Tuesday, December 27, 2016

We can't do wine (but we can't do whiskey, either!)

We recently did our annual look at how the PLCB did supplying the state with the top ten picks from Wine Spectator. But whiskey drinkers get screwed just as badly by the PLCB's inability to pick the best. Whisky Advocate is rolling out their best-of picks for the year; let's see how well the PLCB did in picking the hottest segment of the spirits industry.
If we don't have it then you don't need it.

Craft Whiskey of the Year 
Bainbridge Yama American Single Grain Barley Mizunara Japanese Oak Cask -- Not in PA, no SLO 

American Whiskey of the Year 
Booker’s Rye -- On-line only - Sold Out  

Canadian Whiskey of the Year 
Crown Royal Cornerstone Blend -- In Stock! Wow!

Irish Whiskey of the Year 
Redbreast Lustau Edition -- Not in PA, no SLO

Japanese Whiskey of the Year 
Yochi Single Malt -- SLO only

World Whiskey of the Year 
Amrut Spectrum -- Not in PA, no SLO

Blended/Blended Malt Whiskey of the Year 
Ghosted Reserve 21 year Old -- Not in PA, no SLO

Speyside Single Malt Whiskey of the Year  
Glenrothes Vintage Reserve -- Not in PA, no SLO 
(To me, as a Scotch drinker, it is unbelievable that the PLCB doesn't carry this.)

Islay Single Malt Whiskey of the Year 
Lagavulin 25 year old -- Not in PA, no SLO

Highland Single Malt Whiskey of the Year 
Brora 38 year old -- Not in PA, no SLO

Lowland/Campbeltown Whiskey of the Year 
Ailsa Bay -- Not in PA, no SLO 

So what do we end up with? One whiskey in stock, and actually on the shelf. Another that was online only, and one that you might be able to get SLO. Three for eleven is nothing to brag about -- especially for the PLCB's oft-touted vast buying power -- and further proof the bureaucrats in Harrisburg aren't very good at selecting what the entire state has to choose from. The PLCB claims to be "world class;" that might be true, as long as that world isn't the one of private retail.

When something doesn't work, or doesn't work well, and hasn't for 83 years, you replace it.  Pretty simple, really.

Wednesday, December 21, 2016

A Christmas Gift for the PLCB

I don't often do things for free, and I don't do much at all to help the PLCB. But in the spirit of Christmas, here is my gift to them. I'm giving it to them early, so maybe they can get a head start on using it. I'm not optimistic about that, but you never know.

One shining example of beneficial government regulation is the Pennsylvania Department of Agriculture registration for all baked goods (widely defined as any food that has been cooked in any way). They are good and sensible health regulations for those foods. That is why you see "Reg. Penna. Dept. Agr." on so many products. If you sell it in Pennsylvania, it must comply with the rules we have here.
HARK!  I bring you higher variable prices!
If the PLCB is going to pick our pockets with "variable pricing," they could try to make it up by applying the same kind of forward thinking the Department of Agriculture did in 1933 to protect the citizens. How about if the PLCB required labeling for the amount of added sugar in wine and liquor? There are some wines that have the same amount of sugar per serving as Mountain Dew (Barefoot Moscato is one), and of course the flavored whiskeys and rums almost all have large amounts of sugar.

By requiring sugar content labeling, the PLCB could finally help improve, in some small but significant way, the health of the citizens. It's not completely new, either: both the LCBO (the Liquor Control Board of Ontario, the largest purchaser of wine and spirits in the world), and the Quebec SAQ (their liquor board) require the sugar content be made available on their websites already, so every major vintner, along with thousands of smaller ones have the information ready to go.

The PLCB could and should go further by mandating sugar content be listed on the label. Like anything governmental, it doesn't have to be immediate, say one year to get the sugar content info on the website, and then four years before it HAS to be listed on the label.

So if the PLCB really wants to be a world-class leader, wants to benefit the citizens, wants to help combat poor health, and wants to do something for the first time in 83 years that actually is helpful to their owners (that's us!), they should jump on this bandwagon wholeheartedly. I know it will be a hard pill to swallow, taking an idea from me, but guys: you can always claim it was "under consideration" for the past few years. I won't tell.

