the PLCB training is not.
At the Coordinator level, not all of them have even mid-level industry recognized certifications.  Remember: these are the folks selecting wine for the entire state, Keep in mind that nobody in charge of the operation has any high-level training. Not even the lowest level of  "
Introductory Sommelier" at the PLCB. Of course, this matches the Board and senior executives who don't even have the lowest level of experience in the non-monopoly liquor or wine industry. That isn't to say there aren't any in the PLCB; they just aren't the ones in charge who make decisions about what the entire state is allowed to buy or drink.

You would think that as the second or third largest buyer of wine on the continent would feel the need to have a
Master Sommelier on staff, but on reflection, you can understand why the PLCB doesn't. They don't have to lead in any category, only follow. They don't have to satisfy ALL consumers, just the majority. They don't have to have a business model that expands the boundaries, just one that pushes unsold wine on the populace and calls it a great idea.
Having 111 people listed as "wine specialists" sounds good, but unless you have 111 people that are actually recognized as wine specialists outside the PLCB, you're just misleading the public again. Are your specialists are as good as somebody whose livelihood depends on his knowledge and return customers? These home-grown 'specialists' are the same kind of internal self-congratulation the PLCB engages in when they "self-audit" their compliance with underage drinking laws. Hey, why not tell the IRS you're going to "self-audit" your taxes this year!

The PLCB has a lot of convincing to do. Convince us that having ten wine specialists in Philadelphia, a city of 2+ million, is better than having 50 wine shops. Convince us that having higher prices for the consumer and pitiful price breaks for resellers is good for us. Convince us that being $1.6 Billion in debt is somehow good for the state. Convince us that having people with no industry experience lead is a good way to run things. That's an uphill climb. We deserve better.

One last thing: if anyone at the PLCB believes that I'm wrong about the lack these certifications, you already have the list of names published. Just put the certifications next to the names. I won't hold my breath.


Wednesday, February 27, 2019

Interview with Adam Harris

Adam Harris
We have some news that affects how things are going to work between Pennsylvania's brewers and the government, as represented by the PLCB and the Legislature. The Brewers of Pennsylvania (BOP), the state’s official brewers guild, has hired Adam Harris, former chair of Pennsylvania’s House Liquor Control Committee, as the organization’s new Deputy Director.
The BOP said, in a release put out on February 6, “The newly created position (shades of Joe Da CEO Conti!) will further bolster the BOP’s advocacy efforts and its quest for a more fair playing field within Pennsylvania’s antiquated three-tier system (manufacturer, wholesaler, retailer). In conjunction with Dan LaBert, BOP’s Executive Director, the BOP’s Legislative Committee, and Board of Directors, Harris will assist in outreach efforts to BOP members, potential members, elected officials, and other beer-interest entities to strengthen and expand Pennsylvania’s thriving craft beer industry. According to the Brewers Association, Pennsylvania craft beer ranks second nationwide in economic impact ($5,788,000) and first in barrels of craft beer produced per year (3,724,010).” (Thank you very much, Dick Yuengling and Jim Koch!)
Harris was hired to lobby the government, although as a recently retired House member, he won't be able to directly talk to House members until December of 2019 because of lobbying restrictions. Beer is his direct focus, of course, but as the former chair of the HLCC he's pretty damned familiar with what was going on with Pennsylvania's booze law changes.

