WASHINGTON STATE GOES PRIVATE!

Yesterday, Washington State voters resoundingly voted YES (looking like over 60% in favor) to privatize the state's liquor wholesale and retail operations. All liquor sales in the state will be private by June 1, 2012. Costco spent about $20 million supporting Prop. 1183 (for privatization), a spend that has been smeared as "buying the election" by anti-1183 groups. This ignores the fact that the Wine & Spirits Wholesalers Association spent over $12 million trying to defeat it. So...don't accuse the winner of "buying the election" when what really happened is that you were trying to buy it...and got outbid.

So, congratulations to the people of Washington on your wise choice and your victory! And...what's it mean for us? This definitely puts an intangible momentum behind privatization in PA; another state did it, and the sky hasn't fallen in. But tactically? It doesn't mean much. We don't have a Costco willing to step up and fund a campaign for privatization...and even if we did, it's not as simple as that. Because we have to work with the Legislature, and they've been thwarting the public's will on this for years.

Think about it. The polls consistently show the voting public in favor of privatization by a 2:1 margin, yet the Legislature still argues over whether they should even be thinking about it. They twiddle and diddle and talk about the PLCB's "modernization" plans, and the revenue, and the union, and THE CHILDREN!!!!! All red herrings. The People want the State out of the booze business. Very simple. Get the hell to work on it.

Why don't they? Well, the same polls show that only 17% of voters consider this an important issue. I'll grant that, and compared to some others, it's certainly not as important. On the other hand, the heavy lifting has already been done: there are a number of plans out there, some over ten years old, to privatize. Pick one, and do it. It's not controversial if 65% of Pennsylvanians are in favor of it.

Why else? Maybe because of the revenue coming in from our police-enforced monopoly. Prices at the State Store System aren't THAT much out of line with surrounding states -- I've never said that prices were a major issue, although selection and service ARE -- but that's because the PLCB has been willing to take a hit on profits (the governor's PFM report on privatization shows profits steadily declining; more on that soon) to keep their costs high. That's right, I said willing to take a hit on profits to keep their costs high. Because they're a bureaucracy staffed by a union, not a private company, they don't mind not being profitable (according to that PFM report, over half the PLCB's stores are not profitable), as long as they keep their jobs.

Why are the profits declining? So they can stay somewhat competitive while continuing to collect Pennsylvania's outrageously high wine and liquor taxes. But send that private, and the stiff taxes will be exposed. This is the ugly underbelly of the PLCB's State Store System: we pay more than other states on wine and liquor excise taxes: a whole lot more (jump to the link, then scroll down and take a look at the last three tables).

So we need to tell our legislators that when they take this system private, they need to take that burden off our backs and spread it around in a more fair and equitable manner. Or...pick it up in a Marcellus Shale tax of some kind...which it looks like they're already thinking about. Push for that. Because otherwise some genius is going to look at upping the beer tax, and we don't want that!

A good day for Washington State. With luck, a good beginning for Pennsylvania. Keep the ball rolling!

Retail Booze Privatization: why HB11 doesn't cut it

HB 11, a bill proposed by House Majority Leader Mike Turzai back in July, is still the standard bearer for privatization. Privatization currently has the support of Republican Governor Tom Corbett, who has majorities in both houses of the legislature (although the Senate Republicans are stalling, possibly trying to squeeze out a deal on a Marcellus Shale "tax"). To make things more likely, the PLCB has obligingly stumbled badly in the past two years with: 

• two contracts of questionable ethics and effectiveness – one for the wine kiosks, the other for 'courtesy' training
• the embarrassing public failure of the wine kiosks (and a clumsy attempt to cover up a strongly negative internal review of the idea)
• a disastrous install of a $66 million inventory system that led to a gross overbuy of inventory (which then had to be stored in trailers in summer heat) and a shutdown of licensee deliveries pickups (the PLCB doesn't deliver...what was I thinking?!) for a week
• a still-simmering corruption debacle at the Philadelphia warehouse in which over 20 employees were suspended (and another cover-up)
• a complete fiasco over beer registration raids on three Philadelphia bars that led to very uncomplimentary hearings on the subject
• a frustrating inability to promptly close nuisance bars
• and a baffling failure to turn significant 'profits' with a police-enforced monopoly on sales of wine and spirits

This is the time to strike on privatization, and as you know, I've been all for it. I've called for it, argued for it, howled for it. 

But unless substantial changes are made in HB11, I cannot support it. 

It is not a question of the perfect being the enemy of the good; this bill has fundamental flaws that are simply not in favor of the citizens of Pennsylvania. I believe that they will result in the replacement of an unresponsive public monopoly with a poor selection of goods…with an unresponsive private oligopoly with a poor selection of goods, and I cannot support that. We have one chance to get this right, because changing the laws again will be even tougher. Let's have a look.

First, and most important to me, HB 11 does nothing about the intolerable police-enforced monopoly. If it passes as is, Pennsylvanians are still forbidden by law to bring home a bottle of wine from New Jersey (or Maryland, or Delaware, or New York...). I've been assured directly by Representative Turzai that the police will no longer enforce this, but that's not good enough. You're a legislator; don't tell me the police won't enforce a despicably un-American law; change the law. When so much of the state's population lives in the tight pocket of the southeast, just across the bridges from huge liquor stores, to do anything else is simply ridiculous. Kill the monopoly, encourage competition. The only reason this is even faintly legal and constitutional is because of the overboard interpretation of rights granted to the states through the 21^st Amendment by federal courts; there is no such monopoly on any other goods. The police-enforced monopoly is insulting and intolerable. I cannot and will not support HB11 or any other privatization proposal that does not end it, and neither should you.

Second, the proposed wholesaler fees for exclusivity of brands pretty much guarantee a smaller selection of wine and spirits. Nathan Lutchansky (of the PLCB Users Group blog) has explained this in greater detail than I'd care to replicate; read it there. You'll soon realize that this is a non-starter. Why is this here? Well...maybe this is the reason (and Turzai's general counsel Jim Mann is extremely protective of the bill as written, BTW). Clean bill, please: do-over time.

Taxes are another issue: they're too high. Turzai has replaced the insulting “Johnstown Flood Emergency Tax” with a more rational gallonage tax, but it attempts to replicate the revenues from the onerous Johnstown tax – plus state sales tax, plus the PLCB's “profit” that goes to the state (not really "profit," but a somewhat arbitrary number set each year by the legislature; didja know that?) – by boosting it to crazy high levels...more than twice the taxes in neighboring states. Again, Lutchansky hasthe numbers on this; have a look (see his "Issue #2"). The taxes on wine and liquor simply do not have to be that high. They're unfair at those levels; why should I be paying so much more to fund state programs that benefit everyone just because I drink -- moderately!? Now's the time to make these taxes more equitable, instead of some of the highest in the nation (which is weird, because we have one of the lowest beer taxes...). Replace the revenue with a shale gas tax if you have to.

A huge problem: what about beer?  Why hesitate when we can fix some of the most egregious problems with a couple quick penstrokes (see below) Get rid of the insane case law, now! While we're at it, do away with ALL limitations on sales by licensees: “distributors” can sell anything from a single bottle to a keg, and so can taverns (and delis, and supermarkets with deli licenses), and fix the tax laws so that all retail outlets are on the same footing (right now, bars pay more taxes than distributors...say what?). Then, allow beer distributors to add wine and liquor to their licensed sales; allow the new wine/liquor licensees to sell beer. The artificial separation of sales is all about protecting business status quo; rewrite these laws for the benefit of Pennsylvanians, citizens, and voters for a change! Hell, if Joe "CEO" Conti can say “I'm for the people of Pennsylvania,” so can I!

1,250 licenses is simply not enough. If the number were doubled, to 2,500, we would still be under the national average per capita, and this would help address the issue of oligopoly (see below). It will also help address the red herring issue of rural retail access.

I don’t know enough about how the PLCB sells to licensees to complain about it, so I’ll tell you what a friend of mine, a licensee, said:

“My concerns are from a licensee’s point of view. I don't want to be forced to buy from one wholesaler that has a limited selection, makes it difficult to place special orders, and charges retail and sales tax on ‘wholesale purchases.’”