Friday, December 16, 2016

Why the PLCB will never be anything but 2nd class

Business, not some funny-money state-owned monopoly business but real business, is driven by being able to supply consumer wants and needs before your competition. Being first to market with innovative marketing and products, seeing a demand and then filling it before somebody else does. That's how business succeeds.

Here in Pennsylvania, we get none of that from the PLCB; we get wine kiosks. They were innovative only in the sense that some bizzaro administrator convinced a board of political donor lawyers with no business acumen, that people really want to blow into a tube and pirouette in front of a camera just to get a bottle of Barefoot. Lesson learned: not all innovation is good.

The PLCB, by its very nature, can only follow. The board, with no experience in the industry, follows the recommendations of the PLCB directors...who in turn also have no real experience in the industry. It's a classic case of the blind leading the blind.

Buy more Baaaaaarefoot!
They can't lead on new trends, because nobody has told them what those trends are yet. They have to be offered products; they do not have the ability or knowledge to search out new things. Even once they are told, there are months of delay while products are submitted and maybe (or maybe not) approved. Does that sound like striving to fulfill consumer wants? Or being a sheep and following the herd?

The PLCB got an award from the control state "business association" (it is to laugh!) this year for being the second first place awardee for the licensee online order system; somebody beat them to it last year. Since there are only seventeen control states left to choose from, and the PLCB got skunked on every major award last year, well, it was their turn this year. But it isn't innovation when you're doing something after it has already been done.

The PLCB only has one goal; to keep the PLCB open. That's what "flexible pricing" is all about. It will allow the agency to keep the lion's share of any price reduction from producers, just to keep its bloated carcass afloat, and "prove" it is good for the state; a "cash cow" as the defenders say. In real business, cost reduction is usually applied to the item for sale to gain an advantage over competitors. No reason to do that here, because in Pennsylvania, there are no competitors. The PLCB says they won't take advantage of this but since there is NO oversight, NO required item reporting, and NO indication to the consumer in the board minutes...How will we know? Wait a year and see that the gross margin went up from 45.46% to 50% or 55%, and realize that every point of that came out of our pockets? What recourse does that give us?

A monopoly with no competition, no need to advertise, with a workforce over 40% part time, and it can't survive on a 45% markup? Walmart's gross margin is 38.2% and Target is 36.1% and they seem to make money just fine. And they have to compete not only with each other but with all the other stores out there. Sounds like the American way of shopping: multiple retailers offering the consumer a choice, trying to get their business by offering lower prices or added value or both. Does that even remotely sound like the State Store System?

Remember: the only way the State Stores can make that extra $50-70 million is if they take it from your pockets, by raising prices, and by not giving you what every other real business does — a choice.

When something doesn't work, or work that well, you replace it.  Pretty simple, really.


Tuesday, December 13, 2016

More bad wine news for the PLCB

StateWays is a control state magazine, put out by the NABCA (National Alcohol Beverage Control Association) for the 17 control states to pat themselves on the back for thinking they are doing such a good job running their police-enforced monopolies (which have a guaranteed zero chance of business failure; tough to lose when you write all the rules). They also put out a yearly best wines list, and it only seemed fair to compare the PLCB's performance to their colleagues, after seeing how badly they did compared to the wine pros at Wine Spectator

