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.

Privatize.

At the PLCB, ALL money is TAX money

Well, the good 'ol PLCB got their annual report out, and proudly lists the following as "Contributions to state and local governments" totaling $749.6 million for last fiscal year:

• $371.5 million in liquor tax
• $146 million in state sales tax
• $185.1 million in cash transfers

Of course, the first number is the Johnstown Flood Tax, which was raised twice since the flood in question, the second time about 30 years after the flood. Still, at least they call it a tax. Same with sales tax. That's what passes for honesty in Harrisburg.

It is the last one that the whole PLCB rides on, the reason they still exist: $185 million in "cash transfers," or what they like to call "profit." They don't want to call it tax revenue, but that is exactly what it is, a tax. Webster's defines a tax as: A charge usually of money imposed by authority on persons or property for public purposes. Don't like that one?  This is even more specific: A compulsory contribution to state revenue, levied by the government.

When a government entity -- the PLCB -- is levying a compulsory charge -- which is anything above break-even on their monopoly retail operations -- to increase revenue - it is a tax.

They do that so the codified taxes -- the Johnstown and the sales taxes -- pretty much remain the same. And as we've pointed out many times, they have a police-enforced monopoly and their own pet judiciary system that allows them to do pretty much whatever they want anyway.

No matter what they say, this is not a service to the citizens, nor is it a business. Successful businesses do not have record sales and still go further in debt. The PLCB is well over $1 BILLION in the red...and it isn't going down, it is going up. Businesses do not lie to their shareholders (and they keep saying...that's us!) about plans that have no hope in reaching the levels they promise.

Remember all the money bailment was supposed to save: $100 million. And opening more Sunday stores: $22 million! Opening.remodeled/new stores faster: $25 million. Variable pricing: $75 million. That all totals up to an "extra" $222 million, ON TOP of what they were turning in previously. Wow, dolla dolla bills, y'all!

Have any of these things happened?  Maybe bailment? Probably not since after the first time the PLCB didn't have to take out a $110 million loan that money was never seen again.  No increase in capital spending, no increase in pension contributions, no increase in "profit," and no explanation where it might have gone. Uhhhh...gee, guys, what happened to all that extra money?

The only thing that has consistently gone up is how much red ink the PLCB uses. For real businesses, record sales does not equal record debt for too many years in a row, but the PLCB keeps on with lies to the public about how much of a benefit they are. That's right, lies because if you read the underage drinking report, look at alcohol related DUI and fatalities both underage and legal age. Look at consumption which according to the National Institute of Health spirts consumption - the thing the PLCB is directly responsible for - went up 56% in the past 20 years. We're barely in the middle nationwide. Look at binge drinking and we are 43rd best out of 51; dropping eight places in the past four years. Worse than all the surrounding states, worse than all the free states on our borders, worse than most of the entire United States. "Control" isn't really effective. All it is.... is annoying and expensive.

The PLCB does not control anything, they still exist only to provide a jobs program for the people that work at the PLCB. They aren't even good at what they do. At the last reporting -- well over a year ago, since the PLCB not only doesn't have to report these numbers, they make it a point not to -- 81% of the items they "negotiated" lower costs on had ZERO benefit for the consumer. As a betting man, I'll take every dime you have saying that percentage has gone up and they are screwing the citizens even more.

What they supposedly contribute is meaningless when compared to what they owe, the limited selection and poor service compared to other billion dollar stores, the universally bad reputation they have had over 80 years and the outright proven malfeasance of the leadership are just some of the ways you can see what we have to put up with in Pennsylvania compared to free states.

Maybe this has really been the plan since privatization efforts started in earnest. Run things so poorly, manage so ineptly, lead so incompetently and be so financially inadequate that it will cost far more for the state to bail them out to be able to rid ourselves of this outdated jobs program than to keep them. 

Naw...they ain't that smart...are they?

Don't Let Them Fool You

The PLCB just put out their latest Retail Year In Review, patting themselves on the back — again — about how great the State Stores are doing! Yahoo! It's all here! Just don't look too closely at the numbers!

Because if you do look closely, peek under the gloss and sparkles, you can see just how crappy a job they are doing. Let's start with the record sales. Let's see: police controlled monopoly, citizens can't go anywhere else, rising prices, increased population... It would probably take a real marketing genius to have record sales under those conditions. And take a look at those record sales in the hottest market category - American Whiskey: the PLCB's growth there is less than the national average increase in sales. Not just a little less, it is about 30% less. Imagine how much more in taxes would be collected if Pennsylvania was able to match the strongest national trend in booze sales for just that one category.

The PLCB is over $1 BILLION in debt

Of course, our old friend Jack Daniel's isn't forgotten; after years of us saying that it isn't a bourbon, the PLCB in their normal bout of incompetency gets it half right. On page 32, table 19 of the report there is Jack Daniel's Gentleman Jack sitting in the number 10 spot for "bourbon." At least they didn't have JD #7 listed 3 times like they did last year (page 30, Table 19). It is hard to say if they left it out because it isn't bourbon or they just screwed the table up.

To prove they are keeping up with the "modern lifestyle," a whole one tenth of one percent (0.11%) of sales came from the Internet, which is really pathetic in this day and age for a retail company. Pathetic is the key word when talking about the PLCB's technology track record. Can you say "wine kiosk"?

Then there is the problem of saying things to make yourself look good, even when the numbers that you provide don't always match up with reality.  For most of us this is called lying, for the PLCB it's called "how we do business." Let's look at those "increased sales".  First we have the sales for 2015-2016 from the Retail Year In Review.  On page 4 it lists total sales of $2,303,405,801. On page 5 it lists sales by month and transaction; it doesn't total them up, but have no fear, I did it for you.

Notice that the total is about $23.5 million different. The PLCB doesn't say why, and apparently we don't deserve an explanation.

