Success and Failure

Quiz time boys and girls!  We are going to look at how to do things, and how to do things right. A tale of two (or more) control states. Record your answers and see how you did (some questions have more than one correct answer, but here's a tip: Pennsylvania is never the winning choice).

1.) This control state never had the FBI investigate their senior management in the last 20 years.
Pennsylvania did, and the investigation is ongoing.

2.) This state didn't have have senior management plead guilty to graft
Pennsylvania did.

3.) Pennsylvania spent $4 million (with an out-of-state marketing firm) to rename the State Stores. (Again!)
This state didn't.

4.) This state has people specifically travel to it for great booze prices.
Pennsylvania has people specifically leave it for great booze prices.

5.) This state " aggressively pursues a strategy that provides you with the best possible value."
Pennsylvania? Too lazy to try (and proud of it!).

6.) This state sells a 1.75L bottle of Jack Daniel's regularly for the same price Pennsylvania advertises as a "sale price." (And their sale price is $12 less than Pennsylvania's regular price!)

7.) Pennsylvania has the most liquor border bleed per capita in the U.S.
This state has the most reverse booze border bleed per capita in the U.S.

8.) This state won an award for being innovative in liquor and wine ordering (in control states).
Pennsylvania came in third...over a year later.

9.) Pennsylvania has one liquor store for every 21,000 residents.
This state has 20% more stores per capita.

10.) This state has 2 stores over 20,000 square feet in retail space, and a third that is over 33,000 square feet is being built.
Pennsylvania has one store in the entire state over 15,000 square feet. (And is a much, much larger state, with just under ten times the population of the other state.)

11.) The full time employees of this state generate 3 times the sales of the full time employees of Pennsylvania's State Store System.
The PLCB ended the last fiscal year almost $240 million in the hole.

Did you write down your answers? Let's see how you did!

1.) You could pick any other control state except North Carolina.
2.) Yup, any other control state except North Carolina.
3.) Any other control state.
4.) New Hampshire is famously New England's liquor store of choice.
5.) New Hampshire again.
6.) New Hampshire (as of 6/20/2016 PA regular price is $46.95, sale price $42.95. New Hampshire regular price is $42.99 and their sale price is $34.99. If you buy six, it's almost worth the trip!)
7.) Pennsylvania loses a huge amount of revenue to border bleed, while New Hampshire, with a population of about 12% of the Commonwealth, sells over 250% as much wine and spirits per capita (it ain't consumption, either: they have a slightly lower DUI rate). Over half of New Hampshire Liquor and Wine Outlet customers are from out of state.
8.) New Hampshire: innovative, Pennsylvania: wine kiosks and cost overruns.
9.) New Hampshire (1,350,000 residents / 79 stores) v. Pennsylvania (12.750,000 residents / 605 stores): not even close, New Hampshire wins again!
10.) New Hampshire: getting the picture?
11.) New Hampshire wins again: $647,000,000 in sales with only 305 full time employees = $2,131,000 per employee (right, over 2 million per employee). Pennsylvania? With $2,340,000,000 in sales and a bloated 3,100 full time employees, that's only $755,000 per employee. Sad.

Which state is a success and which is a failure? See, it's not even about Pennsylvania being a control state, it's about Pennsylvania being a lousy control state! If the Pennsylvania State Stores ran as well as the New Hampshire Liquor and Wine Outlets (er...and the taxes were similarly reasonable), this blog would never have started.

When you can't even do wrong right...time to give up. Privatize, because you will never "modernize" to the same level as New Hampshire. (Mostly because by the time the PLCB got there, New Hampshire would be 30 years ahead again.)

Still waiting on the PLCB and their computers

Here is is 2 months and almost 2 weeks after the close of the fiscal year and still nothing from the wizards in Harrisburg about how well they did or didn't do. Maybe covering their butts from Federal charges is taking up their time....who knows?

But you know what really hurts? Other control states already have their numbers in. Let's look at New Hampshire and see how they did. With a population of only 1,327,000 they somehow sold $652,000,000 in wine and spirits (or just over $484 for every man, woman, and child in the state) and at prices that are usually lower than our State Stores. Pennsylvania has a population of  12.8 million and sold $2,240,563,426 worth of wine and spirits. or $175 per person (2014 numbers because, you know, we're still waiting...).