As a first look, here's how the PLCB did last year on the StateWays Best Wines of 2015 listing. The list doesn't note if their selections are available in control states or not, but a quick check of the top two in each category shows that the Pennsylvania State Stores:
  • Don't have the top 2 Malbecs
  • Don't have the top 2 Sauvignon Blancs
  • Do have the top Rosé, but only through SLO (minimum quantity 12 bottles!) and priced 7% higher than the magazine lists.
  • Do have the #2 Rosé...in five of the 603 stores, at only 9% higher than the magazine lists.
  • Don't have the top 2 American Cabernet Sauvignons
  • Do have the #1 Merlot, but as SLO only (minimum quantity 12 bottles!) at 71% higher ($50 ea) than the magazine price.
  • Don't have the #2 Merlot
So the PLCB stocks 1 in 10 (at 5 stores) and you can get two others if you want to pay more; sometimes a LOT more. (We're always told by the State Store Apologists that these SLO-only and allocation situations are set by the suppliers, not the PLCB. Really? Then why don't they set them for the other control states?)
This year StateWays decided just to make a straight list, not breaking it down by varietal. Let's see how the PLCB did for the top 10. Remember, these are wines selected by other control states, just like PA. The "Best Wines of 2016" list:

#10 - Valenciso Rioja Reserva 2009 ($42.95) -- Not in PA, No SLO

#9 -
Bouchard Père & Fils Beaune Clos de la Mousse 2011 ($65) -- Not in PA, No SLO

#8 - Ravenswood Teldeschi Vineyard Zinfandel 2013 ($37) -- Not in PA, No SLO

#7 -
Hamilton Russell Vineyards Chardonnay 2015 ($33) -- The PLCB manages to stock this one...in a whopping 3% of their stores, and look at that: at a price below list! Wow. The blind hog finds an acorn.

#6 - Dr. Konstantin Frank Rkatsiteli 2015 ($14.99) -- Not in PA, No SLO (The PLCB will try to pawn off last year's vintage for a buck over list price, though.)

#5 - Domaine Tournon Shiraz Lady’s Lane Vineyard 2012 ($60) -- Not in PA, No SLO

#4 -
Domaine Sigalas Santorini Assyrtiko 2015 ($27.99) -- Another surprise: the PLCB stocks this at 5% of their stores selling for $3 under list.

#3 - Castello Banfi Florus Muscadello 2012 ($30.99 per 500 ml) -- Not in PA, No SLO (You really have to be careful when searching for this: the PLCB decided to call it just "Banfi Florus" instead of "Castello Banfi Florus." Put the "Castello" in, or just "Florus" and you won't find it, no matter what "improvements" have been done to the PLCB search engine.)

#2 - Maison Ambroise Corton Charlemage Grand Cru 2007 ($185-250.00) -- Not in PA, No SLO 

#1 - Paul Hobbs Cabernet Sauvignon Las Piedras 2012 ($278) -- Not in PA, No SLO

Equaling their insipid performance from 2015, the PLCB can only come up with a total of two selections from this control state-approved wine list this year. Still, they aren't overcharging like they did last year......or at least not yet.

So not only can't the PLCB match what the professionals pick, they can't even match what is selected by other control states. I wonder if we beat Utah, since that is one of the goals of the PLCB.

When something doesn't work, or doesn't work well, you replace it.  Pretty simple, really.


Thursday, December 8, 2016

Can our bureaucrats pick wine? Let's see. (Part 3)

The third and last part of our yearly top 10 comparison of the PLCB's bureaucrat wine pickers to real professionals at Wine Spectator. If you missed Part 1 or Part 2, you can check them; quick recap is pretty simple — the PLCB has two of the top 9 on the shelf. One is available at 5% of their stores, the other at 10%. Not exactly stellar, but that's what the citizens in PA have come to expect. When you select for the entire state, you should be able to select the best...or you have failed. We've pretty much been living with failure in PA for 83 years.

So now it comes time to see if somehow, someway our bush-league Harrisburg cube rats managed to see the value and order the #1 wine.

Wine Spectator says:
Lewis Cabernet Sauvignon Napa Valley 2013 (MSRP: $90; cases bottled: 1,600)

Did the PLCB get it? Did they? 

Of course they didn't, are you kidding? Lewis Cabernet Sauvignon is not available here: not just this vintage, but any vintage, and no SLO either. Why would you expect otherwise? The PLCB has a history of failing to satisfy wine aficionados and the citizens in general so why would this year be any different?

But you can find it in private stores in other states, just the way you could here, if Pennsylvania were allowed to have private stores owned by people passionate about wine.

