What Might Privatization Look Like?

The future is as clear as vodka...

Two years later...I haven't given up, but I'll admit that the pandemic re-ordered my priorities. I've got [THE RAGING FEAR] my concerns under control now, and I'm starting to think about other stuff again. Like privatization. 

There's talk of using a state constitutional amendment to get rid of The Police-Enforced Monopoly that is the State Store System. This tells me two things. One, Republican legislators are tired of Democratic bullshit about this issue, and they're going nuclear. And two, that Republican legislators have stopped thinking clearly. 

Demolition of the PLCB, amendment-style!

It's my strong opinion that this would be the bluntest of instruments to achieve the goal of privatization of booze sales in the state. An amendment would not have the detail necessary to do this well, and would leave open all kinds of maneuvering room for backroom deals of the type I'm pretty sure we all know would happen. 

What kinds of deals? How about minimum square footage requirements, like they included in Washington State's privatization deal? The "reason" is that they're 'saving' us from 'a liquor store on every corner,' but it's really a deal for big-money donors like chain grocery and liquor stores to get a new oligopoly on retail liquor stores, trading a shitty monopoly for a still-limited oligopoly. We don't want that, believe me. 

Or they'll boost taxes to "make up for the shortfall" from the loss of the PLCB "profits." Once again, like Washington State's privatization deal, this is wrongheaded, and will lose us the greatest benefit of privatization: competition. It will put PA liquor stores (and bars, and restaurants) firmly behind neighboring states' stores on price, leading to even more border bleed. 

Because you know that the hated Police-Enforced Monopoly will not go away. We'll still be forced to buy booze in PA. Bullshit on that. Bullshit!

Okay, calm down, Lew. The constitutional amendment idea is not a good one, despite the Democrats forcing consideration of such extreme measures by their bullheaded intransigence on this issue. We need to come up with some way to make this an attractively bipartisan issue. 

Some of the problem is that the lazy legislature acquiesced when the PLCB put the supermarket safety valve in place, and didn't do the right thing: create a separate grocery/deli/c-store/gas station license for retail off-premise sales. That led to supermarket and c-store chains buying R-licenses at insanely inflated prices (over $500,000 in some instances), and now — shocker! — those businesses are dead-set against any move toward such a license. Great. 

But that's a whole other post, and I will get to that, and soon. I'm back on this. 

Time to take over the world, Pinky!

Meanwhile...What do I want to see in privatization? All open to tweaking, but...

First, and non-negotiable: the PLCB ceases to exist except as a regulatory agency...if needed. No state stores, no state wholesale. They've proven that they cannot run this fairly or honestly. They're done. As a regulatory agency, their operations must be made more transparent, and their power to "interpret" state laws and regulations to the point of nullification must end. 

Second, very important: learn from Washington State's mistakes. And they made plenty of them. A study panel should look at what Washington did, and what Alberta did, and come up with recommendations to make sure that we do better. Ask consumers in those places, too. 

Those two are huge, big picture things. Here are more direct things. 

1. Allow ALL R and Hotel licensees -- bars, restaurants, hotels -- to sell any type of alcohol beverage to any legal customer for on-premise consumption. With the purchase of an additional Off-license permit (for a reasonable annual fee to the state), they would be allowed to sell full bottles/cans to go. No more limits, no more "step outside and you can buy another" bullshit. Licenses increased to one per 500 adults in a county. Licenses become non-transferable five years after passage, which should end the ridiculous secondary market in paper.

2. Beer Distributors become all-alcohol stores with off-premise sales. Beer distributors MAY dispense draft beer in sealed (have to work on that definition) to-go containers. Number of licenses is increased to one per 500 adults in a county. License is non-transferable, starting five years after passage.

3. Create a new license for grocery stores, convenience stores, drugstores, and gas stations. Takeout ONLY, no on-premise consumption. Number of licenses are not limited, pay a reasonable annual fee to the state (with allowance for review after five or ten years), and are not transferable. License holders MAY also buy or retain a separate R-license for on-premise consumption if they want. 

