Friday, April 18, 2014

More fun with PLCB numbers

Remember that the PLCB say that they only have a 30% markup and that no private business could survive paying a wholesaler and selling a product at a profit for that amount. Prices will go up, they say, because there's no way they can sell you booze as cheap as the PLCB! They actually say that. a number of things they say, it's true only on the surface. If you look at the agency's Income Statement for June 2012 to June 2013 you will see that Sales net of taxes is $1,731,463,014, while cost of goods sold is $1,192,047,304...which indicates a profit margin of 45.2%. All sorts of businesses can operate on a 45% margin. So how does the PLCB get from 30% to over 45%?  They have bottle fees, bailment fees, "rounding," and probably some miscellaneous stuff we don't know about. Do the bottle fees and rounding account for an additional 15 percent of PLCB  markup?

According to the PLCB itself, it does. This quote is from PLCB Consumer Relations in an email they sent me. "According to our Bureau of Financial Operations, apart from some other minor influences, the bottle fee and rounding do account for the approximate percentage you note of gross revenue on a yearly basis."

Let's look at the last board meeting from April 2 to get an idea about how quickly the price can jump once the PLCB gets hold of a bottle. We'll start with these:

Item..............................................Unit cost...Sale Price..Markup
Shoofly Chardonnay                      $6.05       $10.99      81.6%
Woop Woop Chardonnay               $6.10       $10.99      80.1%
Sassello Morellino di Scanzano      $6.12       $11.99      95.9%
Camara Alta Tempranillo Navarra    $6.33       $11.49      81.5%
Domaine du Chapitre Touraine Blanc $6.47       $11.99      85.3%
Wine By Joe Pinot Gris                    $6.55       $11.99      83%
Chateau Ste. Michelle Dry Riesling   $6.75       $11.99      77.6%
Chasseur Des Brousses                   $6.87       $12.99      89.1%
(Markup for this list is total markup with 18% JFT)

As you can see, a few cents difference -- with the 30% markup + the bottle fee + "rounding" -- can equal a large amount of change in what the PLCB charges the consumer and what their real total markup is.

And think about it. What this means is that even with a 45% total markup the PLCB can't afford to have as many stores as they did 20 years ago, let alone the 750+ they had in the 1970's.  They can't afford to hire and maintain workers at the highest end of retail and still provide the service they are required to provide. Even with a police-enforced monopoly, their business model doesn't work anywhere near as well as the private sector.

Life in Pennsylvania: where the police will tell you what legal products you can buy and where you can buy them...and if you try to buy them somewhere else...they'll arrest you


Yes, the picture is fake but the verbiage isn't. Duh. It's what we call a parody, or exaggeration, a photographic catroon. The difference is, unlike everything Wendell W. Young IV says about the PLCB, we admit that it is bullshit.


Geno Washington said...

That store you photoshopped into your heartbreaking picture is the old incarnation of the current "FINE Wine & GOOD Spirits" on Columbus Boulevard in South Philadelphia. I actually liked it better when it was "Wine & Spirits Premium Collection/Outlet Store". In those days it had a walk-in chiller, but not anymore. I do think it now has public restrooms and water fountains which are a plus. Good job PLCB in making each of your stores identifiable by their completely mismatched signage/logos!

Albert Brooks said...

I've never seen a state store with public bathrooms. I wonder if that is a somewhat limited Philly thing?

Albert Brooks said...

What is even more interesting is that one store was supposed to stem the tide of people buying in New Jersey/Delaware because it was a outlet store. Of course anybody who ever shopped out of state knew what a real outlet store was and pretty much laughed at the PLCB version.

sam k said...

The new store in Bellefonte, Centre County, has public restrooms. Must be part of the makeover.

Anonymous said...

Your numbers are interesting. Except for the fact that the 18% liquor tax is added on before the 30% mark up they would also be true. Nice try.

Albert Brooks said...

You might have a point but if you could read you would see that the number used was SALES NET OF TAXES so the 18% JFT and Sales tax wasn't included. A rather poor try on your part.

Anonymous said...

restrooms are a code requirement and too much product was lost with walk in chillers

Anonymous said...

Check your math friend. This is too funny! The mark up isn't based on the cost of goods, but on the cost after the liquor tax is added on. You need to have credibility even if this is only a blog.

Albert Brooks said...

Damn, I wonder why the PLCB itself agrees with me then?

Gross profit is Revenue minus COGS since taxes are not part of Revenue you have to take them out which would be Sales Net Of Taxes.

Now Gross Profit margin is Gross Profit divided by Revenue which in this case is Sales Net of Taxes which comes out to 45.2%.

Lastly, you don't know what you are talking about the way the PLCB works is:

Wholesale cost
30% markup
LTMF (bottle fee)
18% JFT
sale price.

Now since I already know you don't believe the PLCB itself because they already agreed with my assessment (you did read the article didn't you?) I'm not sure you will agree with the formula above which is also from the PLCB.

However, you are welcome to provide any prove of your theory as to why you are correct and the PLCB is wrong. I'll wait.

Albert Brooks said...
This comment has been removed by the author.
Albert Brooks said...

I guess 12 hours isn't enough time for Anonymous to come up with something. I'll wait some more and check back later.

Albert Brooks said...

Well here we are now 24 hours later and still nothing from the anonymous internet expert. I'm going to guess his Easter meal is crow.