The next table is for the year 2016-17. Again, the monthly sales in total don't match the total listed by the PLCB on page 4 of the current Retail Year In Review ($2,443,725,791). Only this time, it is $76.5 million that has disappeared. Remember, as the owners of this mess this is our money, and I'd like to know where that $76.5 million is.

Here you'll see that the number of transactions was fairly flat, increasing only by 0.91%, while sales dollars went up 3.8%. What this tells us is that the citizens bought 1% more often, but it cost them 3.8% more each time, well above the inflation rate of 2.1%

Retail alcohol is one of the few major sales items where the individual product is elastic (in economic terms, this means that a small change in price can mean a large change in sales), because there are so many suitable substitutes. If your favorite vodka goes up, you can easily find another at a price you are more comfortable paying. The industry as a whole, though, is inelastic, meaning that people are going to pay for some form of the product no matter what the price changes to. The PLCB knows this (probably because they hired somebody to explain it to them), so they will increase prices and not have it affect overall sales that much, if at all. They are doing that right now, through the old variable pricing trick they foisted upon the public (and the gullible Legislature).

So now that you have real numbers in front of you, you have to ask where the PLCB came up with an "average statewide increase of 6.10%", when the numbers they give us don't match? What numbers are we supposed to believe Table 4 or Table 5? And why should be believe anything the PLCB tells us, given their history of anti-consumer behavior, their predisposition to screwing us? Why aren't they capable of making the sales numbers match on their own damn report? As far as that goes, why, in this age of almost instant information access does it take them six months to put this report out? Find another $2 billion business that takes that long...go ahead, I'll wait.

Face it, the PLCB does NOTHING for the citizens except cost them more in the long run. Remember: they are a BILLION dollars in debt and it isn't getting any smaller.

Privatize.

A closer look at the PLCB Cash Cow

The PLCB and the UFCW (the State Store clerks' union) have always fed the public (and the Legislature) a big lie about the PLCB Cash Cow. They make it sound like their bulging bovine is comprised of nothing but filet mignon, and shits millions into the General Fund.

What they want you to think

However, the Federal Government doesn't think so and with new accounting rules in effect, the real value of the PLCB is more starkly in focus. Remember a couple years ago, when pension debt was required to be included in the annual report, showing that the incompetents in Harrisburg were really $240 million in debt? Now other benefits besides just pensions have to be taken into account, and it turns out that the PLCB is OVER A BILLION BUCKS IN DEBT. with total liabilities of over $1.7 billion! Yup, billion.  With a 'B.'*

Let me say that again. The agency that has been stealing from the public and short-changing the clerks the benefits it promised (which it could never afford to begin with) for over 80 years, while telling us all that it makes money...is over A BILLION DOLLARS in debt.

Don't believe me?  Why not ask the PLCB themselves? Here's the minutes from their December 6th meeting; take a look at page 9.

The reality of 80 years of lies.

What does it mean? It means that even with stealing more from you with "flexible pricing," even after screwing us with rising prices just because they want to, even after cheating us out of the discounts given by the suppliers, even after purposely working against PA businesses with imported house brands...they still need more...a lot more. The lying political hack they call a Chairman could barely keep a straight face when he told this whopper: "And, as we’ve said all along, prices will increase for some items, when the supplier and PLCB agree that the market can bear the increase." 

Looking at page 10 of the minutes you can see that for October they claim a profit (Change in net position) of $8,623,941. That means that if they didn't do anything else besides pay down debt, it would take ten years just to break even for the debt due today. Of course, they would be accruing more debt, new debt during those same 10 years. This is a Ponzi scheme worthy of Bernie Madoff. No wonder they worked so hard trying to get the Governor's borrowing plan into place. It would further obligate the citizens into paying off their debts and for the next 20 years keep the people who care about limited government and fair treatment for the citizenry at bay.

What does it take to be rid of them? How incompetent do they have to be? How anti-consumer will they get trying to pay off what they owe? You know where this money has to come from, don't you? I got a hint: the wallet of someone you know really, really well.

Can we afford to keep the PLCB's cash cow? Are state stores worth it? 3,500 clerks should not hold hostage a state of 12 million people. Privatize.


(*) Now $1.8 Billion in liabilities for January)

Lies My Liquor Control Board Told Me

A nowhere near complete list of the bullshit the PLCB has fed and is still feeding the public.

1. Prior to Act 39, we couldn't negotiate prices.

There was and is nothing in the liquor code that prevented negotiating prices. In fact, all the Chairman's Selections prices are negotiated and have been since inception. In April of 2016, Elizabeth  Brassell, the Board's director of communications said as much: "You are correct that the Liquor Code does not indicate that prices can’t be negotiated or that the PLCB has any obligation to use manufacturers’ suggested retail prices. In fact, as you suggest, the PLCB’s buying power, as well as its discretion to list and delist products, allows for some price negotiation with vendors." Yet we've been told that this is a new power, granted by Act 39.

2. "And, as we’ve said all along, prices will increase for some items, when the supplier and PLCB agree that the market can bear the increase." Chairman Tim Holden.

And as we've said all along, "flexible pricing" means "higher pricing." Today will see the increase of prices on 422 items; prices that are going up because the PLCB alone wants them to go up.

3. "Because of cooperative and collaborative negotiations, we hope to reduce prices on dozens of items in the near future." Chairman Holden again, on October 28, 2016

Here it is over 10 months later and of the top ten selling spirits and top ten selling wines the only thing that has gone down in price are pints of Nikolai vodka....by 30 cents.  This can only mean one of two things. Either the PLCB failed to get any price decrease on the items they have the most leverage on; or the PLCB kept all the reductions in purchase price they did negotiate and put the screws to us, the consumers. The truth is, we don't know, because the PLCB refuses to release this information. So much for us being the "shareholders" in this state-owned "business."

4. The PLCB and the vendors view pricing information as proprietary. At least that is the reason given for no longer showing purchase and shelf prices on the board meeting minutes and why the PLCB refuses to let consumers know what 422 items are that went up in price.

