The world as we know it is ending.

It only took 83 years, with five years of us pointing it out, but the PLCB has finally — at least for this month — listed Jack Daniel's correctly across their inventory. There is still one small mistake, but considering how bad it was for DECADES, this is pretty amazing.

Of course, the "adaptive" inventory lookup that the Chairman spoke about well over two years ago still doesn't work.  Don't put in "Jack Daniels" or "Jack Danials" or "Jack Danial's" and expect to find anything...but that's something for them to work on for the next 83 years, I guess. Nope, as of October 2018, the only questionable listing is for item 2419 (the "Jack Daniel's Tennessee Whiskey Family of Brands Combo," a pack of five different airline bottles) which is listed under the category of "Whiskies." Like a catch-all category, except it's one that the PLCB doesn't have. You can't search it on their "Product Catalog," but it does come up on the splashy 'finewineandgoodspirits.com' page. Consistency, guys...

That doesn't mean they're off the hook. There are so many more inventory mistakes to be found, we'll be busy for years to come.

Here's something that made me delve into the PLCB inventory again. I was in New Jersey and bought a bottle of 1792 Full Proof (125 proof) Bourbon. I'm not a big fan of 1792 in general, but a high proof non-chill filtered bourbon isn't that common, even more so at under $50; so I took a chance. Well worth it...if you can find it. So, back to the the online PLCB Product Catalog.

That's never as easy as it sounds. Even the PLCB doesn't think too much of their system, because right in the instructions for using the keyword search, they say, "If too precise, the product may not be returned as expected." In other words, don't put in exactly what you want, put in something close...unless it's Jack Daniel's, because then you have to be exact with the spelling of Daniel's. Which is something the PLCB apparently couldn't do for eight decades. It's tough being a consumer in Pennsylvania.

So I put "1792" into the keyword search box, select "spirits" and hit Enter...no 1792 Full Proof shows up.

OK, I'm used to the PLCB not having most things I buy. But this is pretty mainstream stuff, so I was surprised that it wasn't listed. Well, maybe it just didn't make it through the "good ol' boy" selection process, since it was fairly new. After a month I check again - still nothing. The search page says it is updated daily so if it hits the system, it should show up right?

Wait a minute...I head over to the FWAGS website to see what is there. Sure enough, the Full Proof is an "Online Exclusive." Now, the Online store is technically a store, and everything in it used to be shown in the Product Catalog because, well, you know, it lists "everything." So I randomly search for some things listed as "Online Exclusives" — McKenzie Rye Whiskey, Peerless Kentucky Straight Rye Whiskey, Highland Park Full Volume, and a few others. None of them show up any more. That is helpful in a uniquely PLCB kinda way. Great way to sell product - don't let the consumer find it.  Must be that "control" they always talk about.

I know we don't do much wine here, but...if this is what they're screwing up with a few hundred whiskeys, can you imagine how they're screwing up thousands of wines? The mind boggles.

Hey, PA legislature — are you sure we can't do better?  Privatize.

Proof the PLCB is screwing us - in their own words.

Please see the "We regret the error" post of April 30 for clarification.

The last post showed how even the most basic of business math escapes the political appointees that run our anti-consumer, police-enforced, cronyistic, unqualified, graft-tainted, incompetent (I can keep going) monopoly liquor control system. But even basic math — like you learned in 2nd grade — escapes them. Check this out: they can't even count!

No fair! You said there wouldn't be any more math!

This is taken straight from the law that made recent substantial changes to The Almighty Liquor Code, including "flexible pricing" (the law is commonly referred to as ACT 39):

"The board may price its best-selling items and limited purchase items in a manner that maximizes the return on the sale of those items."  

This is the flexible screwing pricing we have been talking about. We added the emphasis, and you'll see why shortly. ACT 39 then further defines what "best selling" means.

"Best-selling items" shall mean the one hundred fifty (150) most sold product identification numbers of wine and the one hundred fifty (150) most sold product identification numbers of liquor as measured by the total number of units sold on a six month basis calculated every January 1 and July 1." (Again, emphasis added.)