To tell the truth: I don’t even know what HB11 does to address these concerns. I do know that almost every licensee I've talked to who tries to keep a premium wine or spirits inventory finds the PLCB frustrating, and that almost every one is afraid to criticize them. I’d like to hear more about what HB11 has for licensees...I suspect it's not much.

The licensing scheme in HB11 is just that: a scheme. It’s easiest to quote from a licensee who emailed me about this:

“The huge issue I see with the bill is the emphasis on large (over 15,000sf) stores. Was this bill paid for by big retailers like Total Wines? Who the hell is the state to mandate the square footage of a private business? Many of the state stores are much smaller than this. As per the bill, over half of the roughly 1200 stores will need to be over 15,000sf! These large stores often have lots of bottles, but by necessity need to focus on industrial products, not small producers. How is this going to increase selection? We don't need bigger Absolut displays. We need many smaller stores run by entrepreneurs who find and offer cool products. This bill would be the equivalent of mandating that over 50% of all restaurants be more than, say, 5000sf in size. Can you imagine what Philly would be like? A lot more Ruby Tuesdays, a lot less anything good. This aspect of the bill nearly makes it pointless to have privatization!”

I agree. The “protections” against private monopolies could be made much more effective by simply dropping the maximum licenses owned by any one company/person to ten instead of forty. Problem solved. If that loses support from big chains, well, first, too damned bad; and second, it will gain support from the people who are concerned about big chains grabbing all the licenses, and throttling selection. Who are we more concerned about? What’s good for business -- ho ho ho, don't you worry, little voter! -- is good for citizens? Sorry, that’s how we wound up with 75 years of the case law!

Finally, let the results of Granholm flow, and again: favor Pennsylvania’s citizens, not business interests who’d rather see no direct shipping of wine (or spirits or beer) because it might cut into their sales (studies show it doesn’t). Make the taxes realistic, and let direct shipping happen.

Those are the issues I have with HB11. I’d like to see them addressed, or explained, before I solidly support this bill. I've been told that some such changes are under way, but HB11 shows no changes online. Until such time as a majority of these issues are addressed and the police-enforced monopoly is done away with, I do not support this bill, and I urge you to consider these points before you support it. We have paid -- Lord God, we've paid -- for the misguided morality of our Repeal-era legislators and Governor Gifford Pinchot. We've earned a better road to privatization; one that takes our concerns into account first.

Where are we going to get that? I hope that Governor Corbett is doing what I'm starting to think of as his Swan Routine: serene and quiet on the surface, paddling like hell out of sight under the water. From the way he's talked about HB11 after the PFM Report came out (more on that soon) -- "a place to start" -- I don't think he likes it any more than I do. So here's hoping he puts leverage on Representative Turzai (and Jim Mann), or better, puts out his own version of a privatization bill that actually writes privatization for citizens.

The Case Law is Stupid, and the Pennsylvania Legislature is Too Scared to Admit It

1. The Case Law is Stupid. Do I really need to tell you why? Okay, here: have a look. But that's okay, because...
2. The Case Law is Easy to Get Rid Of. Truly. Just strike the first sentence of Section 441, Paragraph b; and strike the entirety of Paragraph f (which is a complete abomination, and never should have been added). Next, you also drop the parts that say a tavern can only sell 198 oz. of beer or less at a time, and you're Done. It's not that hard to figure it out; all it takes is balls. Because the Pennsylvania Tavern Association is about the only group opposed to changing the case law; they say it would devalue their businesses (because they can sell sixpacks). Their lobbying group has been extremely successful at stopping what polls have shown over 80% of Pennsylvania voting citizens are in favor of: dumping the case law. Which proves that...
3. The Pennsylvania Legislature is too scared to change the stupid Case Law. Ask any legislator why we have the case law. They won't know. Ask them why they can't change it. They won't answer you. 

Every time a legislator tries to change the case law -- and the first time I remember this happening was back in 1992! -- there's a lot of talk, a lot of excitement, and then two things happen. First, there's a ridiculously unnecessary "compromise," like saying distributors can sell six-packs, but not singles, or -- really useless -- they can sell 12-packs. Why?! There is no need for any restriction! But that doesn't really matter, because the second thing that happens is that the bill never, ever makes it out of committee. It dies. And we're still screwed.

Well, look. They're talking about privatization of the moldy old State Store System. One of the things that is completely wrong with the current proposal, that is a dealbreaker on Mike Turzai's HB11 bill, is that it ignores beer. Why? The division of beer from wine and spirits was never a natural thing to begin with. Look at other states: they have booze stores where you can buy all three of your faves (and cider, too). Beer is a missing piece of the puzzle.

Beat up your legislator on this. Tell them you want normal, rational, adult alcohol laws in the Commonwealth. Get the government out of the booze business, and kill the stupid Case Law by putting booze in stores with wine and liquor...where it belongs. Make it easy for beer distributors to get licenses to sell wine and liquor, hell, convert their licenses to 'all-alcohol' retail licenses. They've earned it.

Then tell your legislator that if they don't kill the case law, they're too cowardly to get your vote next November. This is our year. This is the year it happens. KILL THE STUPID CASE LAW!

New PLCB Chairman in Favor of Privatization

• Will new PLCB Chairman Skip Brion preside over the agency's demise? 
• Is Mike Turzai's HB11 the road to the promised land of privatization, or too flawed to survive?
• Does the PFM report on privatization change anything?
• Will Governor Corbett step in with his own proposal on privatization?
• Does anyone other than Hereditary Union President For Life Wendell W. Young IV and State Store System employees ever write anything in favor of the PLCB in Pennsylvania newspapers?
• Where's Joe "CEO" Conti disappeared to?

 There's so much going on with the PLCB that it's hard to address it in one post...especially when I'm getting back to things after two months of heavy travel and a ton of work. So I'll give it a shot in a couple of posts instead. First: the latest news.


Joseph "Skip" Brion was confirmed as the newest member of the PLCB on Tuesday, Nov. 1, and immediately became Chairman. Brion is a Chester County Republican, a lawyer (what a shock...), and openly in favor of privatization. Brion will chair his first meeting next week, and has said the Board needs to "open itself up and be more in tune with what’s going on at the Capitol." That would certainly be a refreshing change, given how totally tone-deaf the PLCB has been in recent years.

But is anything really going to change because of this? Not likely. Brion may be pro-privatization, but he's still a politician, and that means that when the chips are down, privatization rhetoric aside, he's looking for more of your money -- sorry, more revenue -- to spend on programs of variable worth. So don't expect the high taxes that are the most unsupportable part of HB11 (yeah; more coming on that, and soon) to change.

In fact, Brion has made noises that he's interested in "modernizing" the PLCB. And that makes my heart sink. Because I can tell you exactly what will happen. They'll get some stuff through the Legislature -- how, I'll be damned if I know, because we can't seem to get a simple thing like killing the damned case law through in 20 years! -- and the We-Know-What-You-Really-Need Committee will continue their latest course of buying every single crackpot product that comes on the market (even though no one in the system has the slightest clue on what they are or how to sell them), and they'll make a big stinking deal out of it (spending millions more of your tax dollars on marketing a police-enforced monopoly)...and we'll be satisfied just enough to let privatization fade. And within five years, they'll be back to the same lackadaisical shit job they were doing two years ago before Tom Corbett came along and made privatization an issue and got them scared.

Is that too harsh? Think I don't know what I'm talking about? Well, friend, just cast your memory back to the Chairmanship of Jonathan Newman. Remember that? Back when "Chairman's Selection" actually meant something other than "No one else wanted this stuff, so they cut us a deal on it, and we bought a whole bunch and stuck it in a hot trailer for a while"? Because things were great for a while, and Newman was energized, and enthused, and then what always, inevitably happens at this agency happened: someone noticed a buttload of money, and started screwing with it. And all of a sudden we had Joe Da CEO popped in there -- because he had so much experience in off-premise retail and running a huge wholesaling operation, right? -- fiddling with the knobs and pulling on the strings. And the wheels fell off. If you don't think that exact same thing would happen after "modernization," I've got a bridge to sell you.