Yet the PLCB listed pricing information for decades. Act 39 and 166 did not make that same information proprietary nor did they say that the public should no longer have access to that information.

5. Wine Kiosks - "This was not a faulty fiscal decision," PLCB Chairman Aug 17, 2011

Yes it was and so was trying to cover it up.

6. Under oath in front of the House Appropriations Committee in April this year, Board Member Micheal Negra said that the loss of 'the shackles' that had been on the PLCB with regard to product pricing "would deliver better revenues for the commonwealth and better product prices and availability for consumers."

Raising prices on 422 items does not provide better availability or prices for consumers. That's a no-brainer. Higher prices are not better prices. And availability? With under 620 stores in a state this size? Don't even talk about availability.

7. The PLCB operates at no cost to the citizens

We pay for everything with higher prices, less selection, inconvenience, pension debt, few stores, inept management at all levels, nepotism, graft, incompetence, anti-consumer practices and unqualified Boards just to name a few. You might as well try to tell us that the Legislature operates at no cost to the citizens.

8. In 1934 the PLCB said that stores would be located at "convenient places to serve the public."

Wow, that's a whopper that they've never gotten over. From a high of 756 stores, we now have shrunk to 604. To reach the national average -- the average -- the total would have to be 1,800. Having 200% less stores than average is not convenient.

9. We are going to run like a business.

A business is successful when it is run by people with experience in the industry, innovates, provides goods at a better price than it's competitors. Provides better service or other services than its competitors do and is convenient for the consumer. The PLCB does none of these well or at all.

"The PLCB is a cash cow!"

10. The PLCB is a cash cow.

The PLCB is $240 million in debt, had negative assets for three of the last seven fiscal years, and by their own admission saved $110 million every year for the past 4 years (through The Wonder Of Bailment!) but has nothing to show for it, limits jobs and job creation due to monopoly practices, spends more on advertising than education, and still only contributes about 0.3 percent of the total state budget.




Tell me again why we need the PLCB? We don't and never have, they do nothing for the state and only exist as a poorly run jobs program. Privatize.

PLCB Math

So here we are, about to be screwed again by the PLCB. What is it this time? More nepotism? More corruption? No, this time it's just plain monopoly gorilla tactics (yeah, gorilla, not guerrilla). They wanted to force a private business to lower their margin so the PLCB could raise theirs.

Once again, they're just playing at being a business. A real business increases profits when it reduces costs through innovation or consolidation, they change benefits, they leverage productivity, they control operating costs. The PLCB does none of that; well or even at all.

For every dollar the PLCB spends buying booze, they make just over $1.45 selling it. (PLCB Financial Report 2015-16), but that isn't enough apparently. How can that be? Back in 2013 when Bailment was put in place -- that "nifty little system" that was going to make such a big difference -- the PLCB saved enough to no longer need a tax and interest free loan of $110 million from the state to start up their operation every year.  So where did that $110 million saved per year for the past 4 years go?  It isn't zero sum as some PLCB supporters suggest. 

For instance, if you start the year in debt by $100 million, and over the course of the year you make $500 million, your net is $400 million for the year. If you have no debt to begin with, then your net is the full $500 million. The PLCB no longer has that debt every year and so should be making $110 million more every year. Are they? Not according to their own financial reports.

In 2012, the PLCB contribution to the general fund was $80 million. In 2014, with bailment in full swing...it was $80 million. Maybe they spent it on improving the stores? Nope, store operations only went up $25 million over the two year period - still missing over $195 million. ($110 million times 2 years minus $25 million) Maybe they paid down some of the non-reported (at the time) pension debt. Hard to say, but if they did then they didn't continue it in 2015-16 when they had to report pension debt. That only went down just over half a million on almost $240 million of debt - a 400+ year payback plan.

Now we have "flexible pricing," which is of course all about "our need inside this building." Since none of the top 10 sellers of wine or spirits went down in price (except pints of Nikolai Vodka, which decreased a whopping 30 cents, and let's not talk about what a whopping display of hypocrisy it is for the PA Liquor Control Board to lower the price on The Drunkard's Friend), one can only assume that the PLCB kept all the negotiated differences of the most popular items. Now the question arises: how much more do they have to squeeze us by the balls to make the projected income increase of $165 million (or $137 million, depending on who you believe)? Raising the prices on 424 items isn't going to do that. Keeping all the $2.1 million in Jack Daniel's profit — as I'm sure they are doing or anticipating doing — still leaves a long way to go. 

By the PLCB's own admission of saving $110 million a year from bailment, and $165 million from price gouging the consumer, my math says that even with paying $195 million to the general fund, the pension debt should decrease by at least $50 million, and if you count that $110 million from the 4 previous years, there shouldn't be any pension debt.

Of course, that would assume the PLCB is an efficient, well run business organization with knowledgeable leadership and people who take initiative. None of which is true. It is a political pig sty stocked with innumerable incompetents that have no real business experience and run like a old boys club, hoovering up the hard-earned dollars of the citizens while giving almost nothing worthwhile in return.

So much for the Chairman's statement of:"...we can both generate additional revenue and achieve more competitive retail prices through cost reductions, rather than broad price increases." As a businessman, let me clue you in, Tim. You NEVER achieve more competitive prices by raising the price for consumers. The idea is to gain competitive advantage over other places selling the same or suitable substitute items. I'm betting you don't have a friggin' clue what that means.

Speaking of the Chairman, he was so proud saying that the PLCB didn't initiate any price increases during the period of 02/14 to 10/16. Well, guess what? They don't have to. ANY price increase gives the PLCB more money no matter who initiates it. I bet the suppliers never initiated 424 price increases all at once, though, did they, Tim? If you listen to the fearmongers at the UFCW and their lapdog bureaucrats in Harrisburg, we are told that there are 20,000 products available from the PLCB!! Yet Ol' Chairman Timmy is complaining that suppliers tried to increase prices on about 4% of them over two and a half years! Da noive o' dose guys!

