Why Is The PLCB Lowering Spirits Instead of Selling Them?

Philadelphia

The PLCB shut down the State Store System of Stores because of the COVID-19 pandemic. They are the ONLY control state to do so (other than Utah, temporarily, because of an earthquake that happened concurrently). Liquor stores remain open in other states (because a lot of them sell booze in grocery stores, you know, like normal people do); beer distributors were literally classified as "life essential" by Governor Wolf in yesterday's shut-down-the-state order; and of course, as we pointed out recently, we were told by the state that we didn't need the State Store System of Stores because "Individuals can still buy wine and beer at grocery stores with PLCB licenses."

Wilkes-Barre

We have encouraged the State to leave the stores closed. The Distilled Spirits Council of the US and American Distilled Spirits Association has pointed out that the current instruction leaves the citizens unable to buy spirits (a completely legal product in Pennsylvania and the United States), and suggested the state at least temporarily allow the sale of spirits at the grocery stores and beer distributors that remain open...somewhat heroically, and I'm not kidding about that.

Allentown (the sawdust is a nice touch)

I've been talking to wine and spirits wholesalers who work with the PLCB to supply their warehouses. They're ready, willing, and able to supply spirits to the grocery stores, convenience stores, and beer distributors that are already open and selling. What's more, they're also ready to supply the restaurants and bars who are eager to do take-out beer and wine and spirits sales, just to keep their people employed, to literally keep their businesses from failing. Not closing temporarily: failing. The wholesalers know that they can find drivers to do the work. The PLCB has said they could do this (click the link, and scroll down to the 7th paragraph), but have never shown a bit of initiative toward action on it.

Williamsport

Has there been any indication that the PLCB is even considering any of this? At least the legislature has decided to come back to work remotely and get something done, but you have to believe this isn't going to be high on their list -- and I'm not suggesting it should be. But as we saw when the Board decided that it could simply "interpret" the hated Case Law right out of existence by declaring a six-pack to equal a case, the courts give the PLCB very broad latitude indeed on "interpretation" of The Almighty Liquor Code (had we mentioned that the PLCB has its own courts?). They could easily rule on all of this stuff, and let the Legislature catch up.

Also Philly

No. The Board, the Governor, the Department of Community and Economic Development have done nothing about this, none of the really easy steps that would take some of the stress off businesses, and extend some fairness to the folks in the spirits production chain (who also need gainful employment), and let those of us who might want a whiskey sour or Bloody Mary (or quarantini, which is apparently a thing) buy a bottle or two.

What are they doing?

Harrisburg

They're boarding up State Stores as a precaution against looting. 

In a state where the last large scale riots were over fifty years ago, the PLCB decided to raise public morale with this amazing display of optimistic trust. Because nothing says "it may be rough, but we're going to get through this together" like boarding up your store...in Williamsport. 

This lack of leadership, lack of understanding, lack of common good sense is just another example of what an awful mistake having this all-too-independent state agency in charge of retail stores has been. The Legislature should, in the spare ten minutes it would take, use this opportunity to say, 'Okay, that's enough. You had your chance, more than enough chances, and that's it. Game over, PLCB. You're done.'

Even better? It really would only take ten minutes. The Legislature actually drew up plans back in 1987 to end the State Store System of Stores and those plans, never enacted, are still available online in the Pennsylvania Code...ready to roll.

Here's the plan; your predecessors already did the work for you. Literally all you should have to do is change the dates and vote.

Because all the PLCB is going to do in this crisis is protect themselves. Apparently they think Pennsylvania is France. We deserve a lot better than this.

Paris

Don't We Deserve a Better Board?

If we have to play by the PLCB rules...could we at least get a better set of players?

Back in 2015 in the Annual Report (page 2), the vision of the PLCB was stated as: "Be recognized as the best-in-class wine and spirits retailer, distributor and regulator in the United States."

Which meant that they wanted to be better than Utah, the only other wine and spirits retailer, distributor, and regulator in the United States. Not a high bar, considering Utah is practically an anti-alcohol theocracy. Four years later, how are they doing? Let's start at the top and go from there.

