As required by law......

There are numerous "newswires" available; the majority of them just reprint press releases from businesses. So and so got promoted, Corporation XYZ broke ground for a new building, that sort of stuff.

But in the insecure world of the PLCB, where every single scrap of good news is treated like a cure for cancer, we get crap like this, telling us that the PLCB gave back license fees to municipalities. That's a press release essentially saying "The PLCB is going to follow the law." It even says, right in the release, "As required by law." Imagine if the Department of Corrections put out press releases saying, "As required by law, inmates were released at the end of their sentence." Or if PennDot decided to let us all know, "As required by law, plow drivers will follow traffic signals."

Maybe the PLCB is trying to make up for all the news that's being reported by independent journalists about graft, nepotism, back door deals, lack of ethics, destroying evidence, shoddy record keeping, wine kiosks, Water Heater Joe, overcharging and variably screwing the citizens. I can think of better ways to do it, though. Here's one example for businesses to follow:

Can you imagine the PLCB actually doing this?

Now I'm all for transparency in Government. That's another reason I don't like the PLCB: they are the least transparent of any state organization. Want to find out how much the Department of Education paid for a chair? You can actually look at the bids, see who won, and what the bid was for those chairs. But if you want to find out how much the PLCB paid for that case of vodka...it's suddenly become proprietary information. It wasn't before Act 39, and there is nothing in Act 39 that makes it proprietary; the PLCB just decided it was so. They say this is so Company A doesn't know what Company B is paying, and that makes negotiations fair.

That would be true in the open market...but not in a government-owned and operated monopoly. You see, it doesn't matter if either one of those companies know what the PLCB is paying them - they have nowhere else to go if they want to sell in Pennsylvania. Each product is a game of chicken between the PLCB and the supplier. The PLCB says, we'll only pay this much or we won't carry it, and the supplier says no, you'll  pay this much or you won't carry it.

So who blinks first? The PLCB, because they won't be providing what the consumer wants (even more so than now), or the supplier, who might lose overall sales? Add to that the knowledge that both sides know what a suitable substitute* would cost the PLCB, and you have price competition. The PLCB doesn't know if the price they paid for that substitute is equal to or above what the supplier they're currently negotiating with is willing to take and the supplier doesn't know if the price they are offering is above or below what the PLCB is willing to take. Of course, all that requires work and if done fairly, would benefit the consumer and so is antithetical to the PLCB way of doing things.

Remember: the Board members ultimately make the decisions about what you get to buy. They are political cronies with no experience in the liquor business; almost every one has been a lawyer with political connections. And you don't have any say in who they are. These aren't elected positions, and they aren't hires, subject to the civil service regulations. The one good thing you can say is that they aren't full time employees, so they can't screw things up 24/7.

The lack of qualified people on the Board is mostly the fault of the Governor - all of them since 1934. They could appoint people with industry experience...but they don't. Instead, they use the PLCB to pay back supporters, cronies, contributors, any non-qualified person they can find. And the legislature rubber-stamps them, which makes them culpable, too.

We need to change the system to something that works for the people. A system that allows freedom of choice, allows convenience, allows competition, and allows government to focus on regulation. We need privatization. 


*A suitable substitute is something that satisfies the consumers desire for a product or type of product. For example, Nikolai would be a suitable substitute for Vladimir vodka on the low end, and Ciroc for Grey Goose on the higher end.

Let's talk New Jersey just a bit

This is a blog about Pennsylvania's drinking problem -- the PLCB. But sometimes we look at how other states do it, either to see how it's done right, or how it's done wrong. Today, "done wrong" is the New Jersey Division of Alcoholic Beverage Control, and their recent "crackdown" on limited brewery licenses...which was followed by an amusing 180 when they were brought to heel.

Let me explain. A limited brewery license is a relatively new thing, an adjustment to the NJ Booze Code that was just passed in the Garden State in 2012. I'll save you the trouble of looking at it: it's a license for breweries that produce under 300,000 barrels a year, and allows them to sell to wholesalers or direct to retailers, sell directly to consumers on their premises (by the drink, or in quantities up to a half-keg at a time for off-premise), and give limited amounts of free samples. The license is an annual fee, between $1,250 and $7,500, depending on the size of the brewery.

There are two restrictions in the law. On-premise sales must be "in connection with a tour of the brewery" (which has been interpreted to be as simple as signs on the brewing equipment or a three-minute instructional video). And "The holder of this license shall not sell food or operate a restaurant on the licensed premises." And that's it. 

And yet...last month, David Rible, the director of the NJ Division of Alcoholic Beverage Control (ABC, and why does it say "control" if they don't have state-run stores?) took it upon himself to arbitrarily issue a restrictive ruling that suddenly limited that "limited license" with a load of restrictions that seem to go way beyond the NJ legislature's original intent of "in connection with a tour" and "shall not sell food." 