So using what you learned in 2nd grade, there are a total of 300 items that can change price, 150 wine and 150 liquor. Everything else is still under the 30% markup rules as before; that hasn't changed. If the price to the PLCB goes up, your price on the shelf goes up; and if a price goes down your price goes down. Pretty simple: 150 wines + 150 spirits = 300 items affected by "flexible pricing...plus the "limited purchase items."

Now let's look at testimony given by the board at a joint legislative hearing about how Act 39 is working out...because the legislators had a lot of questions about "flexible pricing." (You can read the transcript here)

"This rigid markup structure was inefficient, resulting in missed opportunities for the commonwealth to realize additional revenue and for licensees and retail customers of the PLCB to share in cost savings."  

Share in cost savings, eh? That's important. We'll get back to that.

Reading further in the testimony of the board we find this:

"...pricing flexibility has resulted in a reduction of product acquisition costs for almost seven hundred products, retail prices decreases for more than one hundred and twenty products and retail price increases of a hundred twenty-five products." 

Okay. The law states clearly that there the PLCB could change the standard markup on 300 of the best-selling products. Of that 300, prices went up on 125 of them, leaving a maximum of 175 prices that could be reduced or unchanged. Of that 175, approximately 120 went down, leaving about 55 unchanged, or at least in an unknown status. That's all that are allowed to be changed under the law. However, the board said that costs went down for 700 items: 700 minus the 120 items that were lowered in price...means 580 items didn't get reduced.

The Chairman said "Immediately after the effective date of Act 39, we began using the flexibility we were afforded in pricing our limited purchase items, including luxury products sold in our Premium Collection stores, Chairman's Selection, and Chairman's Advantage products, Wine Club items, and products in our e-commerce portfolio. We have always been able to negotiate with our suppliers to obtain great values on these products, but with Act 39, we  have been able to price each item as appropriately based on our supply and anticipated demand and current marketplace conditions."

Math - The PLCB way

Those 580 items that didn't get reduced couldn't be any of the things the Chairman mentioned here, because he said they already had negotiating power over their costs, and ACT 39 didn't change that. What it did change was the mark-up, the price they could charge us on the shelf. Did they charge more? No, only 125 items went up in price. Did they charge less? Not according to their testimony.

Figure it out. By process of elimination, the 580 items that they are now paying less for aren't in the top 150 wine or spirits, and aren't in the group of items that the board said they could already negotiate on. That means they have to be regular items that should fall under the 30% markup rule, which means one of two things. Either the price for the consumer had to go down, which didn't happen according to the testimony, or the Chairman is lying about something. Of course, there is the third option: he has no idea what he's talking about, or he's inflating the numbers to make the system look good in general (which is probably just habitual at the PLCB). Not really all that reassuring either.

Will we ever know? Probably not, since no one on the legislative side of the table seems to want to ask the right questions. Why do we put up with this continued malfeasance that is being perpetrated on the citizens and consumers?

Privatize and end this BS.

The PLCB doesn't know business; just ask them

The PLCB plays at being a business, but they really don't know what they're doing. We've told you that many times. If you don't believe us, you can just listen to them. They'll make it pretty clear.

The PLCB -- the actual three member board, plus the so-called "executive director" Charles "Not a CEO, Nope, No Sir" Mooney -- testified in front of a joint meeting of the House Of Representatives Liquor Control Committee and Senate Law and Justice Committee about the effects of Act 39...especially about flexible pricing (you can read the whole transcript here). It's a big deal, these meetings and the change Act 39 brings, and the Board has to be ready for the legislators' questions.

And of course...they weren't. Apparently, they weren't really ready for flexible pricing, either, despite having asked for it for years. 

Let's start with the Chairman. Here's what he told the legislators when they started drilling him about why they hadn't simply negotiated lower prices to begin with; you know, with the huge "buying power" we always heard about. As we told you all along, the "buying power" bullshit was just that: bullshit. They never used it.

Holden: "If we would have sought lower product costs from suppliers, it would have resulted in reduced Commonwealth revenue due to the required application of a flat percentage markup and taxes." On face value, that would seem to make sense. Lower wholesale prices, run to a set mark-up formula to the shelf, means "reduced Commonwealth revenue," sure. Of course, it also means lower prices for us. You know, the citizens. But if it means the revenues are maximized, well, okay. After all, you can't make more money by lowering prices. 