You gotta ask why the $110 million from bailment PLUS the $137-165 million from screwing the public with "variable pricing" PLUS the $80-100 million or so they have been contributing the last 7 years or so doesn't total up to at least $337 Million being turned into the state ABOVE the taxes collected. Just what black hole of incompetence is it disappearing into? The answer is that it is all a lie. While they might make something more than before, the state, the General Fund, we the citizens are never going to see it. The PLCB needs it to keep their ship of mismanagement and incompetence afloat. They always have said that the PLCB will make more, not that the state or the consumer or the citizens would ever benefit from it.

It's OUR money; not yours.

What we need now is another border bleed study next year to see what damage has been done by these idiots. My money is that real border bleed is over $500 million by then, if it isn't there already.

Now more than ever we need to be rid of the PLCB.

Privatize, now.

The Case Of The Missing Wine

How stupid do the PCLBureaucrats think we are?
As stupid as they are, apparently.

On July 19th I put up a post called Insider Trading, about a missing case of $3,000 a bottle wine, and how it didn't show up on any inventory the PLCB had available to the public. The PLCB explanation was that they deleted all the codes while it was in transit being "hand carried" (because of the heat) to their Ardmore store for sale.

Really? The people who have stackouts of wine sitting the windows of their stores, in the summer sun, suddenly care about heat? Remember, these are the folks who stored wine in the summer in uncooled trailers because they couldn't control inventory.(1) The same people who have been cited by the Attorney General because the auditors: "received little response from management to demonstrate its follow up and resolution to ensure that store inventories are properly accounted for."(2) 

Deleting the codes while the wine is "hand-carried" isn't just a lie, it's a stupid, ridiculous whopper of a lie. Here's why.

1. Items are not dropped from inventory when they are transported. Not once, not ever; you lose the ability to properly account for things if you do.
2. Since the Chateau Ausone 2003 has not been on the inventory since at least June 20th (3) and probably earlier, the PLCB expects us to believe that it took 40 or more days to be "hand-carried" from wherever it was (they didn't say) to Ardmore?
3. Doesn't it seem ridiculous that an extreme luxury product was off-book, not available for sale, for at least 40 days because they were too incompetent to have a listing the public could find?

And on the subject of selling $3,000 a bottle wine... While the Ardmore store is #11 in overall sales, I would have put it in the Philly store on Chestnut Street, or West Chester: you know where the money is. Which begs the question of why it wasn't there to begin with, and why a whole case went to just one store and not split out to three or four. What retailer with 600 locations would do that? Only one: the one that doesn't have to worry about what anyone thinks and is immune from any and all decisions that a real business has to take into account.

Here it is listed on 7-30 but it isn't in the online inventory

To make things even more interesting and proving the PLCB is lying to the public, the Chateau Margaux 2000 (Code #18864, list priced at $2,499.99, on sale for $1,499.99), which was on the inventory on July 28th disappeared on July 30th...but was still listed on the FWGS website. Is it in transit too, being hand-carried by somebody on a leisurely stroll, like the Chateau Ausone? Why is it still listed on FWGS if, as the PLCB says, they remove things when they are in transit? Not even the PLCB can have it both ways.

9:30PM 7-31. Only some PLCB cube rat knows how to decipher this.

So here it is, 9AM on the first day of the big sale and after over 40 days of being hand carried the Chateau Ausone 2003 somehow did make it to the Ardmore store and the public can find it online. Of course, inventory should be able to be found online in almost real time. No such luck with the Chateau Margaux 2000. It was for sale and found just a few days ago but now it has disappeared into the bowels of PLCB incompetence. When and where it may ever be seen again who knows, certainly not the public.

Just another example of how the PLCB does not benefit the citizens. Lying, graft, nepotism, kickbacks, and who know what else?


Privatize.



(1) From the Auditor General report.

• Pittsburgh: Inventory jumped from 300,000 cases to 575,000 cases in 2010, exceeding storage capacity. PLCB management decided to put 72,277 cases of excess merchandise in 57 non-temperature controlled trailers.

• Philadelphia: Inventory reached 763,470 cases. 20,240 cases were moved to non-temperature controlled trailers.

(2) Auditor General report pg 35. Not online but I have a copy I can send if you want to see it.

(3) PLCB inventory for April 21 shows it listed, inventory for June 20th does not have it. It disappeared somewhere between those dates and didn't show up again until July 30. Again, I have copies of the inventory reports since they are not online any longer...and isn't that a surprise?

BEER IN GAS STATIONS!!! No, it's not, and Wolf had nothing to do with it

Everyone's losing their minds because Pennsylvania gas stations can now sell beer, and Governor Wolf made it happen. We saw headlines like this (exclamations added..):

Pennsylvania Liquor Control Board Approves 6-Pack Sales At Gas Stations!
Pa. Liquor Control Board allows gas stations to sell 6-packs!
Gas and brews: Pennsylvania Liquor Control Board approves beer sales at gas stations!
Pennsylvania Finally Catches Up With The Rest Of America, Legalizes Selling Six-Packs Of Beer At Gas Stations!

No, no, and no. Gas stations near you probably still won't be selling beer (without jumping through ridiculous hoops first) and Governor Wolf had nothing to do with it. It's just one more chunk of pathetic bullshit from Harrisburg, designed to dazzle and placate you and keep your mind off how crappy the booze sales system in this state is. Allow me to explain.

First? This is about nine gas stations in the entire state which bought existing licenses (of various types; that's explained quite well here if you're interested) -- like the supermarkets that are "allowed" to sell beer 12 bottles at a time -- and just wanted to have those licenses approved...because, of course, the Almighty Liquor Code actually "prohibits the sale of liquid fuels or oil by licensees."

Just add beer...sorry, not allowed in Pennsylvania!