Rible's ruling on consumer freedom

According to Rible's ruling, the limited license holder was now restricted to 25 "events" per year; "Trivia night" is given as an example of an "event," but so are "live" television display of sporting events, and each event must be approved by the ABC. The license holder may only do 12 off-premise events in a year; beer festivals are not included, but events in the brewery parking lot are. They are allowed to host up to 52 "private events," but only in a walled-off area. These "rulings" make things a lot less fun, but then Rible just got stupid. Yeah: David Rible got stupid. PLCB-level arbitrarily stupid.

The food thing got crazy. No food trucks are allowed, which...how? Why can't a food truck park in the lot? Then this one is just a killer: "No restaurant menus of any kind shall be placed or maintained on the licensed premises of a Limited Brewery." Which, one, in the era of GrubHub and Yelp is just stupid and pointless, and two, would seem to violate all kinds of commercial free speech.

Then there's this one, which is just weird: "A Limited Brewery licensee shall not allow, permit or suffer other mercantile business, such as "pop up' shops, bazaars or craft shows, to occur on the licensed premises." Sounds like Rible doesn't like hippies.

Upshot: there was a huge uproar from consumers, breweries (and I suspect the legislature), and within about a week, Rible was back-pedaling like mad. The whole thing was suspended, and now the Legislature is going to revisit the limited license. (And some brewers are pleased with this! Be careful what you wish for...)

Sigh. This is exactly the kind of crazed arbitrary rulings the PLCB loves to make, regardless of consequences. Rible is not a judge, he's not a legislator, he's certainly not the governor. But he took a law, and simply rewrote it. He presumed to know what the legislators really meant when they said "in connection with a tour" and "shall not sell food," and that was "don't take business away from complacent tavern owners." 

Rible's Library of Arbitrary Decisions and Policy Mistakes

Whoops. Did I say that out loud? Yeah, it sure looks like he did this to please tavern owners, who felt they were being gored by this limited brewery license. After all, because New Jersey has the same stupid limits on licenses that Pennsylvania does -- only worse! -- they had to pay a LOT more for their license, often over a million dollars. And that doesn't seem fair. 

Well, it isn't. But it's not the brewers' fault, and they shouldn't be punished for simply following the law. There wasn't any news of breweries selling food, and every New Jersey brewery I've ever been to (a lot of them), has offered some kind of "tour". 

No, the real problem here is that the licensing system is broken, and no one who currently has a license wants it fixed. Sound familiar? 

I'll spell it out for you. The arbitrary decision by the PLCB to allow grocery stores to sell beer because they have purchased a restaurant license (and maintain a "cafe" area separated from the rest of the store) is a bad idea, and it is only making the broken licensing system worse. And in the future, if the Legislature wants to fix that by creating a new, reasonably-fee'd store license, guess who's going to be spending a lot of money to convince them that's a bad idea? The grocery chains who spent millions buying restaurant licenses, that's who. 

Leave it to the Legislature. They answer to us. Bureaucrats like Rible, and the PLCB, rarely answer to anyone. Though I do have to admire the brewers of New Jersey for standing up to this bullshit. Well done! Hold onto those menus!

New Jersey's example is clear. As long as the PLCB has this kind of arbitrary regulatory power...mistakes will be made. The solution? It's at the top of the screen, as always: Abolish the PLCB. Rewrite the Code. 

Beer in Supermarkets: the Down Side

Giant Market plans to sell beer at their Stone Mill Plaza store in Lancaster County!

Weis Market opens beer cafe in Mechanicsburg!

Yeah, really, beer in Da Grocery Store in Da Commonwealth!!!!

Is this great? Or is it pathetic?

I asked that question seven years ago, when I first bought a beer at a Pennsylvania supermarket. It's high time that the question was asked again, because things are accelerating. We're seeing more and more big supermarkets adding "beer cafes" and selling sixpacks, and there are going to be consequences; we need to look ahead at what may happen and consider action to head it off.

It's a simple problem. It's great that Pennsylvania supermarkets have figured out a way to sell beer, a workaround that involves sacrificing part of their building to create a "cafe" where people could have a beer if they really wanted to (but mostly don't, with a few cool exceptions where the idea's been embraced) and buying a tavern license, which can be wicked expensive (check by county; hello, Chester!). But clearly the big chain supermarkets -- Giant, Wegmans, Weis, Whole Foods, Giant Eagle -- have found that the profit is worth the cost, because it seems like a month doesn't go by without another opening.