But there ARE real businesses that make a profit doing exactly that. You may have heard of them: Walmart. Target. Aldi. Total Wine & Spirits. All of these real businesses, run by real business people, regularly make tons of money by cutting prices. It's established practice: lower your gross margin, so you make less money on each item; but at the same time the lower prices mean more sales, so you make more money overall. The PLCB doesn't get it; guess it's too much work. ("So many boxes to lift!")

They didn't need "flexible pricing," they could have been doing this all along. It's simple. For every item on the shelf, there is a price that will result in the maximum revenue. Higher, and sales decrease; lower, and total profit decreases. That price point is affected by things like competition, or price-matching, or sales, but the PLCB doesn't do any of those; they certainly don't have any significant legal competition. (And no, the PLCB does not have sales, at least, not in the usual sense: if the producers drop a price, the PLCB passes it through as is, and their slice of the pie remains exactly the same. They never cut prices, except on their ill-advised "clearance sales." Thanks, guys.)

Of course I'm lying. I don't know any of this math stuff.

But here's the thing that boggles the mind. Even under "flexible pricing," where they have to negotiate each price of the top 150 wine and spirits items, they STILL aren't using this business tool. So while they are screwing the suppliers and consumers, it certainly isn't as satisfying as it should be for either of us. 

No, the PLCB wants to really ream us. "...brands that are not within the statutory definition of best selling wines and spirits continue to be governed by the proportional pricing requirement of the liquor code. For a future legislative consideration, we respectfully recommend that the same pricing flexibility be extended on all products sold by the PLCB." 

And there it is. It's not enough that they raise prices on the majority of the best-selling items, they want to do that to everything. Keep in mind that there is no institutional pricing oversight by the legislature (only these hearings where the legislators gets to chide the Board about prices, and the Board gets to say 'oh, yeah, guess so, whatever') and as always, nobody with any experience in the industry is leading this parade of monkeys down the path.

More bumbling ensued as the hearing went on. The Chairman: "We made some mistakes at the initial supplier meetings. We asked suppliers for significant reductions to their product costs to increase our margin. But we failed to take a few things into consideration. We miscalculated the reaction of some of the largest suppliers of our best selling brands, who refused to come to the table at all." Imagine that. You said, 'Hey, we want to pay less for these brands everyone wants,' and companies that deal with sharpened pencils every day said 'That's nice. No.' After all, they sell the same products in neighboring states...that don't have the PLCB.

And once again, we suffer for the mistakes of ignorance, just as we have done for the past 83 years. While the Chairman was being the mouthpiece for this failure, it fully lies on Charlie Mooney. After 40 years in the PLCB, Mooney might know about graft, nepotism, bribes: it's apparently the way the PLCB runs. But it looks like he had no idea how the actual liquor industry (or any industry for that matter) worked.

So after blundering around for nine months, and hiring two specialists to help them figure out how to do this, and -- once again! -- paying an outside consulting firm to gather data, that all eventually led to this statement: "... pricing flexibility has resulted in a reduction of product acquisition costs for almost seven hundred products, retail prices decreases for more than one hundred and twenty products and retail price increases of a hundred twenty-five products."

Let me put that in English for you - they saved money on 580 products and you didn't see a dime of it. They raised prices on more items than they reduced prices, and of the top 10 selling liquor or wine items you saw a reduction on only one: a pint bottle of cheap vodka. Remember those top 10 items are the ones they should have the most leverage on, due to sales volume. They screwed us again. Of course they did.

SENATOR MCILHINNEY: "... the state citizens own this system, and they should be able to get some, any benefit by having a good deal when they go to the liquor store."
MR. HOLDEN: "Absolutely",
Except they aren't. We aren't. Weren't the legislators paying attention? We got NO benefit on 81% of the products that the PLCB paid a lower price for. They said so themselves.

Charlie Mooney also came up with: "Senator, we -- I am confident, without all the data in front of me, that, overall, consumer prices have decreased." Well Charlie, without having all the data in front of me, I call BULLSHIT. Especially after you raised prices on 422 items just because you had crap negotiating skills and didn't get what you wanted.

Maybe they should rename it the PLCB principle.