Don't fall for it. Stay staunch. Let's get rid of HB11, take Corbett's report, and forge a good privatization bill. Blow open the number of stores, find state jobs for the union clerks, get beer in there, kill the case law, open the borders, lower the ridiculously high taxes, and then watch jobs get created. Watch the restaurants in Philly bloom, watch our already great beer scene blossom, and watch the state catch up to the 21st century. Don't give up now: keep the pressure on your legislators.

More to come. Shortly.

Where's Joe "CEO" Conti disappeared to?

Wine Kiosks DEAD; Conti says, "It certainly wasn't a failure."

The wine kiosks are dead, they've been taken off life support. As I predicted, the PLCB has used their trumped-up charges against the kiosks' hapless creator, the so-called "Simple Brands," as an exit strategy. They are leaving this debacle bruised, battered, smoking, and humiliated, the kiosks -- their bright, innovative idea to give the consumer what they want (that their own people told them was "deficient") -- rejected by Wegmans and Walmart as well as the state's consumers...and what does Joe Da CEO have to say about the whole thing, this 15-month circus of embarrassing failure?

"It certainly wasn't a failure."

and

"I still think there is merit to the program."

and

"It didn't end up successful, but we learned a lot and we will end up better for it."

Can we run a drug screen on this man? Because he is not in touch with reality at all.

So where are we...the program was an abject failure (except at making the PLCB's top management look like the arrogant, clueless bureaucrats they are), the PLCB is going after "Simple Brands" for $1.2 million in charges (that the company's lawyer -- finally making comment -- called "malarkey," noting that the PLCB was overbilling for maintenance and hardware) through the Board of Claims (a system Conti admitted was glacially slow, noting that one case took 18 years to settle), and, oh yeah, "Simple Brands" is suing the PLCB for $81 million in damages.

And the PLCB (and AG Jack Wagner, and Senator Scarnati) want us to "take off the handcuffs" of the Liquor Code to let them realize their full potential as a government-owned-and-run monopoly business? Maybe we ought to get out some actual handcuffs.

Regime Change?

Privatization may or may not happen. I understand some of the Labor Party -- sorry, Democratic Party legislators are going to be proposing some changes to the PLCB and the Almighty Liquor Code (the ones PJ begged for to "untie their hands"), so the Legislature MAY stay lazy and keep the damned thing. Hey, let's be honest: we may be stuck with this swaybacked mule of a liquor system, this fossilized relic of Repeal, this coprolite.

In that case...could we at least have it run right? As I pointed out in a recent post, the current PLCB administration has presided over an absolute Carnival of FAIL. Can they be held responsible? I think they can. Check the new poll: PJ and Joe Da CEO should resign, or be fired. It's reached that point. As a "shareholder" in this cockamamie "business"...how do you vote?

Some wholesaler stuff

I've been hearing a lot of -- well, a lot of crap from anti-privatization interests (which pretty much means PLCB bureaucrats, UFCW members, Democrat legislators, a couple social conservative Republican legislators, and...no, actually, that's about it) about how the wholesaling's going to be terrible under privatization (and if HB11 stays the way it is, it may well be, but that can -- and better! -- change before it's voted on), and how big stores are going to crush mom and pops and leave us with no choice (like we have a lot now). 

This ignores, of course, what actually happens in states where private liquor sales are the norm -- like New Jersey, New York, Massachusetts -- and all kinds of stores thrive and the selection's just fine; real good, in fact, at many stores. Not all, but you don't have a great selection of groceries at every store that sells groceries, right? There's selection, there's specialization, there's price, and there's convenience to be considered.

Anyway, I was thinking about this when I saw this interview with Michael Binstein in Shanken News Daily [full disclosure: my major client, Malt Advocate, is owned by M.Shanken Communications...for what that's worth], the owner of the big Binny's chain of booze stores in Illinois. They have 25 stores, and the selection is tremendous; love going there when I'm in Chicagoland. 

I saw some pertinent stuff that I wanted to share.  Please notice: Binstein is bullish about expanding, not keeping a cap on his number of stores. He sees competition, and meets it (without the help of the state police). And he sees opportunity for wholesalers who want to work hard, and for small retailers. This is a smart guy, who knows the market, and is successful in it. Probably ought to give what he's saying some consideration.

This is not the whole interview.

SND: In the last four years, you’ve expanded from 19 stores to 25 stores, mostly through acquisition during a very difficult economy. Has your investment paid off? Binstein: The honest answer is that the investment is paying off. Time is the ultimate test, and one needs a certain amount of humility. But there’s not a single acquisition, store opening or expansion of our model that I would take back.
SND: How big a player are you in the greater Chicago market? Binstein: I’m told we’re the largest independent in the Midwest, and certainly the largest independent in Illinois.
SND: Who do you consider to be your biggest competitor in your market? Binstein: This is going to sound like a cliché, but I think anyone and everyone who holds a liquor license is competition, and there are tens of thousands of people who do. Convenience should not be underestimated. We may have the selection, we may have the best price, but with gasoline nearing $5 a gallon, people have to make tough decisions. Every player at every trade channel has a contribution to make. So there’s not a competitor that I minimize.
SND: Do you have any plans to expand to other states? Binstein: We’re keeping an open mind. We certainly have looked, and there are opportunities. But there are so many places within our market, so many communities and areas where we still think we could open a store. I think we’d like to finish Illinois before moving on.
SND: How are your relations currently with major suppliers?
Binstein: They can get very ideological—if not theological—about pricing. I think a bottle of wine, or liquor or beer, is like all commodities. It’s no different from selling soybeans, corn or wheat. It has a price, and it’s based on supply and demand, and it ebbs and flows in every market. Just as the corn, soybean or wheat broker or farmer can’t get too ideological or theological about what a bushel should cost, the same goes for our business. One of the oxymorons in our business is something called price integrity, when suppliers believe something should cost $20 or $30 and they don’t really care what the customer thinks it should cost. I think that’s a very myopic, unprogressive way of looking at business. This is not a very popular thing to say.
SND: How about wholesalers?
Binstein: There are bad retailers and there are bad wholesalers. There are lazy retailers and there are lazy wholesalers. I’ll leave it at that, but I will say that I think wholesalers have an opportunity, a very unique opportunity, to make themselves even more indispensable in this era of consolidation, because suppliers are looking for foster parents. Suppliers are no longer the primary caretakers of a brand. They may actually possess the birth certificate for the brand, but they need other people to nurture, raise and educate the brand. The suppliers have gotten away from brand-building, and now it falls more and more to the wholesaler and retailer to build those brands and fill that void.
SND: Are there still opportunities for small entrepreneurs in beverage alcohol retailing? Can a small, single-unit store survive and thrive in today’s climate?
Binstein: Absolutely. There’s never an opportunity to overcharge and under-deliver. As long as we’re not using code language to ask the question, “Is it still okay to work at outrageous margins and not give people the selection they deserve?” There should have never been that opportunity, and there isn’t that opportunity now. There’s room for the Davids and the Goliaths. And they both need each other.

"Just give me something"

I was talking to a licensee (that's PLCB-speak for a bar owner) the other day about this whole thing. What do you guys think about the movements towards privatization, I asked her.*

"What kind of chances do you think it has?" she asked in response. "Is this really going to happen?" I said that I'd heard G. Terry Madonna, the Pennsylvania politics maven at Franklin & Marshall College (full disclosure: I am a proud F&M grad, class of 1981, and if you have high school age children, you should consider this excellent college.) discussing it; his opinion was that it was the best shot we'd had at privatization since Repeal...and he gave it a 40% shot. That was back in the spring, though, and things had moved forward since then; insiders tell me that the votes are there in the House, and the Senate's swinging our way (and there may yet be some action from a Marcellus Shale tax deal; a 'you vote for my bill, I'll vote for yours' kinda thing). So again, I said...what do the licensees think about this?

