Death By a Thousand Cuts: it's working!

Thousand cuts, baby. That's how I like my hoagies.

Seven years ago, when UFCW 1776 President (For Life) Wendell W. "Windy Wendy" Young IV was faced with the reality of wine sales being allowed at grocery stores (and the possibility of wine sales at beer distributors, but the beer distributors bobbled that), he predicted that it would mean the end of the State Store System. "Young says allowing wine to be sold by private sector would take away business from state stores and be the 'death by a thousand cuts' to the state store system."

Such drama! And then it went through, and Wendy didn't say nothing more about it. In fact, The Haircut That Walks Like A Man hasn't had much to say since Act 39 went through in 2016, probably because he figured flexible pricing was going to be such a bonanza for covering the constant rise of operating costs that his job was done. 

But that "thousand cuts" call is coming back to haunt him...because it looks like he was right. 

Last week, I asked the PLCB for wine sales figures from the past three years for the State Stores, private sales, and overall sales. It's an interesting picture. I had to break it up to fit it into the format of the blog; here's a comparison by unit sales, the number of bottles sold. "Non-licensee" is the State Store sales; "Licensee" is sales through licensed private retailers: bars, restaurants, resorts, and grocery/convenience stores (that includes by-the-drink sales, which you would assume are relatively steady year-on-year).

2015 is prior to the shift to bottle sales at the licensees; 2016 was a partial year, and 2017 is the first full year of such sales. Notice the huge jump that year: 39.9% rise in licensee sales, followed by a 17.4% rise in 2018. Look at the 2015 numbers vs. the 2018 numbers: they almost doubled in three years. Meanwhile, the State Stores were sucking wind: a 4% drop in 2017, a 3.7% drop in 2018.

Calendar Year	Customer Type	Unit Sales	% Change From Prior Year
2015	Non-Licensee	67,034,168	N/A
2015	Licensee	13,331,217	N/A
2015	Total	80,365,385	N/A
2016	Non-Licensee	68,507,884	2.20%
2016	Licensee	15,282,492	14.60%
2016	Total	83,790,376	4.30%
2017	Non-Licensee	65,797,156	-4.00%
2017	Licensee	21,377,505	39.90%
2017	Total	87,174,661	4.00%
2018	Non-Licensee	63,333,698	-3.70%
2018	Licensee	25,099,208	17.40%
2018	Total	88,432,906	1.40%

How about dollar sales? Looks about the same, though the licensee dollar sales actually grew a bit more than volume sales did, each year...which means the State Stores are moving more bulk tanker stuff, and the private stores are skimming some of the higher-ticket sales. A thousand cuts, indeed. 

Calendar Year	Customer Type	Dollar Sales	% Change From Prior Year
2015	Non-Licensee	$835,985,290	N/A
2015	Licensee	$138,374,473	N/A
2015	Total	$974,359,763	N/A
2016	Non-Licensee	$862,634,339	3.20%
2016	Licensee	$160,312,440	15.90%
2016	Total	$1,022,946,780	5.00%
2017	Non-Licensee	$827,676,034	-4.10%
2017	Licensee	$225,796,242	40.80%
2017	Total	$1,053,472,276	3.00%
2018	Non-Licensee	$812,080,965	-1.90%
2018	Licensee	$266,808,655	18.20%
2018	Total	$1,078,889,620	2.40%

Private stores = more state revenue, more jobs

Overall sales are still growing, which is going in the PLCB's pockets because they're still effectively the monopoly wholesaler, but look at how much they grew when people could buy in private stores! Imagine if we went crazy and allowed private liquor sales as well! We'd be rolling in the (Johnstown Flood Emergency) tax revenue; increased sales would clearly eliminate any need for a Washington-style tax increase. Oh, and the PLCB press secretary, Shawn Kelley, happened to mention that they "understand from anecdotal reports from the Pennsylvania Winery Association [that Pennsylvania wine sales] have grown significantly since grocery and convenience stores started selling wine." I'll just bet they have. 

No need to go on; the numbers speak for themselves. I never thought we'd say this, but...Wendell was right. It's not all that shocking, or that brilliant a prediction, though. Give the people a choice, and they'll walk away from the State Stores. Give us the choice on spirits, too, and see how long it is before State Stores start withering and dying on the vine...so to speak.

Privatize. 

How PLCB buying power incompetence has cost you and me Billions

In my last post, PLCB "Buying Power" A Myth, (which you really should read first), I told you how for the past eighty-plus years the PLCB's incompetence in not negotiating or even trying to negotiate the best prices for Pennsylvania liquor prisoners should damn them for all eternity to the lowest circle of Hell, the one Dante reserved for people who betray those whom they should serve.

As always, we are going to provide some numbers to show what they've cost you. I'm going to use the largest selling whiskey in the state as an example, the standard 750 ml Jack Daniel's Old Number 7. (I thought I would use that because when the PLCB reads this (and they do), it might reinforce how to spell Jack Daniel's correctly, since they seem to have a problem with that.)

We are going to compare Pennsylvania prices with the state that has the 2nd highest liquor taxes in the country — Oregon, also a control state with uniform prices — and see who at least attempts to take care of their customers: the PLCB or the OLCC.

From the PLCB we know that (non-negotiated) cost +30% markup (required by law) + handling fee  (arbitrary) + 18% Johnstown Flood Tax (levied on the price) + rounding up (always up!) to nearest .49 or .99 (just because) = Retail Price. In this case, our bottle of JD has an initial cost of  $14.46. so putting that into our formula we come up with $14.46 + 30% ($4.34) + Handling fee ($1.20) + Flood Tax ($3.60) + Roundup ($.39) = Retail Price of $23.99.