Remember that the PLCB has over $1.7 BILLION in liabilities, they are a drag on the economy of the state and stifle a free market where large and small businesses do not exist because of their continued presence in the marketplace. They do nothing for the citizens, unless you happen to be one that works there. Even Russia has free market liquor stores. Pennsylvania doesn't.

We're still screwed: PLCB flexible pricing is coming.

We've posted a number of  stories about how bad flexible pricing is for the people, the consumers, in Pennsylvania. It is potentially the worst thing ever to come from the police-enforced liquor monopoly.

Despite that, here are some of the "benefits" flexible pricing will bring, according to the Chairman of the PLCB Tim Holden. You probably want to take his thoughts with a grain of salt; Ol' Tim still doesn't know the difference between Jack Daniel's and bourbon, and probably doesn't care.

It seems that Tim is upset that some suppliers don't care about PLCB profits. Well, why should they?  Businesses do not exist so that the PLCB can over-charge the citizens. They exist to do as well as possible for their owners, their shareholders. To assume that a business should care about the success of an agency that depresses their sales performance is ludicrous in the extreme and just reinforces how out of touch the PLCB leadership is.

This is how PLCB flexible pricing is really going to work

Back in April, well before the passage of Act 39, Elizabeth Brassell, the PLCB director of communications, wrote to me: "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. However, any advantages obtained through volume purchases are directly reflected in the shelf price." Did they do this? Of course not, because it had no benefit to the PLCB, only the customers.

Chairman Holden tacitly admitted that saving consumers money wasn't all that important when he said: "The PLCB is driven by priorities made clear by the governor and General Assembly: (1) increase customer convenience; (2) generate additional revenue; and (3) achieve more-competitive retail pricing."  It seems that the General Assembly priority is more #3 because they, like most citizens, want to get the PLCB out of the retail and wholesale alcohol business.

Holden goes on to say:" We simply want more competitive costs from our suppliers – comparable to what other states and retailers enjoy." Except that while those other retailers pass on those cost reductions, because they want your business, the PLCB wants to keep that difference, to keep that money to bolster their bloated and failing organization.

They have no reason to pass on anything because they have no competition; there is nowhere else the consumer can legally go. Holden admits this: "We’ll also maintain the current retail price on the vast majority of products we sell, while achieving greater profit on hundreds of them. 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." Of course, when there is no other choice of retailer, the market can bear a lot.

Think I'm over reacting?  Here are some new prices from the PLCB under the "flexible" system on some pretty price insensitive items they know they can bleed enthusiasts for:

Item	2015	2016	$↑	%↑
Family Reserve Rye	$100	$160	$60	60.0%
P. V. Winkle 23 Year	$250	$400	$150	60.0%
P. V. Winkle 20 Year	$150	$250	$100	66.7%
P. V. Winkle 15 Year	$80	$150	$70	87.5%
Old Rip Van Winkle 10	$50	$80	$30	60.0%
V. Winkle Special Res	$60	$100	$40	66.7%

Think that is bad?  Look what happens if you are unlucky enough to win a package deal.

Thirty packages are available with three bottles each: the 20 year, 12 year, and 10 year. The price for each three-bottle package is $999.99; $570 MORE than the individual bottles. There are six packages of four bottles each: the 20 year, 15 year, 12 year, and 10 year. The price for each four-bottle package is $1,199.99: $620 MORE than the individual bottles. And four lucky Pennsylvanians will get the opportunity to buy packages that include each of the six 2016 bottlings, at price of $1,999.99. Only $860 MORE than the individual bottles. Such a deal!!

Tell us again how this is good for the consumer, Chairman Holden? 

This is just one prominent example. Is there any doubt that the PLCB is going to make that extra money by taking it out of your pocket, either surreptitiously or through outright price increases? I hope you're ready Pennsylvania, because you are about to get screwed.

Privatization is the only way to get the PLCB out of sales and into regulation, where it belongs.


All quotes from Chairman Holden are 100% real, and taken from here

"Flexible pricing" means someone's getting screwed again

Is four bottles of wine worth the screwing we're going to get from flexible pricing?

Oh, my pricing is flexible. You bet, Slick.