So that means that the Board is once again ignoring the law ("The board shall refuse any application for a new license, the transfer of any license to a new location or the extension of any license to cover an additional area where the sale of liquid fuels or oil is conducted"), just like it did last year when it said a 12-pack is a case. ("No distributor or importing distributor shall sell any malt or brewed beverages in quantities of less than a case or original containers containing one hundred twenty-eight ounces or more").

Now, I'm all in favor of ignoring the Almighty Liquor Code myself; I do it all the time by running to NJ for booze. But it's one thing when I do it; it's completely something else when the state regulatory agency in charge of enforcing and interpreting The Almighty Liquor Code is doing it. This kind of arbitrary decision leads to madness and badness.

What kind of badness? Realize this: every time one of these gas stations buys a license, that's a bar license (R license, "deli" license, or a straight-up D distributor license; they're buying whatever they can get their hands on) that's out of circulation for years, not being used as intended. Ordinarily, I'd say, who cares? But this is Pennsylvania, where the number of bar licenses is limited by population: 1 license per 3,000 people per county. Then realize that bar and deli licenses, unlike every other kind of license, can be bought and sold on the open market for whatever the market will bear, and you see that every gas station and supermarket that buys a license makes the price of other licenses higher. And that means fewer start-up bars, more chain restaurants, and more high-end expensive bars...and more bars that are likely to try to sell as much booze as possible to make that monthly payment on the license. Not good. I wrote about that here. What else? Well, how about...the Board can easily play favorites, because they can decide the next batch of applications don't get approved, and they don't have to give any reason, nor are they bound by precedent...because that's how the PLCB works. Every ruling stands on its own. Period.

It would be much better to have a new license for retail beer sales, without the stupid 12-pack restrictions and separate register foolishness, than to continue to do this workaround. But that would require the Legislature to do something, and that would upset the tavern owners AND the beer distributors...even more than this is.

To my pleased surprise, the decision also was not well-received by the Brewers of Pennsylvania, who responded -- correctly!-- that "To truly “free the six-pack” as Governor Wolf requested from the PLCB, then the future call to action must be to allow six-packs to be sold in many more businesses than just gas stations... To truly achieve consumer convenience as well as provide for a variety of purchasing options for consumers, the BOP highly recommends allowing six-pack sales in all channels of trade. Doing so would immediately benefit all small craft beer producers in Pennsylvania..." BOP president Bill Covaleski (of Victory Brewing) told me "the consumer is at the forefront of our thinking. We are headed in the direction of the consumer, we need them to tell us where that is." He noted that "where that is" clearly seemed to be in every grocery store and convenience store. It's refreshing to see that the brewers get what the Legislature doesn't: the consumers should be considered first, not the special interest groups.

Second? Once again, this is about nine gas stations in the entire state. It does NOT mean "gas stations can sell sixpacks." You won't be seeing beer at every Wawa anytime soon, especially not in southeast Pennsylvania, because bar licenses are really freakin' expensive here; like around $400,000 in Montgomery County. So why is everyone so excited? Because Governor Wolf made a big deal about this.

Yay me! I wroted a letter!

Third? What does Governor Wolf have to do with it? Nothing but shameless self-promotion, that's what. Wolf heard that the PLCB was about to vote on these applications, and like everyone else in Harrisburg, he knew the PLCB was likely to say yes. So he sent them a letter asking them to do that as a favor to his friends, the people of Pennsylvania, and then made a big stinking deal out of it when they approved the applications. As a friend of mine said, tomorrow Wolf will send out a press release predicting the sun's gonna rise in the east, and he'll be two for two!

Did anyone know Wolf was a big supporter of "free the six pack"? No, you didn't, because "Free the six pack" was just something Wolf hitched his wagon to the day before the PLCB was going to approve these piddling nine applications. He's an opportunistic fraud.

To recap: not much has changed; Wolf had nothing to do with it; and this is still a terrible way to change things. As I've said for years, the arbitrary nature of the PLCB and the byzantine impenetrability of the Almighty Liquor Code make for an ever-worsening situation here.

So when you don't see beer at your local gas station...remember this, will ya? And tell your legislators to Rewrite The Code, with you in mind, not the unions and the beer distributors and the tavern owners and the convenience stores and Pat Deon. It's the only way we'll ever change this.

PLCB "buying power" a myth

This is the single most important piece of information I've written about.

The House appropriations committee had the PLCB in for their annual hearing on February 25th, and besides the normal tap-dancing that they do ("Well, sir, it's my personal feeling that we'll meet those goals, yes"), the Chairman of the PLCB let it slip out that the PLCB doesn't really have any buying power.

Ooops! In a response to a question put forth by the Appropriations Committee about where they might be able to find more income, LCB Chair Tim Holden said that because of the current 30% markup structure, the board can't negotiate for the best price. According to Mr. Holden, the manufacturer sets the price they want to sell their product for, and the the PLCB backs down from that through the 30% markup, 18% Johnstown Flood Tax, bottle fees, and whatever other charges they have that they've hidden from you, to come up with a buy price that they will pay. Unlike a real business that tries to get the best possible price and then adds on what it needs to make a profit and cover expenses.

This quote is taken from the Appropriations meeting; you can see it here, at about 2:43 in. Holden says, "People somehow believe that we have the ability to negotiate with the vendors. We have to do it proportionately so we have to have a markup that's consistent. And we believe that the money that can be made by negotiating a better price on different products is where the greatest amount of [increased] money can be achieved."

A little later, Board member Mike Negra backs him up, even more clearly: "The manufacturer sets the MSRP, the manufacturer's suggested retail price, and through the system it's backed down to determine what we pay for that product. Not necessarily your typical retail relationship between us and the manufacturer. We can't really leverage our ability of purchasing, our 'buying power' is not really leveraged in that manner. There are significant dollars, we believe -- it'll take a lot of time, it'll take a real learning experience for our vendors and for our buyers to change that." Remember: Negra is the first Board member in a while to have any actual retail experience!