Why is that a problem? A few things. First, Pennsylvania has a "quota system" for liquor licenses: one per 3,000 people in a county. It's essentially a broken system, as it's never really kept up with population shifts, and there are a ton of "grandfathered" licenses in counties that have lost population, and there are a number of exceptions (The Almighty Liquor Code has a silly number of kinds of licenses), but essentially, there are no new tavern licenses being issued. If you want a liquor license, you have to buy one on the open market, because the Legislature foolishly made them transferable and salable. I say "foolishly" because when a liquor license -- a piece of paper issued by the State with no intrinsic value except what the State-enforced "quota system" has given it -- is sold in Chester County, for instance, for $270,000, the State gets next to nothing. Even though the full value of that license only exists because of State law. Yeah, I call that foolish.

That's a problem, because every time a supermarket simply wants to sell beer, it buys up another of these limited licenses, which then become more scarce, and therefore more expensive if you want to buy one to open an actual bar, tavern, brewpub (you need a license to sell anything other than your own beer or Pennsylvania wines at a brewpub), or restaurant. As licenses get more expensive, you get more chain restaurants and fewer independent operators opening (because they don't have the deep pockets); you get more nuisance bars (because they have to sell more booze to make their loan payment), and you get more high-end places with expensive booze (which isn't bad in and of itself, but if the ratio is unbalanced, people have fewer choices).

Another part of the problem is that it creates two tiers of grocery stores: the ones with beer and the ones without. I recognize that some grocery stores don't want to sell beer; especially in rural Pennsylvania, where there are some family-owned places that simply don't hold with alcohol at all. Fine, no reason to force stores to sell beer, but there are stores that would like to and simply can't afford the ridiculous unnecessary expense of buying a tavern license and tying up a substantial amount of retail space and equipment in a "cafe" with separate beer cashiers.

This was brought up at the McIlhinney Hearings in 2013, by a representative from Redner's Warehouse Markets, and Senator McIlhinney's response was essentially 'that's nice, but that ain't gonna happen.' Since then, there have been attempts to come up with a separate license for grocery store sales (of course, another type of license is exactly what we need!), none of which went anywhere. Given the tenacious opposition of the beer distributors to any expansion of grocery store beer sales (and the likely opposition of the already-licensed groceries), I doubt this will fly, and...

That is going to mean we'll have this half-assed workaround forever. The stores that got a liquor license won't be happy with anything that devalues that major investment, so they'll be fighting it. And Pennsylvanians are pathetically grateful for anything that even looks like buying beer in grocery stores (and having a liquor license actually puts the stores one tiny step away from selling wine, as there's already been a push to allow taverns to sell "to-go" bottles of wine), so if we think we have it, we're not going to push for it; we're just going to go to the stores that sell beer. That means that more and more supermarkets are going to go after tavern licenses, which is going to accelerate the scarcity issue (more chains and more nuisance bars!), and put even more pressure on the family-owned supermarkets to sell or close.

Well, hello, unintended consequences!

More crappy nuisance bars. Friendly neighborhood bars will sell their licenses at top dollar while they can, and the families will retire. And we get further away from a REAL solution to the problem.

This is yet another fine mess the PLCB and the Legislature have gotten us into, with the help of the MBDA and the behind-the-scenes maneuvering of Bucks County beer mogul (and SEPTA Board and Turnpike Commission member; and did you know he also owns 4% of the Sands Casino?) Pat Deon. Please note that I do NOT blame the supermarkets; they're just playing the hand that was dealt to them, and playing it well.

The only solution to Pennsylvania's alcohol beverage sales quagmire is going to be an all-alcohol solution, some grand bargain that fixes everything. More on that to come.

House Liquor Control Committee passes HB790 to the House for consideration

Just watched the House Liquor Control Committee debate numerous amendments to HB790 -- Rep. Turzai's PLCB privatization bill -- and pass one of them, Rep. Mustio's, which did bring down the license fees a bit. It still squeezes one hell of a lot of money out of the wholesale end of the business, and that has to change, or we're going to see price increases in PA just like they did in Washington. But that can change, and must, on the floor of the House.

It's also clear to everyone on both sides of the aisle that beer has to join the process. It should be clear to beer wholesalers and retailers as well; things ARE changing, and it would be a good thing for beer lobbyists to get to Harrisburg and make their best deal possible to advance liquor/wine privatization. It's not a time for greed on either side; this is a time of opportunity that needs to be seized. It's also a time of change, no doubt, and many folks would rather not change. Well...maybe then it's time to bring in new blood.

Interesting times. Now it's up to Rep. Turzai to get this through...while still maintaining real privatization that doesn't get Washingtonized. Cross your fingers, people, and then uncross them and talk to your reps about what you want in a privatization bill. Contact them TODAY, because it may come to a vote quickly. I'm emailing my rep right now.