Ever since the State Store clerk's union and its president (Wendell W. "Windy Wendy" Young IV), the Democrats who do their bidding in the Legislature (yeah, they do, and if there's a Democratic legislator who can give me a real reason for keeping the State Stores other than "it gets me lots of campaign cash from the unions," they'll be the first one), and syndicalist economists put forth their plans for the "modernization" of the police-enforced monopoly of the PLCB, one thing has been the hidden poison in the sweet candy of concessions, the coiled and sharpened spring waiting to slash out of the intricately-ticking machinery of "improvement" and slice open our wallets — "Flexible pricing."

Whenever the laundry list of proposals came out — more stores open on Sundays, open later, hiring outside Civil Service rules (so they could hire some less dead wood) — flexible pricing was always there, about five or six bullets down the list, promising to break prices free of the mandated mark-up so that they could give us lower prices! Except it didn't say "lower pricing," it said "flexible pricing," and we told you over and over again, "flexible pricing," in the PLCB's control, was only going to "flex" in one direction: UP. 

Well, they got it, when Senator McIlhinney laid his latest mutated liquor bill on us, and Speaker Turzai signed off on it (there were some good things in there, but whether they were worth the cost...), and The Wolf Who Walks Like A Man signed it. Hurray! Free at last...a little!

Remember: Wendy said to look concerned.
But... Flexible pricing, guys! Hot damn!

And Wendell cried and pounded the podium, and told us that allowing supermarkets to sell wine was the beginning of the end, death by a thousand cuts...but he must have been smiling as he turned away from the cameras, a secret, villainous smile, because the PLCB and the union got the flexible pricing they wanted. It was limited to the 150 best-selling products (which is where most of the money comes from anyway), and it cost them a tiny little slice of their monopoly, allowing licensees to sell no more than four bottles of wine at a time (at prices guaranteed to be higher than the State Stores, because they had to be bought from the PLCB wholesale monopoly at rigged prices). 

But it was worth it to Wendell and his yellow-shirted minions in the PLCB. Now journalists across the state are finally waking up to what we told you years ago: flexible pricing means we're getting screwed. Again. The PLCB is finally using their long-heralded buying power to hammer down the price to them, but you'll never see a dime of that. Have a look. 

The Pittsburgh TribLIVE, October 5th: "Pa. LCB accused of using new 'flexible pricing' law to boost profits" — "Privately, though, wine and spirits officials said the LCB asked for specific percentage cuts in cost but without saying what markup would then be applied. That strategy means suppliers wouldn't know what the final shelf price would be for shoppers." 

Harrisburg PennLIVE, October 19: "Lawmakers need to go back and include liquor in 'liquor reform'" — "We urge the state to forego what it euphemistically calls "flexible pricing" for another two years. We urge the General Assembly to finish the job and complete privatization." 

Harrisburg PennLIVE, October 18 — "Here's how Pennsylvanians got hoodwinked by booze 'modernization'" — "The provision, known as flexible pricing, isn't likely to be very satisfying to anyone who shops for wine or spirits in Pennsylvania. It gives the Pennsylvania Liquor Control Board (PLCB) the ability to manipulate price, something it has long desired as a way of raising revenues." 

Pittsburgh Post-Gazette October 20 — "Pennsylvania's liquor ‘modernization’ hoax" — "Here’s an unfortunate reality about Pennsylvania’s so-called modernization of its liquor business: You’re going to pay a lot more for it. This isn’t modernization, but rather a step backward."

What does Windy Wendy offer in rebuttal? This almost incoherent mish-mash of his old arguments — the State Stores offer competitive prices (Really? How can they be "competitive" when there is, by law, no competition allowed?), they bring in lots of taxes (just like private stores would), and the new licensees will not match the selection or prices of the PLCB (that's actually true: because the law doesn't allow them to) — with a pathetic plea to 'stop picking on me': "Is it time for PennLive to perhaps take a different tack on the long-running battle over dismantling the Pennsylvania Liquor Control Board (PLCB) by, perhaps giving it a rest already?" Perhaps perhaps! He's so pissed he can't even speak straight; this is a direct quote from the op-ed piece that PennLIVE allowed him to dump on their website: "We opposed this law, Act 39, will cost taxpayers millions in lost revenue." [SIC] Sad, really. He's clearly got nothing, and his Democratic lapdogs in the Legislature have got nothing. 