"I'll tell you," he* said, and paused. "The Tavern Owners don't know what to do. You know, it would be great; in other states, the Absolut rep would come to you and say, 'I got a deal on this week; you buy two cases, I give you this price,' and I could say, well, what can you give me if I buy four cases, and he'd say...ooookay, and he'd give me another price, and then, then I could pass that on to the customers, do a special that week." And, I said, not only that, they'd deliver it to you. "Right!" they both* said, beaming.

"But you know," he* continued, and got right in my face: "The prices we have to pay are crazy. We don't get a good discount. And the beer sales thing? [meaning the six-pack sale monopoly taverns currently have] We know the beer stores are going to get into wine and liquor sales if this goes private; they've got the money, they're already set up. We're going to lose a lot of takeout sales [we'd already guessed that wine and spirits in the distributors would mean sixpack sales there as well], I know that, but no one's putting anything for us in the privatization [bill]. Just give me something! Ease up some of the regulations, cut back on the fees; just give me something."

Why don't you say something, I asked. They* shook their heads, and she* said, "We don't know if it's going through." The implication was clear: no one wants to piss off the PLCB by being openly pro-privatization...and then face the bureaucrats if it fails.

My advice to the 'privateers' (as Hereditary Union President For Life Wendell W. Young IV has wittily tagged the pro-privatization forces): give them something. Put something in the bill that acknowledges licensees are getting a raw deal; level the playing field by putting no exclusivity on suppliers -- let licensees buy from whatever source they want -- or take off that ridiculous 'happy hour' restriction, or let all bars sell packaged goods (to-go wine, liquor, and beer) and don't tell them how they have to do it. You'll get a powerful ally...and be a giant step closer to getting privatization.


*Might have been a woman, might have been a guy, might have been a husband and wife; might have been around here, might have been up in Clinton County where I was vacationing...I ain't saying, for obvious reasons.

Auditor General: "The Board and the vendor lost credibility..."

I'm back from vacation...and apparently just in time! Auditor General Jack Wagner's audit of the wine kiosk fiasco -- sorry, program -- is out today, and it's pretty much unforgiving. Well, the man's an auditor; of course it's not forgiving, that's not his job, and this was a fiasco. Some pertinent stuff (the full report's here in PDF format; the AG's statement is here (added emphases are mine, of course)):

Wagner’s special performance audit...chronicled the problems that existed from the beginning of the ill-fated kiosk program. The six findings, are:

• The board used kiosk technology that effectively controlled the purchase of alcohol (about the only positive statement in the whole report)
  
• The board followed state procurement requirements, but the request for proposals did not enable fair and just competition
  
• The board and the sole responding vendor negotiated the kiosk contract in ways more advantageous to the vendor than necessary
  
• The board spent $1.12 million more than it took in over two fiscal years and has invoiced the vendor for the losses. But the vendor has not paid
  
• The board and the vendor lost credibility when the kiosks malfunctioned,
  
• The board overstated the convenience of the kiosks

Note that he says "effectively controlled the purchase of alcohol." Not "efficiently," or "nonintrusively." The same thing could have been "effected" by a live person standing at each kiosk -- which the malfunctions eventually also required -- and the statement would have still been true. But weak competition on an RFP, vendor-favorable negotiations (when the vendor is heavily invested in campaign contributions to a sitting governor), losing money on a supposedly cost-free project, operation failures during the busiest sales season of the year, and the total cluelessness on the definition of "convenience?"

Look, read the statement, which covers most of this. Read the actual report, and pay particular attention to Section C, beginning on page 71, where the Board responds to the report. The AG's report takes that response and pretty much shreds it, saying over and over that the Board simply chose not to respond to some (the most awkward) of its findings.

But the message here? The wine kiosk program was a failure. Black and white, accountant-certified, this thing was a catastrophe. The break-even point -- as stated by the PLCB -- was 210 bottles a week per kiosk; only 3 out of 32 machines met that threshold; 17 -- over half! -- sold under 100 bottles a week. They simply didn't work: in the first three months of operation, "auditors determined that 1 out of every 21 transactions was problematic." That's leaving the general shadiness of the contract and the apparent lack of any escape hatch for the Board aside!

And the response from PJ Stapleton (who apparently may have been reading a different report)? "As it has done throughout this process, the Board will attempt to take whatever steps it can to maximize the possibility that the wine kiosk program will succeed."

PJ. Dude. It's over. Walmart blew you off. Wegmans blew you off. Where are you going to put these things? In Post Offices? In courthouses? Wait, wait, I know: how about in the State Stores! 

As I have said for a long time, the major problem at this agency -- beyond the tonedeaf attitude, beyond the terrible business model, beyond the insane insistence that the little stores out in the sticks carry thousands of SKUs when there's no demand for them, beyond the personnel system that doesn't properly reward product knowledge and sales competence, beyond all these serious problems -- is hubris. PJ and his Pals on the Board, Joe Da CEO, and their lieutenants have consistently responded to criticism with an attitude of 'you don't understand, what you call failure is innovation; what you call unethical is faithful to the letter of the law; what you call inconvenient is controlling the best interests of the people of the Commonwealth.' As if we are somehow too stupid to see that this is simply very bad management.

Let me lay this out in such straightforward terms that it can't be ignored.

• The wine kiosks are a public relations and sales disaster that have indeed cost the Board credibility
• The very real disaster of the PLCB's Oracle-based inventory system (subject of another audit) that wound up costing the Board hundreds of thousands in ruined wine (though they say it's fine, and what the hell do they care) and ad hoc storage fees in an absolute orgy of managerial ignorance
• The "courtesy contract," which exposed the PLCB's total lack of basic sales skills and was awarded in a way that showed poor judgment and created the appearance of a conflict of interest, not to mention being an expense that was not worthwhile...according to the AG again (in...yeah, another special audit)
• The embarrassing spectacle of over 20 workers at the PLCB's Philly warehouse being fired for undisclosed "financial irregularities" -- and they are still "undisclosed" 10 months after Joe Da CEO promised an investigation
• The PLCB's large number of unprofitable stores -- in a police-enforced monopoly -- and questionable business models
• The beer registration raid fiasco, where the PLCB's ineptly-kept beer registration database led to pathetically comic 'raids' by armed BLCE officers on three respectable Philly restaurants and one respectable Philly wholesaler, costing them thousands in lost time and sales (read it all here and here)
• The terrible record on nuisance bars (sure, it's the BLCE doing the enforcement, but the PLCB does the administrative punishment, and it's soooooo sloooooowwww....)

That's just in three years. Three years! I mean, speaking pragmatically, PJ and Conti have been a godsend; they're making my job easier. But speaking as a PA taxpayer? When are they going to resign because of their incompetence?! These are major screwups, this is a terribly run agency that lurches from one disaster to another, reacting to the Legislature, arrogantly ignoring the Governor and lawyerly disagreeing with the black and white criticisms of the Auditor General. But who do they answer to? Apparently no one. Which is, in my mind, one of the biggest Reasons of all that they need to be completely restructured, and the retail monopoly taken away from them.

A Plea for Civility; a plea for truth

First, watch this video. (very sorry; it's no longer available. Glad I took the time to transcribe so much of it!) It's Joe "Da CEO" Conti wrapping up his testimony at last week's Liquor Control Committee hearings (which were, apparently, largely about Conti and Hereditary Union President For Life Wendell W. Young IV speaking for as long as they could...probably because they know that if you talk till lunch, most legislators will leave and not give any time to your opponents) with "a little bit of a challenge for civility to the proponents of the bill (HB11)."

He then quoted legislative press offices and "a think tank" -- which I assume is the Commonwealth Foundation -- making remarks about the PLCB and him that...well, they were things like "The PLCB doesn't care about the consumer; ineptitude, goofy, or systematic malfeasance," and "a state system that is broke, even Joe Conti realizes it," and "a state of perpetual tone-deafness...the PLCB should stop acting like coneheads and communists."

Okay, Joe's feelings are hurt. (Mine are too; he didn't say anything about some of the stuff I've said about the PLCB.) But he's clearly never been the target of a Tony Auth cartoon (looks like a conehead to me). This is the "rough and tumble of public life:" man up. I get hate mail all the time -- really, people actually bother -- and you don't see me crying about it, and certainly not to a legislative committee...oh, right. Conti is a former legislator (who didn't get re-elected because he was completely tone-deaf about the legislative pay increases a few years back), and he's looking for professional courtesy from former colleagues. Nice. If only we could all expect such courtesy.