4. Open up wholesale. Beer wholesalers may add all other alcohol. New wholesalers allowed, reasonable annual permit, non-transferable. More wholesalers means more competition, which means better prices and service. Charging $100 million for a wholesaler license is not a way to get more wholesalers. This may need tinkering; for instance, are multi-state wholesalers allowed to operate in the state? We may want to say no to that, or we may not. 

5. Pennsylvania citizens AND licensees may buy and sell from out of state. Period. This has gone on for way too long. If the state can't tax and regulate booze in a manner consistent with neighboring states, that's too damned bad. Look at it as incentive to do better. 

6. Sales tax to be applied at wholesale (or producer) level. Convert the Johnstown Flood Tax from a tax on price to a flat gallonage tax, like the rest of the country, and peg it to current national average. If that means less revenue, screw 'em. What Pennsylvania's tax does -- unintended consequences -- is make blotto booze (cheap wine, cheap vodka) even cheaper, while making better booze even more expensive. If we're taxing alcohol for some health or moral reason, the gallonage tax is more honest; if it's just about raising revenue...well, why not put an excise tax on everything and share the pain?

7. Rip out the old Liquor Code and start over. Aim for simple, understandable laws that ruin as few businesses as possible, but changes them where they are unfair, or not in the public interest. For instance, booze wholesale should emulate food wholesale: competition allowed, exclusivity as something that suppliers would pay for. The Code is currently open to way too much interpretation and confusion, and that has to end. 

8. Perhaps the most important is this: when this is done, when it's being written and decided upon, it must be 100% transparent. There must be citizen and industry representation on whatever task force does this rewriting of the Liquor Code, and regular reports must be presented; weekly, if necessary. There's too much money at stake to do otherwise, and we've already seen that it causes corruption. Obviously, I volunteer. Seriously, there should be representatives from all sides: wholesale and retail booze business (but only one each), consumers (one or two), anti-alcohol types (gotta be fair), the UFCW (no, really, it's only fair), and politicians. Maybe more stakeholders, that's just a first cut, but there must be representation and openness. 

These points will make me no friends in the industry. They completely upset the apple cart, and may ruin long-established family businesses. But they will create new businesses, and the solid family businesses will thrive and succeed...as long as big businesses, chain retailers, aren't allowed to write this privatization bill. And of course...nothing's set in stone, and politics is the art of the possible. 

It's about time, it's long past time, that the consumers, the voters, had a large say in how this gets done. 

Privatization. Yesterday, today, forever.

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.

The PLCB conundrum

The PLCB, not known for their problem solving ability, continues to create problems caused by their own inefficient business model and inability to adapt.  The bloated overhead, incompetence, top heavy management, and lockstep mentality prevents them either coming up with solutions that a real business would, or varying from their "one size fits all" systemic thinking.

An example of this is being played out in a corner of Westmoreland county.  The PLCB has two stores in Belle Vernon, PA. One is actually in the town, while the other is in what is called the tri-county area. where most of the retail stores are. The store at 321 Tri-county Lane, which they want to replace, is about 120 feet from the entrance to the Giant Eagle grocery store, which follows the current publicly expressed desire to have stores in or near a grocery store.

They want to move it someplace within a mile of the current location -- how convenient.

They are also going to make the new store bigger, going from about 3,000 square feet of retail and warehouse space to 4,500 square feet and they say that this will happen by the fall of 2015. Or it might be like Lebanon, which inexplicably took 3 years to move and upgrade (and it still isn't done yet), or like the store in Mountaintop which took over 2 years to move less than 100 feet, or the one in Philly near Penn that took over a year. You get the picture. We'll see at some point if they hold true on this one. If you want to see what it will supposedly look like, the PLCB used the exact same plans for store 4027 at Pittston Crossings in Pittston Township. Seriously, they didn't even change the store number on the plans to reflect the different store.