Okay, headline...I got it!
"McIlhinney's Mistake Screws Us All"

So let's do something about this. "Flexible pricing" was foisted on us by Senator Chuck McIlhinney, for reasons known mainly to him. Why don't the newspapers ask McIlhinney why the PLCB got this one-sided tool without any restrictions on its use, or requirements for reporting on how it is used? Ask him why there's a four-bottle limit on wine sales at licensees? How about you ask him why his law favors big markets over mom-and-pop stores by requiring the whole separate "cafe" with separate registers and clerks to ring up beer and wine? Ask McIlhinney who he's compromising with. And ask the Democrats why not ONE of them has voted for real liquor privatization.

And the rest of us? The citizens? Ask your legislators, your reps and your senators, to put a two-year hold on "flexible pricing." Haven't we paid enough? Why should we pay more so the PLCB can continue to paper over the ruin that their spiraling operating costs are creating?

The best solution to all of this? Stop tinkering: PRIVATIZE. It works in over 2/3 of the other states, it works in over 85% of the countries in the world. Why not Pennsylvania? 

Insider Trading?

We all know the PLCB doesn't do a very good job of selling the high end. One only has to look at the Screaming Eagle fiasco to see that. However, a by-product of their ineptitude is that sometimes... something really high end gets reduced to below regular market value so they can get it off the books. Such is the case (or maybe half case) with Chateau Ausone 2003 (PLCB inventory #18803). The PLCB price is $2999.99 as shown in the Board Agenda for July 20th on page 29. It also shows that the price is being reduced -- by $1700! -- to $1299.99, following Board approval. What a deal!

Have you seen this bottle? We're guessing not.

The only problem is that if you look up the wine by name or code number...it doesn't exist in the PLCB inventory. Not in the product catalog online or on the FWAGS website. Don't take our word for it: try searching yourself: the code, the name, the appellation...nothing. (BTW, the other big sales on the page, even the Chateau Margaux 2000, a $1000 savings? They're all in the system. Just not the one really BIG savings.)

So where did they go, and how many were there? More importantly, who gets these bottles we ordinary citizens can't even see? Did the PLCB just "misplace" a few $3000 bottles, lose them in inventory? Or did somebody get the nod, and will be waiting at the right loading dock on August 1 to get one of the few real deals available in the State Store System? (Maybe they're saving them for their friends at the DNC.) This isn't the first time this has happened, and with a department brought up on graft it won't be the last. Will we ever know the truth? Probably not.

Privatize.

The letters

I'm not going to post much commentary on these letters between myself and the PLCB;  I'll let the letters speak for themselves.

February 26th, 2016 Letter to PLCB Chief Counsel Rod Diaz

Dear Mr. Diaz,
On Feburary 25th the House held an Appropriations Committee meeting with the PLCB.  In that meeting the Chairman of the PLCB Tim Holden said that they do not negotiate with suppliers because, and this is an exact quote: "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."  Later Board Member Michael Negra reiterated with "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."

Now looking at Title 47 Ch. 1. Art 2 Section 2-207 (b) General Powers of the Board, I can find nowhere that says prices can't be negotiated nor that they have to use the MSRP. In fact, the wording of the stated section, "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.". would seem to indicate that they should be negotiating to gain an advantage through volume purchases.

Given the language of the law, I'd like to know what the Board's reasoning (legal reasons, decisions, laws, opinions or whatever else pertains) is used to justify not negotiating and simply using the MSRP to determine pricing.

Sincerely,
Albert Brooks

April 6th, 2016 -- The reply came not from Chief Counsel Diaz but from Elizabeth Brassell the Director of Communications for the PLCB. It turns out there is no legal reason after all. (The emphasis in bold is added.)

Mr. Brooks:
I apologize for the delay in getting back to you, but on behalf of the PLCB and Chief Counsel Rod Diaz, I’m happy to address your February 26 email regarding the PLCB’s ability to negotiate prices with suppliers of wines and spirits under the proportional pricing mandate of the Liquor Code.

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. However, any advantages obtained through volume purchases are directly reflected in the shelf price.

Because of the proportionality requirement, the mark-up applied to wine and spirits must generally be uniform across the state and across various product classes and brands.  Suppliers know that, and when they present products and prices for PLCB regular listing consideration, they often start at or above the retail price at which they want their product offered on our shelves, then reverse engineer the tax and mark-up formula to get to the price at which they’ll sell to the PLCB.