The expected response from our fine Liquor Corruption Board workers is that New Hampshire residents are all "chronic alcohol users,"  because that's what they always say when confronted with anything that shows the state stores up, be it better selection, more sales, better staff...whatever. Let me put forth a different theory. People go to New Hampshire to buy liquor; and they leave Pennsylvania to buy liquor. New Hampshire makes shopping worth the trip by having better prices, better stores, and a larger selection than nearby competition. The majority of that competition is in Massachusetts, right on the border and the largest state in New England; they also have substantially higher booze taxes than New Hampshire...which has none.

What does PA have? Certainly New York has more people, and higher sales taxes with liquor taxes being pretty close, but we don't see that influx to make any real change in the Corruption Board bottom line. Ohio and West Virginia are control states too, so not much difference there. Most of Maryland is a free state with higher sales tax, lower liquor excise tax and higher beer tax than PA but still draws people across the border because competition drives prices down.

Delaware, as we all know, has no sales tax so that makes them less expensive right off the bat. But they also have stores with far greater selection than anything in PA to draw people in too.

New Jersey has a higher sales tax but a lower liquor tax. Mostly people go because of the selection and prices, again due to competition. The large stores across the river -- Joe Canal's, Total Wine, Moore Brothers, Roger Wilco, etc. -- are not there because of people living in New Jersey. They are there because of the people from PA who find better price selection and service even if they have to pay a toll to get there.

$300 million leaves the state every year and it isn't going down.

Border bleed is real and large and Governor Wolf's proposal to raise the sales tax here is not going to help reduce it, Putting in baskets and changing the name of the state stores is not going to help reduce it, "modernizing" is not going to reduce it, thinking about raising the markup when private stores think about cutting costs is not going to reduce it, and having one store for every 21,000 residents is not going to reduce border bleed either.

Privatization will.

RECORD PROFITS FOR THE PLCB!!!!

The PLCB announced the results of the 2012-13 fiscal year this week, and they were clearly happy with them. They had net income of $128.4 million (what they used to call "profit", but apparently we've trained them out of that), an increase of $24.9 million over the previous year, and "transferred" $512 million to the state's General Fund in taxes and fees, like the Johnstown Flood Emergency Tax and sales tax. The PLCB credits "robust sales and cost controls" for the increase, and a 6% increase in wine sales.

Happy control freaks immediately rejoiced, and one dropped a comment here this morning:

$128 million is hard to overlook.

Here's my response. 

What's that? The amount that was wasted on the wine kiosks? The cost overruns on the new POS system? Oh, the so-called profits for 2012! Well, hell, it's against the law to buy booze anywhere else, they ought to be making SOMETHING.

Seriously, glad you brought this up. The PLCB is doing some bizarre sack dance right now about the "record" amount of money they siphoned out of the pockets of Pennsylvanians the past year...and all it took was millions in advertising, national growth in wine and spirits sales, and a police-enforced monopoly. Wow, pretty impressive.

Except when you look at the gross sales vs. profits over the past few years. Five years ago, the PLCB's gross sales were $1.778 billion; this past year they were a record $2.171 billion, an increase of 22.9%.

Five years ago, the "profits" were $112.2 million; this past year, they were $128.4 million. That's an increase of 14.4%.

Profits not keeping up with sales? Well, their costs must have gone up, right? Actually, they closed about 30 stores in that time; I have to assume stores that were losing money (why close them otherwise?). So what the hell, PLCB? Where'd all the money go? Fatter salaries for bureaucrats? Courtesy contracts? De luxe wine tasting rooms? Or just failed programs, like the wine kiosks?

I know what some of your "cost controls" were that put profits up 24% this past year: not filling positions. Board member Robert Marcus admitted that earlier this year in legislative hearings, saying roughly 250 positions, many of which he described as essential, remain unfilled. Marcus tried to blame the Governor, saying he would not permit the jobs to be filled, but that's malarkey coming from an agency that has its own source of revenue and is all too independent. Corbett spokesman Kevin Harley noted (in this story in the Inquirer) that the LCB is an independent agency that controls its own finances and hiring, and said he was not aware of any open positions that the administration had refused to fill.

Meanwhile, up in New Hampshire, where they KNOW how to run a State Store System, they made $145.6 million in profits on less than a third of the gross sales the PLCB did. Oh, and they did it while charging a bit less than the PLCB. Kind of looks like the PLCB is -- as I've been saying -- grossly mismanaged and inefficient. Are these the people we want to trust to come up with "modernization" ideas?

I have one modernization idea: PRIVATIZE.