Now I understand that $90 wine isn't for everybody. In fact, that's one of the arguments the pro-PLCB types bring up: "Why do you need that $90 wine?" But when you are the only legal outlet, you have to provide for ALL wants and desires — within reason — just like the private market would. They may say, "No private store has all of these wines!" That may be correct but in the real world of retail you can go to another store that does. Anything less is failure, and we have been accepting failure for far too long.

So with a dismal record of 20%, the PLCB marches on to the beat of trying to survive at our expense, of not satisfying consumer needs, of being inconvenient and incompetent. Of being second rate, because they will never be able to lead.

I'll have some other PLCB wine info coming up and we'll see if they can come closer to the professionals...or if they remain the 1,000 monkeys typing away at 1,000 keyboards trying to replicate Shakespeare.

When something doesn't work or work well...you replace it.  Pretty simple really. Privatize.

Monday, December 5, 2016

Can our bureaucrats pick wine? Let's see. (Part 2)

Once again it is time to see if those who pick the wines that Pennsylvanians are allowed to buy agree with real wine professionals, or if we're getting second rate service from the wineocrats in Harrisburg. Wine Spectator's top picks for the year are rolling out, and as we have for several years, we're checking to see how few of them Pennsylvanians will be allowed to purchase. The PLCB managed to bat .500 for picks 10 through 7 — better than usual! — but will they be able to hold on to that average? Past history says probably not.

One of 12 different labels

The #6 wine as selected by Wine Spectator is: Orin Swift Machete California 2014 (MSRP $48: cases bottled: 15,500). You ain't gonna find any of those 15,500 cases anywhere in Pennsylvania...legally.

Wine Spectator's #5 pick is: Produttori del Barbaresco Barbaresco Asili Riserva 2011 (MSRP: $59; cases bottled: 1,100) 

While the PLCB doesn't stock this actual vintage, they do claim to be able to special order an older vintage, if you want twelve of them. Though you might have some trouble finding it: the PLCB spells it wrong in their database. Classic.

The #4 Wine Spectator pick for 2016 is Château Climens Barsac 2013 (MSRP $68; cases bottled 1,417). Much as you might like to try it, this one didn't make it into the state either.

The #3 wine as selected by Wine Spectator is Beaux Frères Pinot Noir Ribbon Ridge The Beaux Frères Vineyard 2014 (MSRP $90; cases bottled: 2,405). Sorry, no luck. Our cube rats aren't doing so well in this batch. They're 0 for 4 so far.

Wine Spectator picked this as their #2 wine of 2016: Domaine Serene Chardonnay Dundee Hills Evenstad Reserve 2014 (MSRP $55; cases bottled: 2,000). 
We'll go half a point on this one. It's not really in stock on a shelf, but they say you can order it SLO. We'll give them half a point simply because you can get it in Pennsylvania, even though the PLCB buyers have nothing to do with SLO orders since they don't select them at all. Half a point is generous.

If you're playing along at home, don't try spelling any of these correctly, like Château or Frères, as you will only confuse the hell out of the inept PLCB search engine.

So as predicted by history, the PLCB "wine specialists" score has dropped to two out of the top nine actually on the shelf, and you can maybe get one more...if you want to wait a few weeks for your SLO order.

Can they redeem themselves by having the #1 wine? Does anybody want to buy a bridge?

Thursday, December 1, 2016

Can our bureaucrats pick wine? Let's see. (Part 1)

Once again it is time to see if those who are selected to pick wine for the entire state agree with real professionals, or if we are getting second rate service. Wine Spectator's top wine picks for the year are rolling out, and as we have for several years, we're checking on how many (or few) of them Pennsylvanians will be allowed to purchase.

Admittedly, wine selections are based on opinion and experience, and in the case of the PLCB, it is their opinion that you won't and aren't allowed to buy these wines (because they don't have the knowledge and experience to select them). Don't count on these vintners buying those direct shipping licenses either.