So I asked the BOP if they could set me up with Adam for an interview. I'd met him at a Commonwealth Foundation event five years or so ago, and we had quite an affable conversation.
(One note: I tried my best to keep up with the conversation as I typed, but let's just say that everything I 'quote' Adam Harris as saying is actually a paraphrasing. I've also moved pieces around to make more sense of the flow as we went back to clarify things; there was no intent to change meaning. I tried to stay as true as possible to what we both said, but if there are any problems, I invite Harris or the BOP to send me an email and I'll be happy to discuss it.)
What are your top legislative priorities to create opportunity for Pennsylvania breweries?
The issue that's most time-sensitive is the taproom tax. We pushed it back once already. That would be a killer. The brewers were told in 2015 that the taprooms would be tax-free. So they jumped in. It would be a step backwards to tax that now. The governor wants a legislative fix. Our legislative side is talking to members.
Could you explain what we're talking about in a bit more detail? And I'll note that the tax has been delayed until June 1.
In 2015, the PLCB said, look, if you have a G license, a manufacturer license, you can have a tasting room. Now, a tavern is paying the sales tax on beer, but they're paying it at the wholesale level. They pay 6% on the wholesale price of the keg when they buy it. They want the brewers to pay the 6% sales tax by the drink. That's 4-5 times as much in sales tax. We'd love to keep the tax-exempt status, but we surely don't want to be paying more. Our attorneys are talking to the Department of Revenue, and they're getting that.
How did it happen? Who made the decision, and how did the tax get put in place?
It's hard to track down where this began, or who made the policy decision. There has been no legislation. Ironically, Department of Revenue came out with a statement that the taproom sales would be tax-free, and now they are changing that to a 6% per drink tax. On a premium pint, in Philly when it's already got a per-drink tax, that's a significant increase, and it trickles down to employees: fewer pints sold, fewer people employed. If it goes ahead, brewers are going to pass the tax on directly, and itemize it on the receipt so people know why they're paying more.
As I said, I can't lobby the House members for twelve months, so I'm talking to Senators, and to brewers to make sure they understand the issue, making sure they interact with their legislators. We meet with everyone we can in the Governor's office, and Revenue, and they've been receptive to the idea. The governor's office indicated he'd like a legislative fix to take the gray area out of it.
The thing is, if we run it as a tax code bill, that usually doesn't get passed until June 30. We're hoping we can get it done earlier. If you wanted to change the tax structure, you do it in a tax code bill, but if we're not changing taxes in the budget, there may not even be a tax code bill. But we do a budget every year, and it has to balance.
Why does it seem that it's always everything that needs to get done gets jammed into the last half of June?!
(Laughs) It does appear that June's when it all takes place. It all gets done in one month, and it's a hot month.
Drinking the good stuff. 
What's the Beer Equity program?
You have the manufacturer – the brewers – and the wholesalers, who have franchise rights to the brands once they contract to sell them. Those rights, that contract, runs in perpetuity. That's a PLCB ruling, from about a decade ago. There are very few opportunities to get out of those. Usually it's a great relationship, but a few aren't, and those people literally cannot get out those relationships. They can be traded to another wholesaler, or go to court, which isn't easy. We're trying to find a better way to open these contracts. We want legislators to know this is an issue for us. The wholesalers are great for us, and get the beer out where we couldn't. But the few exceptions, that makes it harder for a brewer to think about signing that contract. It causes a great deal of stress and anxiety. 'We're making great beer, getting great reviews.' But they don't know what to do. If the contract was just ten years, and had to be renewed, that would be better.
We got the end of the case law, and the regulatory workaround that allowed grocery stores to sell beer by installing a 30-seat “cafe” and buying a tavern license. Are there numbers on how much those two measures actually benefited PA brewers: sales increases, numbers of outlets?
Let me check on that. It was a huge win, no doubt, to see them spring up all over the state, give consumers that option.
On the flipside, there are problems with the grocery store beer sales situation. Taking limited restaurant licenses to use for grocery stores makes those licenses more expensive and scarce for on-premise businesses. The system is inherently unfair to smaller grocery stores. It does little to bring beer sales to convenience stores, a major sales outlet in other states. What we clearly need in PA is a grocery store license. Why can't that happen here?
It's becoming the game only the big guys can play. The rep in Carbon County has way too many R licenses and they're worth nothing, while in Chester County, how can a young couple start a small restaurant when the license costs $500K? Any time you talk about new licenses or transferring, you get into a fight that stalls out. We talked about transitioning D licenses, but there was considerable pushback. There are some distributors who are still doing really well, if they're willing to push the envelope. The landscape has changed.
You want to do what's right for the consumer, but this is people's livelihood. That sixpack sale, for instance, is how the tavern-owner pays their mortgage. My comeback was video gaming terminals for the taverns. We'd be down a whole new rabbit hole with that.
Why is the legislature so reluctant to take substantive action on creating a more open retail situation that would directly benefit both Pennsylvania brewers and Pennsylvania consumers? This is not the first time the PLCB has taken independent and somewhat arbitrary action that effectively rewrites the Liquor Code; they made a case a 12-pack, for instance, and then the legislature did away with the limits altogether. The Board has often shown no reluctance to defy the stated desires of both the legislature and governor. Is there any interest in the legislature to limit this power?
They are a bit of their own little fiefdom.
But the only negative feedback we had from brewers on the case law changes was, 'Hey, you just gave us 12-packs, and we re-did the package lines, now a few months later you give us singles. Could you stop giving it to us piecemeal?'
It really is strange. The ultimate backstop is that anything the legislature passes and gets signed is then the law. It might seem like they [the PLCB] spring surprises, but they're open about process. I don't think they anger people enough that we'd limit what they do. [Adam interjected at this point that PLCB member Mike Newsome has gone over to the Governor's office, so it's a 2-member board right now.] We could always call over to them and get things done. It never got personal or unpleasant. [He should know, but I'll note here that at PLCB hearings I was watching it most definitely got unpleasant on occasion.]
As the former chair of the House Liquor Control Committee, can you give me some insight on why it always seems that the interests of the FOURTH tier, the actual consumers, come last in considerations of alcohol legislature?
Say we wanted to get something done for the consumer. We'd pull the committee in, and we'd want to change things, and...personal relationships with voters and businesses in legislative districts stalemate things. The consumer is finally getting a few wins, but slow and steady wins the race in Pennsylvania. We'd do a big omnibus bill, and you'd get a lot of things. Some of it you liked, some you didn't. We've gotten away from that. The consumer's more engaged. They get more and they want more. I will say that I don't think there's that many anti-alcohol advocates in the general populace or the legislature as there were even ten years ago. For some of them it's a revenue issue, but with Uber and Lyft, there's no reason anyone would have to drive drunk.
Look, we're playing catch-up for sure. Got to get our guild solidified, talking to their legislators. I grew up in small-town Pennsylvania, in Juniata County, and all we knew was Yuengling. But there's no animosity among the brewers, there's cooperation. More than I saw in the legislature.
And that's that. Thanks, Adam Harris.