Oregon doesn't give us their unit price so we have to work backwards from the retail price to figure out approximately what their cost price is. Oregon works on cost + 79.8% markup + $1.40 Handling fee + $.50 per bottle surcharge + roundup (to nearest .05). Oregon's shelf price for a 750 ml bottle of Jack Daniel's Number 7 is $24.95 or about $1 more than PA. Taking that $24.95 and working the formula backwards we subtract the roundup (which we'll call zero, because the price is already at $X.95, and we don't really know, except that it's not much). Next we subtract the surcharge of $.50, which gives us $24.45. Then we take out the handling fee of $1.40 to leave us with $23.05.  Taking out the 79.8% markup ($23.05/1.798) ends up with a cost price of $12.82 at most (it's unsure because of the unknown roundup, but it's less than a dime difference). Remember: PA is paying $14.46.

Hey, but Oregonians still pay more on the shelf, so Ha-ha! Only...how much is the PLCB's "non-negotiable" system of costing and pricing costing you, when you compare it to the unit price the OLCC is getting? Easy enough to find out. Put Oregon's cost into the PA formula. $12.82 +30% = $16.67; adding $1.20 gives you $17.87; drown it in the 18% Flood Tax, and that brings it to $21.08, then add the roundup…and you end up with $21.49, a $2.50 savings ON EACH BOTTLE, if only the PLCB did their job. PLCB incompetence in business cost PA consumers over $6.1 Million extra on Jack Daniel's alone last year.

You're getting screwed out of $2.50 every time you buy a bottle of Jack — remember, that's only one example — because the PLCB can't be bothered (or doesn't know how) to use their "massive volume leverage" to get the same price little Oregon does. Multiply that by how many millions of bottles they've sold since 1934, and that is how much they have cost the consumers of the state. An amount you have been paying extra for all these years because of PLCB ineptitude, laziness, and their "we don't give a shit, we're a monopoly" attitude. Far more than any so-called "profits" they have ever turned in.

Remember: this isn't a tax that's being levied on you that's going to benefit the Commonwealth, it's not a fee you're paying to the PLCB to pay for alcohol enforcement, it's not "profit" that gets sent to the general fund whether it's real or just hidden pension funds...it's money the PLCB doesn't know how to get from distillers, vintners, and importers. It's gone to line their pockets, exactly the people who the PLCB apologists rant and rave that privatization will somehow steal all your money to pay. Too late: they've already got it, had it for decades, thanks to the PLCB.

Is this the system you want to keep or do you want them to "modernize"? Because "modernization" and "flexible pricing" will just cost you more by statute instead of by PLCB incompetence; the only difference will be that the PLCB will waste the money on Increased Operating Costs to fuel the Boondoggle Machine. I say we privatize and let business people run businesses and end the PLCB screwing of the public.

Governor Wolf? What Money Are You Spending in Johnstown?

Governor Tom "Control Yourself" Wolf, avowed defender of the Commonwealth's antiquated booze monopoly, just announced in Johnstown on Friday that LifePoint Health Business Services would be getting $612,200 in state funding "in exchange for a pledge to create 132 new jobs over the next three years" in Johnstown. He traveled to Johnstown to make the announcement, where he also announced that Johnstown would be getting more than $15 million in "additional state investments" to "align" with "Vision 2025, a framework for revitalizing greater Johnstown. That's what he went to Johnstown for, and his office Tweeted about the news from Johnstown while the Governor was in Johnstown.

Wait...state funds? For Johnstown? Aren't they already supposed to be getting millions from the Johnstown Flood Emergency Tax we're paying on every bottle bought at the State Store System? It's hundreds of millions of tax dollars, according to every State Store Supporter. So how come Governor Wolf wants to give them even more?

I don't know about you, chum, but this is on my mind
every time I have a cocktail. Here's to Johnstown!

Well...the wonks at the state department of Revenue will tell you that it was never called the ‘Johnstown flood tax,’ and that the tax was never directed specifically to Johnstown, but was always directed to the general fund. So there, and you're just stupid.

Except that rings incredibly hollow when you look into the actual details of the origin of the tax, which I happen to have handy. The bill is titled "AN ACT Imposing an emergency State tax on liquor, as herein defined, sold by the Pennsylvania Liquor Control Board..."and it's dated June 9, 1936, a little less than three months after the flood (which affected other cities in Pennsylvania, as far away as Lock Haven and Williamsport). There was no other 'emergency' at the time, so calling it the "Johnstown Flood Emergency Tax" is perfectly honest, and the people at Revenue are tap-dancing.

But they're dead right about one thing: whatever you call it, the tax was never meant to be only for Johnstown. It was just money, that went to the General Fund, for politicians to do with whatever they wanted. Nothing makes that more clear than the fact that they raised it, twice, 30 years after the flood was over.

The Johnstown Flood Emergency Tax is one of the classic examples of a "temporary" tax that never ever goes away. And back in 1936, we were still so happy just to be able to buy booze legally again after Prohibition that the bluenoses were able to nail an additional 10% tax on at the drop of a hat...or some rain. We're still paying it, even though that emergency is long over; hell, the 1977 Johnstown emergency is long over too. It doesn't matter...Pennsylvania will keep that 18% burden on the back of booze buyers forever. You pay more than your fair share. Kind of rankles, don't it?

Would privatization help this? No, the tax would still be in there. But we could take the opportunity to change it to a gallonage tax (which would make cheap booze more expensive, rather than the backwards way today's tax works), we could make it a more reasonable bite. That's the "Rewrite the Code" part.

Governor Wolf! Johnstown tax money for Johnstown! And when it doesn't need it any more...declare an end to the 'emergency!'