The #10 wine as selected by Wine Spectator is: Hartford Family Zinfandel Russian River Valley Old Vine 2014 (MSRP $38: cases bottled: 2,200). Surprise: the PLCB has this at 42 stores (out of 601). Rejoice: using their massive buying power as the second-largest purchaser of wine in the U.S., they are selling it at list price — oops, it can be found in the private market for up to 18% less. Of course, even if they did get a deal on it for less, you won't see that price savings, thanks to "flexible pricing!" The PLCB will just keep the difference. Don't you love it when a plan comes together?

The #9 wine as selected by Wine Spectator is: Château Smith-Haut-Lafitte Pessac-Léognan White 2013 ($106: cases bottled: 2,500). But none of that matters, because the state missed out on this one and you can't buy it here. Bummer.
The #8 wine as selected by Wine Spectator is: Antinori Toscana Tignanello 2013 ($105: cases imported: 2,500). Hey! The PLCB stocks this one too, in 5% of their stores (wonder if it's going to be marooned in Potter County?) and with a $4 discount off list. Even a blind hog finds an acorn now and then.
The #7 wine as selected by Wine Spectator is: Ridge Monte Bello Santa Cruz Mountains 2012 ($175: cases bottled: 5,243). Nope, the cube rats missed this one too, although they do have a six years older vintage that would have been around in the "let's store wine in trailers in the sun" days. 
Well, getting two out of four so far was unexpected. I'll be doing another set soon, and we'll see if they can keep up their average.

Monday, November 28, 2016

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

Monday, November 21, 2016

PLCB lies of omission

Sounds like the PLCB to me.
People — or government agencies — don't always tell the truth when their jobs are on the line. Such is the case all too frequently with the management of the PLCB. From the former CEO telling the workers to destroy wine kiosk paperwork, to a different CEO not knowing who came up with the idea to spend millions on anti-Pennsylvania "house brands." 

Now we have the lie of omission from the Board. After years of meetings with the House Appropriations Committee, the Senate Appropriations Committee, the Senate Law and Justice Committee, and others, not once, not ever did they say that "modernization" won't reach the goals that their supporters in the legislature said it would, specifically the $65 (or even $50) million that the Legislature estimated.

Until now
, that is.

I'll save you the click, and give you the nut:
"[PLCB director of communications Elizabeth] Brassell says she cannot speak to the specific $65 million figure because it did not come from the PLCB. The number came from a House fiscal analysis in June. A House Appropriations Committee report last month pegged that number at a slightly more conservative $50 million in 2016/17.
“I’m not sure what/when fiscal analyses came from different folks or what may have changed. Sorry, can’t speak for data or assumptions that aren’t ours,” Brassell said. “We have yet to be able to meaningfully estimate how much additional revenue might come from flexible pricing, but it’s certainly not the estimates attributed to Act 39 as a whole.”
Did you notice that she didn't say what the PLCB thought it would be? Another omission designed to keep the "owners" — you and I — in the dark. Why would they do this? Because if they didn't agree and the figure is is much lower, as it appears it will be, then "modernization" would be shown to be the failure that it is. And why not? The recent history of the PLCB is full of schemes that were supposed to make money that never panned out: the bailment scheme, the new POS system, the SLO system, closing stores and reopening them (well, someone's cousin the real estate agent probably DID make money on those deals, right?).
More PLCB excuses.
I didn't say that. I didn't say anything!
Disingenuous? Most certainly. Illegal? Probably not, but should we expect more from the people that run OUR business? Shouldn't we hold public servants to a higher standard because what they do or didn't do affects the entire state? You know who pays the price for these lies isn't the PLCB. It's us, the public that has to put up with more lipstick on the PLCB pig.

After all that has supposedly changed in the past year...can you buy a six-pack of beer, a case of another beer, a bottle of wine, and a bottle of liquor in one place? Nope. Can you buy wine in grocery stores? Not really; the huge majority don't and won't have a license because of the inane "cafe" requirements. Can you find the selection that you see in other states, and on the shelf, not in their "online store," something you can look at buy right now? Not even close: there are private stores that stock on the shelves as many items  as the PLCB carries on their imaginary stocklists.