But he blew it -- for me, at least, and I hope for anyone else with a spot of brain matter -- when he then immediately started spouting the UFCW party line about newspapers. See, the UFCW has seen that almost every newspaper across the state has editorialized in favor of privatization, often scathingly, and they needed a response. Their response: the newspapers are doing it for money, because of all the advertising bucks they'll make off private liquor stores. (Though the PLCB spends big bucks on advertising now, and the Inky runs full-page ads for cross-border liquor stores -- more proof of border bleed, Joe.)

So Conti's pleading for "civility," and the first thing he says after that "challenge" is this: "Now we understand many of the proponents are financiers of print media. I've met with most of them, they're very up-front about it, we get that. We understand that the think tank perhaps receives funding from these financiers..." And then he drops that, and goes off in a completely different direction of how "we welcome" this debate ("relish it," he also said). But he's slyly planted the stinking smear-seed that maybe the Commonwealth Foundation is just doing this for money, at the behest of "financiers" who are just doing it for money. Says that, and doesn't back it up, or have the guts to stick it home. Does he deserve civility?

And then he -- well, I was about to say "he lies," but let's be civil and say he once again clouds the issue by saying "If we disappear, your income tax has to go from 3.07 to 3.21 [percent]. You know that." What's he talking about? He's talking about The Johnstown Flood Emergency Tax and the 6% state sales tax that make up approximately 3/4 of the PLCB's "contribution" to the General Fund. And he's 'clouding the issue' by leaving you with the impression that if the PLCB is no longer the state's booze seller, no booze taxes will be collected, and the state will make up the difference with income tax. That's not lying, but it's the next best (worst?) thing.

He goes on to shamelessly wrap himself in the flag. Better get a kleenex ready. "We must be mindful when you walk by a playground, speak to a Rotary Club or a local Chamber, or when you visit a senior center, those Pennsylvanians are benefiting by the performance of this agency. And we get up every day, and we want to do a better job for the people of Pennsylvania. There's really no reason for the incivility we see." He's made selling vodka into an altruistic mission; amazing.

So right after saying there's no reason for incivility...he makes a threat!* Conti issues a challenge (he's got a whole pocketful, apparently) "Michael [Turzai] and Jonathan [Newman] and Matthew [Brouillette]" to debate the issues. "But let's keep it on point, because I'm warning you: if you get off point...[dramatic pause] I'm for the people of Pennsylvania. And anything that either purposely or inadvertantly diminishes our performance and diminishes our return, hits the pocketbook of the people of Pennsylvania, the innocent folks who may not be as emotionally invested in this as you, as the proponents are."

Conti calls for us all to be civil. Then he smears the intentions of the proponents of privatization, he deliberately misstates the results of privatization, he claims moral high ground (for an agency that performs retail sales?), and dramatically threatens his opponents. I don't owe Joe Conti anything. He's trying to set the terms of this debate to benefit the PLCB and himself. He says "financiers" perhaps fund the privatization proponents? He benefits directly from privatization not happening; he has a $150,000 a year job that will disappear if privatization goes through! Is it uncivil to bring that up?

What's civil in political discourse? No one's brought anyone's personal life into this (with the necessary exception of the husband-wife relationship between the winner of the PLCB's 'courtesy contract' and his wife, the PLCB regional manager), no one's made any personal threats, no one -- to the best of my knowledge -- has engaged in anything beyond a bit of name-calling. Does Conti ever watch Fox News or MSNBC (or Olbermann, wherever the hell he is now)? There is no need for excess civility; it's clearly an attempt to hobble the debate in favor of the PLCB and the status quo.

Meanwhile, Conti has other problems. It appears that earlier in the hearing he lied -- sorry, Stacey Witalec says Conti "misspoke," whatever -- about the PLCB's committee looking at the wine kiosks. That's in the Tribune-Review today. "In response to a question about that recommendation, Conti told the House Liquor Control Committee the report did not recommend against the LCB's plan." Oops, turns out not to be the case: "A review by LCB Chief Counsel Faith Diehl found the final report "recommends against going forward and does contain the word deficient," Witalec wrote in an e-mail.

Where's the civility in lying -- sorry, misspeaking, I keep getting that wrong -- to a state legislative committee made up of your former colleagues? 

*He also makes an amazingly inappropriate Blazing Saddles reference, but you'll have to watch the video, words don't do it justice. And remember the actual line that Conti bowdlerizes...amazing.

PLCB Spirits Selection Sucks...just like we always said it did

I don't have numbers to support some of the things I thoroughly believe about the PLCB; one of those things is that the spirits selection sucks. Well, the whisky and cognac/armagnac selection in particular. But I didn't know for sure, I was basing it on what I'd seen in privately-owned liquor stores.

Nathan Lutchansky (PLCB Users Group blog) has the numbers, and it turns out we were right. Nathan got the numbers on how many different spirits the PLCB offers in a variety of categories (and actually different; not different sizes or gift packages of the same spirit), and compared it to four well-known destination stores: Astor, Binny's, Party Source, and BevMo. Take a look; it's an eye-opener.

The two most damning? Single malts: the PLCB offers a paltry 37, while the next smallest amount (BevMo) is 132, almost four times as many. The other? You won't believe it, but it's vodka. Add non-flavored and flavored together, and the PLCB offers 179, and we've often said they have too many...but in this group? They come in fourth out of five. They can't even do that right!

Hard numbers prove it: the selection at the PLCB sucks.

Wine Kiosk Debacle Footnote

The Commonwealth Foundation has posted the documents referred to in my previous Wine Kiosk post -- the ones where the PLCB's own internal evaluation committee advised against the wine kiosks -- here.

I don't really think any further comment is necessary.

State Stores Lose Money...and the PLCB's proud of it

In the Bizarro World of the PLCB, where crap selection and lackadaisical service make a store "world-class," apparently it is also a good thing to have 45 stores (out of 620-ish, about 7%) losing money! Is this all about the PLCB's touted "Serve The Rural Areas With Booze!" program (see below; sorry about the Chinese Communist Party-style title, it's almost irresistible with the PLCB)? Not completely, it seems like it's more about the PLCB's business incompetence. Check out this piece at the Pittsburgh Tribune-Review, which reports that "The LCB data obtained by the Tribune-Review show that the losing stores weren't all rural: Two stores in Brighton Heights and Downtown and one in Philadelphia were unprofitable in 2009-10."

But put aside how completely awful at business you have to be to not run a profit when you have a police-enforced monopoly. Joe "Da CEO" Conti says it's a good thing! Here he is in an AP story about yesterday's hearings:

Conti said a standard state store carries nearly 2,500 types of liquor and wine*, and that the board maintains stores in rural areas, even when they are not profitable, as a matter of fairness for consumers, which may not be the case under privatization.
"The bill cannot force a grocery store to bid for a license," said Dale Horst, the PLCB's director of retail operations. "If the PLCB can't make any money because the sales volume is simply not there, these areas may not be served at all."

Here's a thought: the number of stores in the state is set by the PLCB, not by law. They claim it's to cut down on drunkenness, on the ill effects of alcohol abuse. Really? Or is it because they've already got stores in all the areas that can make money using their horribly inefficient business model? Wouldn't it make more sense to go private, and allow the local grocery store to sell wine and sixpacks, and liquor if they want to, than to force a State Store to carry 2,500 different kinds of booze?

Check this assbackwards reasoning. They won't allow specialty stores in Philly and Pittsburgh to carry a large selection of wines and spirits, like the big stores right across the border, but they'll tell you that you can "easily" order from 30,000 selections (you know, odd sizes, and double-entered SLO/on-shelf items, but it's a lot, Joe Da CEO says so!) on their SLO system and have it delivered (to the store, not to YOUR house, that would be too easy). But then they turn around and force rural stores to carry a relatively broad selection of stuff -- and lose money on it! -- rather than pare it down to a reasonable selection...and let them order other stuff by SLO! I mean, if I lived in Snow Shoe, I suppose I'd be glad, but it's not like it makes sense.