Now I can understand why the lazy way is taken. It is less work for the PLCB if they don't negotiate every price. But I have yet to find any justification in the Liquor Code for the attitude that they can't negotiate for the lowest price, which is what the board members are saying here. That reasoning seems to go against the what the Code says the Board should be doing already. The Code says the price has to be "proportional," not that it has to be proportional from the MSRP or that it can't be negotiated.

Section  2-207 (b) of The Liquor Code under General powers of board says: "Prices shall be proportional with prices paid by the board to its suppliers and shall reflect any advantage obtained through volume purchases by the board." Isn't that the definition of 'buying power'? If they aren't negotiating prices, which the Chairman says they are not, just how are they leveraging their volume purchases beyond what the vendor says they will give? As Negra admits, they aren't.

I'm going to say this in really big letters so you can't miss it.

There is no volume discount on standard stocked items, because the goal is to sell them at MSRP.

If you are the 2nd or 3rd largest retail buyer of ANYTHING and don't try to get a better price, then the entire organization needs to be replaced, eliminated, done away with for sheer incompetence.

The board not only doesn't want to save you money, they want to take away what money they could save you by negotiating lower prices by using the nebulous "flexible pricing" they want as part of "modernization." Believe this: "flexible pricing" means negotiating a lower price and still charging you the higher "MSRP" they charge now, and keeping the difference. At the PLCB, they don't care about the consumer. All they care about is covering their ever-increasing expenses so they can keep the boondoggle machine running at full speed.

Do we really need this? Privatize and let real businesses try to save you money by being in competition with other businesses, because they're motivated to keep you as a returning customer...rather than knowing that you have to come to them because that's the law.

Honestly? Sometimes you have to wonder how stupid we all are for putting up with kind of crap for eighty years.

The PLCB benefits the PLCB

The PLCB makes decisions that work for the PLCB, no matter how many crocodile tears they shed over the prospect of privatization 'limiting the choices in rural counties.' Just ask the people in Lewisburg. They know all too much about how PLCB decisions get made.

News leaked on March 10th that the State Store located in downtown Lewisburg might be moving. The PLCB had not made any announcement nor had they talked to the residents or businesses before making the decision.

We don't care what you want, you'll take what we give you!

Seeing the precarious health of downtown threatened by the loss of the retail store, the community organized. Due to the outcry and involvement of local legislators and a letter writing campaign the PLCB backed off, and said that there was still a chance the store would remain downtown. Guess what? They lied. Even after meeting with State Senator Gene Yaw and local Representative Fred Keller (Hmmmm...both supporters of the privatization bill) in May and again stating that no decision had been made, they were actively looking for a new location. Apparently the $12.75 million in mostly state money used for downtown revitalization since 2012 meant nothing to the PLCB.

Even the option of keeping a smaller store downtown was rejected, though the PLCB keeps lots of small stores open, even stores in close proximity to each other. Newtown Square is a prime example, with two stores within 400 feet of each other. Talk about a liquor store on every corner!

This is not the first time the heavy hand of the PLCB has come down against the wishes of the citizens, citizens who are supposedly the owners of this "valuable asset," as Wendell W. Young IV always puts it. This is a case of the workers telling the owners what to do, then.

This is the same thing as happened in Lock Haven. As I wrote in the Lock Haven post: for 80 years the PLCB has only been concerned with itself, deciding what we should be allowed to buy, where to put stores, how many stores to have (there were over 750 at one point, there are 605 now), and when they should be open. They are like some overbearing, deaf deity, ineptly bestowing its grace upon the masses.

The masses are getting sick and tired of it. Sick of a system that should have been done away with decades ago, sick of being told what they will be allowed to purchase by largely unknowing and incompetent overseers, sick of not having the convenience they see in other states, sick of the case law, sick of arbitrary "interpretations," sick of graft and corruption, and sick of being treated like children.

So the next time you hear that the PLCB benefits all Pennsylvanians, just don't ask the people of Lewisburg or Lock Haven. And the next time you hear Wendell W. Young IV tell us that we OWN this valuable asset...ask him if he knows where we can SELL IT.

Agency stores - How the Democrats will prove privatization doesn't work

In an August 5th interview with the Pittsburgh Tribune-Review, Democrat State Senator Jay Costa said he backed "agency shops" as a compromise to efforts by GOP legislators to privatize the State Store System. What he is really saying is, 'Let's show how these fail and keep the State Stores.' How do I know this?  Let's look at the scenario.

It's for all his friends in the rural areas.

First: The stores will only be put in underserved rural areas (you know, those 20 counties that have only one or two State Stores in hundreds of square miles), and he admits that it's to avoid cutting into PLCB profits from well-performing outlets in populous areas of the state. Nothing like a fair and level playing field for the suckers lucky entrepreneurs in those agency shops!

Second: Given the lack of enthusiasm for the "store in a store" concept (only fifteen in the whole state after 35 years!), it will probably be a standalone structure, forcing a higher cost per square foot than if integrated into an existing store. Even if not, the existing store would still legally have to provide separate entrance and register, increasing their cost. Of course, the hours won't be any better than the current State Stores either.

Third: "State Mandatory" items that all State Stores have to carry may not be the product mix these rural stores need to have, costing shelf space and sales. But Harrisburg knows best, so they're stuck.

Fourth: These stores will still have to buy from the PLCB. It isn't clear if they will get wholesale prices, which is highly unlikely (given the PLCB's jealously stingy attitude toward any private entities), or some discount from the PLCB retail price, like bars and restaurants do. If they do get a discount, you can be sure it won't be the same the State Stores get, thereby ensuring higher prices at the agency stores...exactly what the PLCB bureaucrats want to prove: private stores "cost more."

Fifth: Cost of transportation, while not stated, will certainly play a part. If you think the PLCB will provide free shipment to their new competition, you are just wrong — it ain't gonna happen.  That leaves the agency store going to a larger state store to pick up product, or all the way to one of three warehouses in the state.  (P.S. The PLCB is trying to knock that down to only two warehouses — more convenience!) In either case it is time and expense that the State Stores don't have to bear.