We deserve better and the free market provides it; the PLCB never will be able to.

Wednesday, November 16, 2016

I Do Not Like These Changes

Take the Liquor Code out behind
the Capitol and beat it to death.
Watchdog.org asked me what I really thought about the PLCB and the Almighty Liquor Code in light of recent changes (the ones Governor Wolf said were "historic").

So I told them.

Favorite bit?  “If privatization means less booze-based revenue for the state, well, fine, let them find it in someone else’s pockets for a change. Moderate drinkers have paid more than our fair share for long enough."

Privatization IS Modernization. Rewrite the Code; the WHOLE Code!

Tuesday, November 15, 2016

Where the PLCB Money Goes: Then and Now - A Second Look

Let's have a look at what the PLCB has done with its money -- our money -- since the new millennium has started. I did this story almost 3 years ago so let's see what may have changed The numbers from 3 years ago will be in parenthesis. 

Fewer stores, more employees: In July 2000 there were 692 stores with 2,869 full time workers and 1,072 part-time workers In June 2016 there are 601 (604) stores, and as of May 15th, the last reported figure for FY 2015 there were 3,067 (3,080) full time workers and 1,606 (1,417) part-time workers. Stores decreased by 15.1% (it was 14.6% the first time I wrote this) and employees increased by 18.9% (13.5%). Just looking at it from 3 years ago there are 3 less stores but 176 more employees. 

Higher gross, lower margin: In 2000 the PLCB had record sales of $1,083,330,579 and record operating income of $89,868,893 or 8.30% of sales. In 2016 the PLCB had record sales of $2,430,209,796 ($2,171,946,398) and non-record operating income of $131,770,874 ($151,877,723) or 5.42% (6.99%) of sales a decrease of 53.14% (18.6%) in operating income for every dollar spent in sales compared to 2000. (Hardly surprising, given the increase in overhead represented by the previous point.) Looking at these numbers is there any doubt "flexible pricing" is going to cost you more?

Cost overruns: In 2000 the Auditor General found the PLCB incurred $408,000 in additional costs due to problems in Its implementation of a new computerized Warehouse Management System. In 2010 the Auditor General reported the PLCB incurred excess costs of $500,000 due to problems with the new inventory system (on top of being over budget). The inventory system was contracted for $25.8 million and as of June 2010 has cost $66.6 million, or 158% over budget. Of course, we are still paying the legal expenses for the wine kiosks too.  Who knows when that will end or how much it will total.

More for ads, less for education: In 2000 the PLCB contributed 0.76% of their expenses to drug and alcohol education.  In 2013, the biggest year they ever had up to that point, they donated only 0.66%, up from the 0.53% in 2012 (also a "record year"). This year it went up but only because they had to pay the $800,000 they shorted Drug and Alcohol programs last year. It is still below 2013 levels  The PLCB hasn't released how much they spend on advertising until this year where they said the spent "about $6,700,000" or over double what they spent on education.

More booze, less enforcement: In 2000, the PLCB gave 7.39% of their expenses to enforcement of the liquor code.  In 2015, the PLCB only did 5.51% (6.19%), a shortage that works out to over $9 million less for enforcement compared to 2000. So even though the number of licensed establishments increased and the population increased, there was less liquor code enforcement. State stores still aren't checked at all for compliance.

More embarrassment, less arresting? In 1992 the Auditor General reported that: "Policing bootlegging and illegal importation of liquor without payment of Pennsylvania taxes should be the primary mission of the liquor law enforcement personnel."  In 2013 there were 2 reported cases of “bootleggers” caught. It could be that the more support for privatization there is, the less border enforcement takes place...since that would highlight the huge problem of people who purchase out of state. It might have something to do with the $9 million the BLCE doesn’t get since they were no longer funded at year 2000 levels too. While I'm sure a few token bootlegging arrests were made in 2015 I haven't been able to find out how many.
The real PLCB new funding source.
Same lack of relevant experience: In 2000 no member of the Board has had any experience with running an enterprise anywhere near the size of the PLCB.  That hasn’t changed at all in any year since and they still only work 21-22 days a year. It hasn't changed with the current board, or ANY board either.