Of course it doesn't. It's Bizarro State. Fix it. Privatize, boost the number of licenses, and kill the case law. Let the PLCB focus on enforcement. Fix the booze tax situation. Make booze law that serves the citizens instead of bureaucrats and business. Please.



*Compare that to the 13,000 SKUs of liquor, wine, and beer at the latest Total Wine to open in Florida. Or, if you'd rather, compare it to under 500 SKUs at almost any gas station or drug store in rural Maryland...which most rural Pennsylvanians would find incredibly convenient compared to having to drive an hour to get to a part-time State Store in one of the nine Pennsylvania counties that only have ONE State Store. Conti and Hereditary Union President For Life Wendell W. Young IV will tell you that lots of stores with a minimal selection is so much worse than one store in the 522 square miles of Adams County, or the one store in the 898 square miles of Clinton County, or one in the 405 square miles of Wyoming County...If only the Legislature would kill the case law, or change the ridiculously strict population limits on licenses, or...something. Something like privatization.     

TableLeaf: so much money for another bad idea

Back in 2009, we heard rumors that the PLCB was considering changing the name on the State Store System. They were spending a lot of money on it, too: $3.7 million, which may seem a bit exorbitant, considering you're talking about changing the name on a Police-Enforced Monopoly retail system. I mean, what were we going to do...buy our booze at the State Store 10 miles away instead? (Or, if you live in, say, Potter County, at the State Store 110 miles away?) What a waste: why does the State Store even bother? We are forbidden by law to buy booze anywhere else. What the hell do they care?

After spending the money (with a California-based firm, thanks so much, because Pennsylvania firms are all staffed by dopes, apparently), the best they could come up with was "Table Leaf." Which means...what, exactly? Anything to do with the best-selling vodka (Jacquin's Royale, very high-end), or the best-selling wine (Sutter Home White Zin, the plonker's choice)? No, not much to do with anything, and I was waiting to crucify them when they plastered that on the front.

Well, unfortunately, they came to their senses, and just call the State Stores "Fine Wine and Good Spirits." Dopey, right? Still, they'd spent all that money coming up with "Table Leaf," so they stuck it to another brilliant program: a house brand wine. They've recently rolled out TableLeaf Merlot, Cabernet Sauvignon, and Chardonnay. (Note that there seems to be some disagreement on whether it's "TableLeaf" or "Table Leaf." Typical.)


So...the PLCB loves its suppliers so much that they've decided to go into competition against them! They're not satisfied with swinging their ponderous regulatory and monopoly weight against beer retailers;* they're going to use it against winemakers too!

Think about it, say you're Cycles Gladiator Cabernet Sauvignon, a nice wine we've bought for BYO dinners. You're on the shelf at the State Store System for $9.99, a good price. So now, your retailer, wholesaler, and regulator suddenly throws in their own brand, in direct competition, at $8.99...oh, and by the way, it shows up as an alternative selection every time you look at a cabernet sauvignon on the PLCB website, and you know damned well every clerk knows about it when people ask for a cab. I'd feel hard done by, but what are you going to say? You going to complain to your regulator? Not likely.

Kinda good to see the PLCB acting like the dominating, monopolistic SOBs they actually are, you know? This is government directly undercutting private business by manipulating their law-granted, police-enforced monopoly status. Is this fair? Privatize!



*Remember Dominic Origlio's line from the beer registration fiasco hearings?  "I would be remiss without mentioning what I believe is the underlying cause of these regulatory and enforcement problems. Pennsylvania's beer industry is regulated by its competitor -- the Liquor Control Board, a state run corporation which sells wine and liquor."

Wine Kiosks...what a beautiful debacle

The ridiculous Wine Kiosks have turned out to be a microcosm of the PLCB: corrupt, incompetent, inconvenient, bloated, and wildly unpopular with Pennsylvania citizens. They are, as I predicted, a public relations disaster for the PLCB.

• The bidding process was suspect (a single-bid contract).
• The company that made them, Simple Brands LLC (again...a "hi-tech" company with no website?), was suspect (company officers were mostly large Rendell donors, and the principal's main experience before was with neonized skeeball machines).
• The contract was suspect (the PLCB kept saying the machines didn't cost them anything...except maintaining and supplying them, and the drone employees looking at videocamera feeds in Harrisburg, and then the drone employees sitting beside the malfunctioning behemoths).
• The machines themselves were crap.
• The whole concept was flawed from the beginning...and the PLCB knew it.

Eh? What was that last bit? Crazy, but true: jump to this story in today's Pittsburgh Post-Gazette and read about how the PLCB received a report from an internal committee prior to signing the wine kiosk contract, a report that strongly advised against going forward with the contract. For instance, the committee pegged the top problem: the kiosk idea simply sucked.

"The committee has a general concern that the proposed process for purchasing products via the kiosk machine is cumbersome and may meet with public criticism for not being 'user-friendly,'" according to the evaluation memo submitted by Matthew Bembenick, a middle manager who recently left his position with the LCB.

The committee had real problems with Simple Brands, the way they operated, and the contract they presented.

The memo also addressed concerns that Simple Brands continually changed its business plan "on the fly as the committee has broached operational issues and concerns." According to the memo, "The committee is concerned that the lack of a coherent business plan will open the [LCB] up to public criticism and could contribute to a potential project failure."

Smart people they had working at the PLCB...too bad they not only didn't listen to them, they completely disowned the report, and 'disappeared' it in Orwellian fashion:

The day after the committee submitted its recommendation, an attorney for the LCB instructed employees to hand over all hard copies of the report and to delete all electronic copies.

Now...spokesperson Stacey Witalec is quoted in the piece saying that it's normal to destroy electronic copies, it's to maintain the integrity of the original; no bits and pieces floating around. As an old records management type, I can understand that. But...hard copy? That's damage control, and when you do damage control before something even goes public? DING DING DING DING! That's a serious red flag. Hope the upcoming AG audit on the wine kiosks knows about this.

Meanwhile, the PLCB is fighting an endgame with Simple Brands that  looks a lot like a desperate search for an exit strategy that will allow them to can the wine kiosks with a statement that clears them of any blame (or stupidity) while pinning the failure on Simple Brands. Have a look. Simple Brands is exposed as the fly-by-night operation it always was; the PLCB is lashing out in an attempt to blame the failure of the kiosks on the company that they were warned was problematic. No one wants these misbegotten monsters, and is that a surprise to anyone?

 

The kiosks are clearly a failure; they were flawed from Day One, functioned below expectations, were despised by the very people they were meant to enthrall, and every party involved is racing away from the stench of their rotting demise. The Philadelphia Inquirer editorial staff put it so well last month.

With any luck, though, the Commonwealth's beleaguered wine-droid army will someday have one proud distinction: It will be regarded in retrospect as the LCB's Waterloo. Rarely before has any government agency so succinctly, thoroughly, and convincingly made the case for its own elimination.

With any luck, indeed.

New poll: serious this time

With privatization actually in play, I've decided to do something different here. I've put up a poll that's actually serious, rather than just an attempt to raise consciousness through humor. Take a look at the upper right corner of the blog, you'll see the new poll on what concerns you have about privatization, either directly with HB11 or in general. You can vote for more than one issue; please feel free to do so, and please spread the word -- I'd love to see a big response on this one. If you have a concern that's not on the poll, feel free to make a comment on this post. Cheers!

Special note to UFCW and ISSU members: once your "talking points" arguments have been made once in the comments, I won't publish them again. The 'tax collection' and 'Walmart' arguments have been made; the 'no stores in small towns' red herring has been displayed. Make new points, or don't bother; no 'avalanches' here, thank you. Of course, that goes for already posted pro-privatization arguments as well; please read the comments before adding your own.

Is the PLCB on the ropes?

The efforts for privatization have gotten two major boosts recently (and yes, I am keeping track; it's just been really busy in my job, the money-making part of my booze-centered life -- my apologies for not keeping up here). One was related to the misbegotten wine kiosks (which I did predict would be a "public relations disaster for the PLCB", though that didn't take much brainpower), and I'll talk about that in a separate post; the other was a far-flying boomerang that came back and caught the PLCB in the back of the head.