Sixth: While Ohio does have agency stores, that is ALL they have. There is no competing with State Stores, no limitations on being only in rural areas, and still no competition because the state sets the prices. They are a control state, just not as onerous as PA. Not a real improvement, by any stretch of the imagination.

Seventh: With a very limited number of these stores (no details on the amount, or what the criteria is for selection), there wouldn't be the incentive or need for any price competition that the free market brings. It would be the same as the beer distributor oligopoly, only with even more protections for maintaining a higher price.

So Senator Costa is selling us a bill of goods, and not an attractive one at all. What agency stores would really be about is three things.

1. Like "modernization," putting in agency stores would lead directly to a cry to 'give them a chance,' which is really about kicking the privatization can down the road, putting it off so Wendell W. Young IV doesn't have to worry about it for another five years at least.
2. Set up to fail, agency stores would be a great straw man for anti-privatization fanatics to point to and say, 'See, we gave you privately-owned stores, and what happened? The same selection (or less), higher prices, and no more convenience than the State Stores!!!" Because that's the way Costa wants it to be.
3. The PLCB no longer has unprofitable stores. Because they'd dump all the stores that aren't making a profit — due to their ballooning operating costs — on the agency stores, allowing them to decrease the number of State Stores again, keeping their bloated payrolls and administrative costs humming along in markets where selling booze is like shooting fish in a barrel. 

We urge the GOP not to bite on this. Senator Costa is actually proposing to save the State Stores — a bad idea from the 1930s — with 'agency stores,' another bad idea from the 1930s. Don't double down on stupid.

Like we keep saying: End It, Don't Mend It. There's a great solution to the problems of the State Stores: privatization. Don't let this moment go. Don't let Governor Wolf off the hook.

Wolfonomics: competition causes higher prices

Governor Wolf, the businessman who knows how to get things done, who can reach across the aisle and find common ground with the opposition, is not a stupid man. However, he must think we are.
For a guy that wrote about “Conflict and Organizational Accommodation" for his Ph.D. dissertation, he doesn't seem to be to very "accommodating." As reported in numerous newspapers, the Governor's "My Way Or The Highway" approach is blocking progress.

"That's MY way over there; the HIGHWAY is over there."

His interview in Keystone Q & A gave us a warning when they asked:"How much of the budget that you introduced do you hope to see as an end product?" and he answered "All of it. It actually is a holistic program not meant to be cherry picked," Which means he isn't willing to compromise, at least not in the way I understand the word. Of course, that is a flip-flop from his inaugural address, when he said, "We have to believe that none of us alone has all the answers—but that together, we can find an approach that works." I guess he forgot to add "except for the budget."

As a college-educated man he had to take a few business courses, like accounting or economics, at some point in his academic career. One of the things you learn in those classes is that monopolies are inherently anti-consumer due to:

1. Higher prices than competitive markets
2. Decline in consumer surplus
3. Less incentives to be efficient.

They are so inherently anti-consumer that there are laws prohibiting them. Then there is that whole idea of centralized planning; that worked so well for the eastern bloc and Soviet Union. You remember that: where the government decides what you are allowed to buy, where you will buy it, and how much should be made available. Sorta like the PLCB. 

Centralized government planning is known for:

1. Being poor at predicting future trends
2. Having a lack of incentives when income is guaranteed
3. Being inflexible, with difficulty responding to shortages and surpluses

What is really ironic about centralized planning is the theory that the government will be able to overcome market failure and achieve equality of distribution...thus preventing monopolies from emerging to exploit consumers. Pretty funny considering our home-grown Fossil of Prohibition, the Relic of Repeal, the State Store System.

The Governor's reasons for vetoing liquor privatization really call into question what he thinks of the citizens of the Commonwealth. As noted in the Washington Post's blog (how badly does a Democratic governor have to screw up to be called out by the Post?): "Pennsylvania’s governor doesn’t understand economics (or won’t admit the real reasons he vetoed ending state liquor monopoly)."

It's bad enough that the PLCB treats us like children, but now we have the Governor doing it too. The piece in the Post quotes the Reason blog: "Wolf and his fellow Democrats 'warned that prices would rise as private businesses sought profit.' In other words, private merchants will jack up prices because they want to make money—unlike the Pennsylvania Liquor Control Board (PLCB), which seeks only to raise revenue." Except competition -- as 200 years of economic theory and experience prove -- drives prices down. When Wolf ran his family business, Wolf Furniture, did Wolf raise the price of his cabinets to be more competitive? Or did he lower them? Is this the dawn of Wolfonomics?

The Governor specifically mentioned, "In the most recent case of another state that pursued the outright privatization of liquor sales, consumers saw higher prices and less selection.” He's clearly talking about Washington State. Their higher prices wouldn't have anything to do with the 27% in new fees that came with their privatization plan, would they? You know they would, we've told you that, time and time again, and backed it up with fact, not speculation. More Wolfonomics: apparently competition somehow causes higher taxes, not government!

And the notion that selection has decreased for Washington's citizens is simply absurd. The number of stores increased almost fivefold, and true superstores entered the market, stores with more products on the shelf then the entire state control system stocked. You can see the same thing in New Jersey at any Super Buy Rite, Total Wine, or Joe Canal's. There are stores like these all across the country, and there is no reason they won't be in PA too (despite what you may read in comments sections of news stories). The Commonwealth Foundation had a nice synopsis posted that you can read here.

It was the Pittsburgh Post-Gazette that put it best, though: "Since [Governor Wolf] is now the sole person standing in the way of this historic privatization, the governor has earned the right to have the state stores named in his honor." 

We agree. Welcome to:

Unchanged for 80 years!

I would ask the Governor to put his business hat on and take this simple test. If you wouldn't put a system like the State Stores into place today... why do you want to have it tomorrow?