It is this general listing process that Board Chairman Tim Holden and Member Mike Negra were referring to in discussing price negotiation in recent appropriations hearings before the legislature. 

While the proportional pricing requirement was intended to promote flexibility when it was enacted in 2007, in reality it simply limits the PLCB’s ability to consider any factors in setting a shelf price other than what we pay vendors. Suppliers are aware of these constraints and use it to their business advantage. 

We do, however, actively negotiate lower prices on one-time buys, which is how we procure products for our Chairman’s Selection and Chairman’s Advantage programs, as well as many luxury products. We believe price negotiations are a key reason one-time buys are the fastest growing part of our business.

The PLCB is charged both with offering consumers quality products at reasonable prices and maintaining and growing tax revenues and profitability for the General Fund.

In seeking a legislative amendment to Section 207 of the Liquor Code, we’d like to have a clear mandate to consider other factors in determining shelf prices, such as product class, the sales history of the product, surrounding sates’ competitive prices, national market pricing and the marketing support suppliers put behind their products. This would allow us to lower some prices and increase other prices as the market allows, thereby applying the benefit of flexible pricing as increased PLCB contributions to the General Fund.

Thank you for your questions and the opportunity to respond.  Having read your blog posts and social media commentary over the years, we’d also like to invite you to visit PLCB headquarters and meet with leadership staff here. We’re always striving to improve our operations, and we welcome a productive dialogue that could help us advance. Let me know if you’re interested.

Elizabeth Brassell | Director of CommunicationsPennsylvania Liquor Control Board 604 Northwest Office Building | Harrisburg, PA 17124

 

Who do you believe?

April 7th, 2016 -- My reply, pretty much saying that if you wanted to do better...you could.

Dear Ms. Brassell,
Thank you for the reply. I really do understand that negotiation is a give and take between two parties, each with their own idea of the value of what is being bought or sold.  That said, I have serious doubts that the PLCB has ever done any analysis to see if the sales increase from lower pricing would more than offset the amount collected at the current higher price thus collecting more for the state. Since increasing sales IS one of the primary goals of the PLCB, this option should be taken far more seriously than it is.

As in my example with Oregon for a 750ml of Jack Daniel's, there certainly is room in the pricing structure, since Oregon also works on a set markup, and yet the math says they have to be paying a lower price even though Pennsylvania buys more than 5 times as much. 2,422,647 units for PA Vs. 433,506 * units for Oregon.

While I realize negotiation is not possible across all the items that the PLCB stocks, certainly the top 100 sellers should be scrutinized using Sales Price Variance Analysis to decide what cost is most beneficial to the state and consumer, it isn't that difficult to do.

I appreciate your offer of a meeting but my goal is not to make the PLCB better, they have had 82 years to work on that themselves, my goal is to eliminate the state store system and have it replaced with what most of the country considers normal.  A free market system that is regulated by the state.  Since our goals are non-congruent with each other a meeting will not further my wants and won't shed any more light on your problems than the reading of the blog which you say you already do. 

Sincerely,
Albert Brooks

So there you have it. Why they say they can't or won't try to get better prices for the consumer and why I say they aren't trying. The question now is...who do you believe?

Revealed: How the PLCB is going to make that extra $185 million...

Well...they aren't. Nobody really believes that the "Consortium of Control States" is going to work; states just won't work together on booze sales. That puts a big hole in the total right off the bat.  Using the 6.92% profit margin for the PLCB that has been bandied about by some legislators -- which is optimistic, at best --  the state would have to sell over $1.3 Billion in additional product — an increase of over 50% — in the next two years to hit the revenue goals in "modernization." In other words, they want to take more money from you in increased sales, fees, and higher prices.(We break it down for you here.) Not exactly how most people think of "control."

The only way the PLCB "makes" more money is by taking it from YOU

Tell your legislators that is it time they did something FOR the people, and not TO the people. Free us from 80 years of incompetence, mismanagement, graft, idiocy, nepotism, and political payback by making Pennsylvania normal again. Let the state regulate, not retail. Or as some genius on the PennLive site recently commented: 

"End it, don't mend it."