Jonathan Newman, in favor of privatization

The boomerang, first: former PLCB Chairman Jonathan Newman, the Chairman for whom the original "Chairman's Selection" was named (because it was his program, and he picked the wines...ask PJ Stapleton how many of the "Chairman's Selections" he's selected), who brought the PLCB further into the 20th century (yes, while working in the 21st century, I know) than any other person, who was
Wine Enthusiast's 2003 Man of the Year because of his work at the PLCB, who resigned when Governor Rendell appointed* Joe Conti as "CEO" of the PLCB... Newman came out strongly in favor of privatization this past Tuesday. At a hastily-arranged press conference at The Wine School in Philadelphia, Newman was introduced by PA House Speaker Mike Turzai and stated his support for privatization of the State Stores. (Happily, "hastily-arranged" also meant that the speakers weren't harassed by scripted questions and chants from UFCW members and union president Wendell W. Young IV.)

I was there, and Newman sat me down at a table with Speaker Turzai, and we talked. Chances sound better than I'd been hoping; it looks like the votes are there for privatization in the House, the Senate is going to take more work. You may have heard that Senate Pro Tem Joe Scarnati questioned the need to privatize the State Stores right now. That came up, and while Turzai had nothing to say, others in the room nodded wisely when I brought up the Marcellus Swap Theory: is Scarnati signaling that he will support privatization if other legislators will support a Marcellus Shale tax/fee of some kind? I believe that's what's going on, and I say, that's a deal I'm willing to support.

I'm not nuts about Turzai's bill, and if some changes aren't made, I can't support it; I'm hopeful that it will get better. I did take the opportunity to ask if the bill takes away the Police-Enforced Monopoly. It does not, but Turzai said the Monopoly is not enforced (though he did admit that there are occasional instances when it is...usually having to do with personal issues with a local cop in a border town), and would not be enforced. I don't like that, I'd much rather see it formally done away with. That's one of the things I'll be pushing for. More to come on that, but about Newman...

The UFCW has, of course, already tried to tar Newman with doing this because of possible financial gain. First, Newman is doing this for the same reason we all are: the PLCB State Stores suck, and they've sucked more since Newman left. The PLCB has stepped in crap -- ethically, managerially -- so may times since Conti took over that it's hard not to link him to it. Second, if Newman stands to make some money off this -- he does have a wine wholesaling company -- well, so what? That's what private enterprise is all about! Of course he'll support it. Only the Union thinks making money is a problem. The Union thinks that the State should be collecting all profits, apparently. That is ridiculous, and one more reason we should privatize.

More soon. Things are rolling, and we've got to get loud in support -- and in making this a good bill.

*Rendell says he "hired" Conti, but that implies a regular hiring process applied to this $150,000 a year job, which it didn't -- which is why Newman resigned.

PLCB toots own horn, shows amazing knowledge of market

Just got this off my daily email from Shanken News Daily:

After Record Year, PLCB Chairman Says Premiumization Will Be Key To Further Gains
Following yesterday’s announcement of a 4% sales increase to $1.96 billion in the year through June at the Pennsylvania Liquor Control Board (PLCB), chairman Patrick “P.J.” Stapleton III told Shanken News Daily that future growth will depend on consumer trading-up patterns. “In the past year, most of the growth came from the premium to budget level,” Stapleton said, adding that he hasn’t seen much premiumization in recent months. Still, the new fiscal year has started off strongly. “The first weekend of July was very encouraging,” he said. “On a same-store comparison with last year, we were up 8.3%. So there are signs that we’ll have another very good year, but the extent of that will depend on consumer buying patterns and whether they’re willing to trade up.”
Pennsylvania overtook Michigan as the top spirits control state in calendar 2010 and remains by far the largest control market for wine, which accounts for around half of its dollar sales. The PLCB’s Chairman’s Selection premium wine program—up 19% to over $50 million in the fiscal year—is growing in popularity. Chairman’s Selection wines range from $8 to over $100—with wines normally selling for $20-$50 often discounted to between $10-$15 within the program. Stapleton said the $10-$15 range continues to be the sweet spot for wine market growth in the Keystone State. He added that the PLCB has abandoned plans to extend its supermarket wine kiosk program into spirits, acknowledging that the kiosk initiative has had a “rocky road” so far.

Let's parse this. The PLCB is making much of their 4% sales increase and record "contribution" to the State's General Fund. Of course they are, they know they're in deep crap, and "revenue" is like shiny bits of glass and tasty pieces of bacon and chocolate to legislators: irresistible. This ignores that the State Store System has the humiliating advantage of the Police-Enforced Monopoly to force us to buy whatever they put out there, and also ignores that PA's liquor and wine taxes are bizarrely high (have a good look at that report; we'll be talking about that soon, too).

Then, "premiumization"? Jeez, PJ, are you behind the freakin' curve again, or what? Premiumization's only been the biggest news in spirits for the past ten years, y'know? Once again, the PLCB is wickedly late to the game.

Hey, here's a thought: given that the PLCB doesn't seem to know squat about selling, maybe the sales are at a record because inflation continues to drive up prices, the monopoly is still firmly in place, and the economy has recovered somewhat in PA (and alcohol was not severely affected by the recession to begin with)? Hmmm? Show me what the PLCB has done -- other than the brilliant kiosk program -- to earn any kind of praise for what largely looks like an act of nature, and I'll consider it. Face it, PJ: Pennsylvanians buy from the State Store System because they have to. They have no other choice. If you can't make money at that, you might as well practice law.

Guess people want to know!

I honestly find this hard to believe, and I'm sure it will correct itself soon, but...the blog-rating service Wikio has started a segment for spirits blogs, and somehow..."Why the PLCB Should Be Abolished" came in fourth. Sweet. Thanks for reading, and spread the word. Things are starting to move, there are competing ideas for privatization, and we may have a great idea for a mass public movement to dramatize just how serious Pennsylvanians are about privatization. Stay tuned!

1	Alcademics
2	Imbibe Unfiltered
3	Off The Presses
4	Why The PLCB Should Be Abolished
5	RumDood.com
6	What Does John Know?
7	Underhill-Lounge
8	The Cocktail Chronicles
9	Mixology Monday
10	Drinkhacker.com
11	Liquidity Preference
12	Jeffrey Morgenthaler
13	The Chuck Cowdery Blog
14	Kaiser Penguin
15	Looka!
16	Tipsy Texan
17	A Dash of Bitters
18	SLOSHED!
19	Beachbum Berry
20	cocktail virgin slut
21	drink dogma
22	Cocktailians
23	A Mountain Of Crushed Ice
24	Blogging Tales of the Cocktail: 2010
25	Dr. Bamboo
26	Caskstrength
27	MC Slim JB
28	The Dizzy Fizz
29	Drinks for the House
30	Spice & Ice, and more...

Ranking made by Wikio

Or Maybe Not: privatization bill coming soon

Okay, maybe I got carried away. Because I wrote to Representative Taylor after my last post, and asked him why he was giving the PLCB what they wanted, their "False Dawn Initiative," the "alternative to privatization." I was despondent. Then I got this response, and I feel all better. Check it out:

"At this time, Representative Turzai has not introduced his privatization bill. I fully expect this bill to be introduced within the next 10 days."

I almost forgot to read the rest of the letter. Here we go, people, here we go. Are you ready to do something? Are you ready to write your reps (and copy Taylor and Turzai and the Governor), are you ready to go to Harrisburg? Are you ready to take part in a civil disobedience demonstration against the unAmerican Pennsylvania booze sale monopoly law that could get you fined or even taken to jail? More to come.

Taylor Privatization Letter June 23

And I thought Joe Da CEO was clueless...