We all know the answer. No one really wants this system except the people who directly (or indirectly...through campaign contributions or dues) benefit from it, but it is because of those people and their outsized influence that Wolfonomics had to come into being. We don't want it, and you know we don't, and as a business owner you can't really want it. Do the right thing, Governor.

End It, Don't Mend It.

(Wolfonomics - a system of economic theory that reverses 200 years of thought by presupposing competition increases prices. Or "Everything you know is wrong"  Feel free to use it whenever the Governor talks economic policy.)

UFCW Wine & Spirits Council trying to hide from the truth.

The union that represents the State Store clerks, the UFCW, likes to use its puppet organization, the PA Wine and Spirits Council, to show all sorts of "proof" that the PLCB is doing a great job. Unfortunately for them, all of their information is either old, no longer true, or both. Let's look at some of the points they bring up. 

1. The UFCW says - The U.S. Centers for Disease Control (CDC) Task Force on Community Preventive Services announced its decision and rationale for recommending against further privatization of alcohol sales.
The real truth is - The statement is true but the science used to justify it was debunked as reported in Forbes.

2. The UFCW says - This document reports that in 2007 Pennsylvania had the lowest rate in the nation of death by alcohol-induced causes.

The real truth is - Since that point in time alcohol-induced deaths in PA have gone up 31% (page 78) and the state is not the lowest in the country. New Jersey and Maryland on our borders beat PA along with other states, even the famously booze-drenched state of Louisiana. Looks like there may be some problems with that 2007 study.

3. The UFCW says - "Control states have significantly lower rates of youth drinking and binge drinking, as well as lower rates of alcohol-impaired driving deaths, than license states.” Using a study from 2006 they go on to quote "In states with a retail monopoly over spirits or wine and spirits, an average of 14.5% fewer high school students reported drinking alcohol in the past 30 days and 16.7% fewer reported binge drinking in the past 30 days than high school students in non-monopoly states"

The real truth is - Not in Pennsylvania.  According to the PLCB's own Act 85 report (page 9) "...lifetime alcohol use was higher in Pennsylvania for the eighth grade (7.3% higher in Pennsylvania compared to the national MTF rates), 10th grade (9.4% higher in Pennsylvania compared to the nation) and 12th grade (6.0% higher in Pennsylvania)." 30 day use is shown as higher for Pennsylvania high school student too.A look at nationwide drinking rates by SAMHSA doesn't paint a rosy picture either. Binge drinking for adults places PA in a tie for 31st in the country, and of the border states, only New York  does worse -- five do better.

4. The UFCW says - "Increased availability of alcohol is generally associated with increases in consumption. States that license alcohol retailers generally have higher alcohol density, greater physical availability, longer and later hours of sale, all of which are factors that contribute to the increased availability of alcoholic beverages."

The real truth is - Wendell is trying out for the Captain Obvious role, telling us that more stores and longer hours contribute to the increased availability of alcohol. No kidding, that's why the State Stores suck! But the idea that more stores/outlets will drive higher consumption is an old policy projection that has been debunked; see the next point.

5. The UFCW says  - Using a report based on the experience in Sweden, "According to the projections, scenario 1 (just stores privatized) yields a consumption increase of 17% (1.4 litres/capita), which in turn would cause an additional 770 deaths" or "The corresponding figures for scenario 2 (stores privatized and wine in grocery stores) are a consumption increase of 37.4% (3.1 litres/capita) leading to an additional annual toll of 2000 deaths." This does not agree with another report listed further down the page that is also from Sweden that comes up with a different result..

The real truth is  - The facts do not match the projections. Washington State, for instance, didn't have a 37.4% increase in consumption or even a 17% increase when they privatized the state liquor stores recently. DUI fatalities have decreased since privatization and are below Pennsylvania's rate. The report is real, but just like the CDC report debunked above that said consumption would go up over 40%, it doesn't match any reality. More junk alcohol science.

6. The UFCW says - Using a report on wine consumption from 1968 to 1991 that came out in 1995, the conclusion is that sales increased dramatically in five states that 'privatized.' "After controlling for both nationwide and state-specific trends, we found significant increases in wine sales after privatization of 42% in Alabama, 150% in Idaho, 137% in Maine, 75% in Montana and 15% in New Hampshire. The increases in liters of pure ethanol per year in the form of wine were 621,000 in Alabama, 432,000 in Idaho, 364,000 in Maine, 363,000 in Montana and 171,000 in New Hampshire."

The real truth is - Privatization of the selling of wine did increase sales in those states: up to the level of the national average. Wine sales in general more than doubled overall in the US over the same period. In fact...Pennsylvania has seen that same proportional increase, without privatization. Yet.

We could go on, but... Let's address the real issue: control vs. regulation. There are many points that should be taken into account as guidelines, regarding store density, age carding, single serve take out, etc. but they all have to do with REGULATION, not whether the state should be the sole retailer, trying to sell and control as much product as possible.

While there are definitely significant problems associated with drinking too much, those problems are not confined to states with private alcohol sales. Despite decades of "control," and one of the lowest "alcohol outlet densities" on the planet, Pennsylvania does no better than the national average for most measures of alcohol-related harm, and is worse on some. This plainly shows the current system doesn't work very well. The majority of risks can be managed by regulation and enforcement, just as they are now in other states.

It's a simple prospect. If you don't want to be like Camden, then regulate and zone store density, as most states have done. If you want to lower DUI, then perhaps the state should concentrate on prevention and education instead of Mother's Day vodka sales.

Pennsylvanians already consume more alcohol per capita than New York, Maryland, Ohio, and West Virginia, so our vaunted "control" and current regulations, actually, our whole system doesn't seem to be working. Our system is broken, and the best and only real fix if to get the state out of selling a retail product and back to regulation like most normal states. We can't move forward dragging the dead carcass of Prohibition with us. Especially since they don't really want to come along for that ride.