"Multiple weaknesses" in procurement: In 2000, the Auditor General reported that: “Weaknesses exist in the administration of the Pennsylvania Liquor Control Board's warehouse management system consultant contracts.”  In the 2010 Audit the Auditor General reported that: “…multiple weaknesses in the PLCB award process, including lack of documentation. As a result we could not verify the PLCB adhered to proper procurement standards or exercised proper due diligence in awarding the contract.” (Remember that one of the PLCB “modernization” plans is to have less oversight in procurement although thankfully that part of "modernization" wasn't part of ACT 39.)

The PLCB has not changed in the sixteen years since 2000...Act 39 will only cause a larger bureaucracy with less customer service and more problems, that spends less on its very reason for existence: control. The problems are systemic, pervasive, and totally ingrained in the PLCB's processes and workforce. They won’t be fixed until the entire system is replaced with privately-run wholesale and retail operations -- as it is in the majority of other states and countries -- and they are able to fully concentrate on regulation, compliance, and enforcement, and not sales.

Privatization is Modernization – accept nothing less.

Tuesday, November 8, 2016

Free Market or Socialist PLCB - who makes jobs?

The Legislature continues to ignore the drag the PLCB puts on the economy. Every place that has fully privatized has tripled employment in the industry. A side benefit is that a free market allows entrepreneurs to open businesses that a controlled market, by its very nature, limits. Since over a third of the PLCB is already part-time the claim of losing 5,000 "family sustaining" jobs from privatization is blatantly false.

Just one example of that limitation in jobs is craft distilleries. In 2012, the first year that limited distillery licenses were allowed — years behind other states — Pennsylvania had four. Now, four years later, the state has about 50. In contrast, Washington State — with about half the population — has 86 (as of mid-July). Since privatization of the state liquor monopoly in 2012, Washington has added 51 distilleries, added jobs, added tax base. Slow old Pennsylvania has added 50 in the same amount of time — with twice the market, and our proximity to big markets in New Jersey, New York, Ohio, and Maryland — an increase that should be well over 100, based on population ratios.

So what is holding things up? The PLCB's friends in the Legislature and the Almighty Liquor Code, of course. How many jobs, how much investment and taxes has the state lost because of the PLCB? Far more than the heavy hand has allowed in. What are we afraid of? Success? Money? Tax revenue?

While ACT 39 has added a few jobs (mostly in the PLCB hiring consultants to figure out how to implement it), there hasn't been the boon in employment full privatization would bring. No new warehouse jobs (union jobs!) that would be created by the formation of new distributors, because the state still controls wholesale. No new delivery jobs (more union jobs!) trucking wine and spirits to new stores, because there are no new stores, and besides, for the most part the PLCB doesn't deliver anyway. No new sales jobs because there still aren't any new stores. Poorer service because while private stores depend on good service for return customers, the state stores know you can't go anywhere else. Less selection because the PLCBureaucrats in Harrisburg are selecting the shelf stock for every single store for the entire state, instead of customer requests and demand, new product promotion, and American-style competition like how EVERYTHING ELSE  is sold in retail.

While the PLCB is a jobs program, it isn't a jobs program that benefits the citizens overall, just the lucky winners at the State Stores and warehouses. It benefits them by denying and disrupting the normal opportunity and jobs found in free and open markets.

If the Pennsylvania State Store System were really all that good...Well, think about it. 

  • They wouldn't be afraid of competition. 
  • Other places would be trying to emulate our system. What a ridiculous concept! 
  • The citizens wouldn't want change. They do.
  • Pricing would reflect buying power. Flexible pricing makes sure it doesn't.
  • Qualified people with industry experience would be making business decisions, not political hacks. 
  • People would come into Pennsylvania to buy; instead the state has the largest alcohol sales border bleed in the country.

We aren't safer, we aren't better served, and even with McIlhinney's four-bottle folly, we aren't satisfied. The only way to really satisfy the consumer is with a free market, not a closed system.