So there is the conundrum.  Do you keep the stated goal of customer convenience, or do you put some lipstick on the pig of a state store and make it larger but carry less different products per square foot, as all the remodeled stores do? Also, with this larger store, will the smaller store in Belle Vernon stay open, or close? I can't find an answer to that, but the PLCB has closed 20% of their stores in the union era. It apparently just got too expensive to keep them open.

What would real businesses do? To start with, one owner probably wouldn't have the only two locations in town! It turns out the parcel of land directly behind the current store is empty and not owned by the shopping center. That would be the first thing I would look into, if the zoning would allow a store to be built and what kind of deal could be made with the current owner. However, the PLCB doesn't want to own their stores and makes no permanent investment in the locations they are in (I don't think redecorating counts), so unless the owner wanted to do everything up front and then lease it -- the PLCB isn't interested.

The next thing would be to look at the market. Would a real specialty store be profitable? I don't mean a PLCB "specialty" store (which is just a regular PLCB store with Chairman's Selections), but a store that caters to the harder-to-find items in wine and liquor. The PLCB could do that if they weren't so locked into the cookie cutter approach (and if they knew how to sell product), but the biggest reason they don't do it is that they can't afford it.  The less expensive the item, the more profit margin they make. As I showed in this story, they can make over 80% and sometimes near 100% margin (including the JFT) on an $9-11 bottle of wine but only about 50% on a $100 bottle of wine.  When you don't know how to sell good wine, and the majority of wine you do sell is lower priced, that can be a problem.

Of course, this whole problem goes away under privatization. Grocery stores could be selling wine, and if you did want something they didn't have, you could go to a real liquor store or order it -- most likely online -- from another PA store. You can be sure they wouldn't tell you it will take 2 to 3 weeks to arrive like the current SLO system. (I love that, it shows at least one person in the PLCB knew what they were doing -- SLO(w) system indeed!)

Lastly, remember how the Union says that they provide rents to local property owners as a so-called benefit of the state store system? In this case, the Glimcher Group whom they rent the current store from is a multi-state corporation with properties in 13 states.

More New State Stores (that are not near grocery stores)

Greetings, PLCB real estate specialist. Your mission is to find, have built or renovate, 4,500 square feet of retail space within walking distance of a grocery store. You have at least a dozen grocery stores in the area and three years to accomplish your mission. If you fail, the PLCB will deny any knowledge of your existence, your mission, and any money spent on it.

As an addendum to my post of the 26th, and a prime example of why "modernization" is going to turn out to be just another raft of lies, here's a bit more proof that the PLCB may not want to do -- or get done -- what they say they want to do. In 2011 the State Store at Crestview Drive in Lebanon closed. Now, over THREE YEARS LATER, the PLCB is going to open a new store in the Kmart shopping center at 1745 Quentin Road, supposedly in September of this year right between a hairdresser and a Dollar General. Given the PLCB's stated "modernization" goal (which the Democratic (and pro-PLCB quasi-Republican) legislators wave as an alternative to privatization) of locating more stores in or near grocery stores, that sounds great, right?

Well, guess what: there isn't a grocery store in the Kmart shopping center. While Kmart does carry food, it isn't a full-fledged grocery store, like the Weis, Giant, Aldi or Foodland (the nearest, in a different plaza across the street), all of which are in nearby shopping centers. Maybe the Dollar General store next door fits the PLCB idea of a grocery store? Or is it that Foodland being across a busy street in another plaza is the PLCB's idea of "one-stop shopping"?

Remember, this is after having over 3 years to do what they say they want to do. It's not like it snuck up on them. So you have to ask....do they really give a damn about consumer convenience, or are they just giving lip service? Then ask yourself why it even took three years to replace the store that closed? Would a private retailer ignore customers for that long? Of course not, but a monopoly can because they know the customers aren't allowed to and can't go anywhere else. That is what they call world class service.

It seems to be another fine example of the PLCB not doing what they say they want to do. But at least we do know what floor polish will be on the floors.