Check out this tone-deaf defense of the wine "kiosk" debacle by PLCB Chairman PJ Stapleton in today's Inquirer.So much amazing stuff here, like this: "it is worth remembering that Wegmans made an investment with full knowledge that the kiosk reached far outside the face-to-face customer service Wegmans was accustomed to providing." So it was Wegmans' fault that the "kiosks" were so far to the left on the customer service bell curve that you couldn't see them with binoculars; they knew that these machines were supposed to operate on their own and should not have been surprised by that. Got it, PJ! Wegmans is crazy! (Well, except...the "kiosks" didn't operate that well on their own, which is probably what surprised and eventually seriously disappointed Wegmans.)

More? How about this petulant foot-stamping: "The wine kiosk was evidence of innovation at its finest, something the wine and spirits industry had not seen before. This made it an easy target for criticism." It clearly was not "innovation at its finest," since it didn't work the way it was supposed to. It was a kludge, an ATM welded to a soda machine, bolted to a security camera, with a breathalyzer duct-taped on the front (note: that was sarcastic, and no actual duct tape is used in the "kiosks." I don't think so, anyway). That's what made it an easy target for criticism...which both Wegmans and the Inquirer recognized. Not to mention...it was unnecessary "innovation," since there's already modern technology available to do what the wine "kiosk" was supposed to do, and do it better: it's called shelves.

Then he winds up with this whiny crap: "...what we could use is fewer inaccurate political attacks and more productive discussion and action on behalf of all Pennsylvania consumers." First: not political. It's an unpopular bureaucracy. No politics involved. Second: not inaccurate. Wegmans said the "kiosks" didn't work and made their stores look bad. They demonstrably didn't work as advertised, and that definitely makes the stores look bad (not to mention, taking up valuable retail space while they weren't working).

Finally, what would be "more productive discussion"? They give PJ space with a straight face, and that's not the first time the PLCB has been allowed on the editorial page. The PLCB doesn't want to discuss this, they want to keep doing what they're doing. Sorry, no longer on the agenda. Privatization hearings are coming, PJ: put on your dancing shoes.

And be sure to read the comments. Wow. Hope these people write their reps with anger like that.

Is Privatization Bad for your Health?

The guys at Freakonomics have always struck me as a bit too quick to jump on the anti-alcohol wagon; sure, there are valid points to be made for the social costs of alcohol abuse, but the numbers that are out there would really benefit from a closer look. But this piece was handled more fairly, I thought, even though the big quote from the Herzenberg study overweighted things a bit.

Thing is, as the comments pointed out, the whole argument that privatization increases consumption is quite likely a flawed one, based on questionable methodology: "retail purchase" is a reliable substitute for "consumption." That sounds okay, till you consider how many Pennsylvanians cross the Delaware, Maryland, and New Jersey borders to buy caselots of booze. Look, if my DAD did it, I know plenty of other Pennsylvanians are doing it. Hell, I'm in Kentucky right now, and I have four bottles of bourbon that I can't get in PA in the car (Old Fitz BiB, Heaven Hill 6 Year Old BiB, and Charter 101 (the 4th is a surprise for someone, but trust me: it's not available in PA!); I'm planning on giving them all away before I return to PA, though...).

It doesn't even pass the "straight face test," to use a popular Washington phrase. If consumption in these newly privatized states and provinces were really up by 48%...where's the corresponding increase in alcohol-related problems? Because there is none. We're being sold a sack of crap again.

Republicans Selling Privatization Down the River

I hate to say this, but privatization may be dead...again. And to my deep disappointment, it's the Republicans in the state Legislature who are killing it. Check out this action in committee this week:

o HB 260 (Rep. John Taylor, R-Philadelphia): Allows the Pennsylvania Liquor Control Board to implement customer relations marketing programs to offer incentives to customers, extends the Sunday closing time from 5 p.m. to 9 p.m., removes the limit on the number of stores allowed to operate on Sundays, increases the range of fines for minor violations of the Liquor Code from between $50-$1,000 to between $100-$2,000, and increases the range of fines for major violations of the Liquor Code from between $1,000-$5,000 to between $2,000-$10,000.
o HB 1356 (Rep. Scott Petri, R-Bucks): Allows the Pennsylvania Liquor Control Board (PLCB) to hire employees outside of the Civil Service Act, allows the PLCB to establish a classification and compensation for these employees that shall not be subject to the Administrative Code, and allows the PLCB to purchase all goods and services deemed necessary at its sole discretion.

Let me translate that for you. HB 260 will let the PLCB offer coupons and 'membership' programs, open all their stores till 9 PM on Sundays, and dump more money into the PLCB's budget through fines (fines that are, I'd remind you, imposed by what amounts to an independent system of courts and police). HB 1356 will allow the PLCB to become a total patronage pesthole, hiring whoever they see fit -- under the guise of hiring wine and spirits "experts," experts along the line of Joe Da CEO, I assume -- and buying whatever they want -- more kiosks? more crap vodka brands? more 7' tall bumblebee costumes? -- without any oversight.

I can make it simpler: the Republicans in the Legislature are lining up to give the PLCB bureaucrats everything they asked for to stave off privatization. Why? Cui bono might be a better question. Who got to these guys? Why are they not listening to the voters and citizens of Pennsylvania, who have been consistently polling at over 2/3 in favor of flat-out privatization?


Do you give a damn about privatization? Write your legislator, ask them why they're preparing to ignore the will of the people on this. If privatization goes away this time, it's going to be 20 years before we get another shot at it.

Why prices matter (and why they don't)

First, read this story in the Inquirer (which they picked up from the Harrisburg Patriot-News). It's about prices at the State Stores vs. prices in private stores in border states. Here's a sample:

But a survey of liquor stores in four states conducted by the Harrisburg Patriot-News reveals that prices aren't always better across the state line. In fact, in some cases, Pennsylvania prices are cheaper.
A 750-milliliter bottle of Bacardi Superior P.R. Rum sells for $14.99 in Pennsylvania and $15.99 at Plaza Wines & Liquors in Manchester, N.J. A Yellow Tail Chardonnay is $7.99 in Pennsylvania and $8.99 at the New Jersey store.
Across the border in Delaware, a 1.75-liter bottle of Johnnie Walker Red is priced at $29.99 at Total Wine & More vs. the $41.99 Pennsylvania shoppers pay.

This is a "survey" conducted by the paper. Look, I know Sue Gleiter, I like her. She's interviewed me for stories, including some on the PLCB, but this is kind of sloppy. There's no information given on how many stores were 'surveyed' or how the 'survey' was done. I'd like to see one done like the supermarkets do it around here; don't check individual prices and show me WOW THIS ONE ITEM IS C*H*E*A*P*E*R* AT OUR STORE!!! Fill a typical cart and add up the total (and don't fill it at the PLCB's "outlet stores" on the border where prices are kept artificially low by adding liter bottles at cut-rate prices...that the rest of us in the state can't get). 

Next, read this letter in today's Inky from wine writer (and Pennsylvania resident) Mark Squires. He rips the story a new hole:

A story on May 24, "Pa. liquor often cheaper than in neighboring states," was an example of sloppy analysis and virtual propaganda. Of course, you can find instances when Pennsylvania prices might be cheaper on a particular item. With the 18 percent Johnstown tax, though, prices won't be cheaper overall or cheaper all the time.
In Pennsylvania, you aren't allowed to shop around because the Liquor Control Board is a monopoly. If you find a store in New Jersey with a bad price, you can go to another store. Or to Maryland, Delaware, wherever. Not every little private store may be exemplary, but there can be little doubt that, taken together, private stores win on service, selection, and price.
Incidentally, I was able to find online in about 90 seconds a 2010 Yellow Tail Chardonnay in a variety of stores ranging from under $5 to $6.33 in New York, New Jersey, and Washington, while the writer of the aforementioned article merely found that Pennsylvania, at $8, was cheaper than one New Jersey store.

Dead on the money, so to speak, and the bolded bits strike home to the real problem with the PLCB: the monopolistic nature of it. They have no real competition when it comes to Pennsylvanians, and we are a captive audience, forced to buy at these stores by the coercion of law.And yet...we put up with that, and seem willing to allow legislators like Senator John Pippy run our lives and make our decisions. For God's sake, Pennsylvanians, stand up on your hind legs and act like adults. Tell your legislator that you don't need to be CONTROLLED any longer.