The Pennsylvania Liquor Control Board has three members, none of which over the past 85 years has any previous knowledge of the liquor industry or about running a 2 billion dollar enterprise.

We have a Chairman who has no experience with even a million dollar business, let along something the size of the PLCB. He did make it to Congress, and served on the Livestock, Dairy, and Poultry subcommittee, and Transportation and Infrastructure committee, before the citizens decided that he wasn't doing the job they wanted and voted him out. Since there isn't much call for somebody who's chummy with with politicians, and knows a little about Livestock, Dairy & Poultry, the PLCB was a perfect place to put somebody who was owed a couple of favors.

Governor Corbett appointed Republican benefactor Mike Negra to the board. Mr. Negra does have a history of being involved in multiple successful businesses, so at least he has a concept of what is going on, but no actual hands on with the liquor business, or anything the size of the PLCB.

Lastly we have the newest member and first woman ever to serve on the board, Mary Isenhour. Although you wouldn't know it by looking at the PLCB website. Here it is, over a MONTH after her confirmation, and the PLCB still hasn't decided if she rates being included with the other board members. (Let's see how long it takes for them to include her once this is published.)*

Keeping the public informed through transparency is sadly not the way the PLCB works.  Remember that it took over 100 days before they removed Michael Newsome, and that was only after I poked them with a stick again. Newsome might still be there if I hadn't said anything.

What are Isenhour's qualifications? She was Gov. Wolf's Chief of Staff and a campaign aide. Her business experience is like the others, desperately lacking in knowledge and size. She replaced Michael Newsome, who was Gov. Wolf's CFO in the furniture business -- can't get more qualified to sell liquor than that...or can we?

Remember how we were comparing the PLCB to Utah's State Store System of Stores? So how does the Utah DABC stack up? They have a seven member board that's appointed, but there is also an advisory board of seven members...who must come from defined specific areas of expertise. The Governor can't just willy nilly pick his favorite dog walker to sit on the Advisory Board. Utah specifies that the advisory board members are selected from the following areas of expertise.

Retail Alcohol Industry — Wholesaler Industry — Manufacturing Industry — Restaurant Industry — Utah Substance Use and Mental Health Advisory Council — Alcohol or Drug Related Enforcement — Division of Substance Abuse and Mental Health — Alcohol or Drug Abuse Prevention and Education

The Utah version of a Superstore

Another view. Pretty nice, right? 

It is almost certain that since this system was adopted every Utah DABC Advisory member is far more qualified than any that have ever been appointed to the PLCB. This doesn't mean that Utah hasn't had their share of people of limited competence on the Liquor Board. The Governor selects the seven members of the Liquor Board, so it can be and likely is as full of hacks and cronies as Pennsylvania. The difference is that the Utah board can't go off the rails making arbitrary decisions without an adult from the Advisory Board watching them. No deciding that 12 packs are cases, no robot wine armies, no variably price screwing the citizens, and no being over a Billion in debt. Oh, and they have had women on the Boards for years already.


End the PLCB jobs program - PRIVATIZE


*True to form it only took the PLCB 42 days to finally put up a picture.  Not quite as bad as the 102 days it took to take down the board member she replaced.

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.

Privatize.

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.)

Pennsylvania isn't even a good liquor control state Pt. 2

In the first part of this story, we showed that even the other control states didn't think much of the PLCB, pretty much shutting them out of the "best practices" awards at the NABCA convention (National Alcohol Beverage Control Association; yes, it's real). Maybe it's because Pennsylvania doesn't even pay attention to what other control states are doing.

Imagine you are a slow, lumbering dinosaur from the Prohibitioneaous Era, just doing your own thing, not really paying any attention to what the world around you is doing; why should you, you've got the world to yourself! About 40 years ago, you get this itch. It isn't so bad, so you just ignore it, but it gets a little worse each year. Finally you decide to see what it is, and you plod over to the dinosaur doctors at Stateways (where all the dinosaurs go!). They tell you that you need to paint yourself different colors, and maybe put some State Approved plants around where you hang out to hide your huge bulk and ungainliness. Maybe change your name from Huge Lizard to Fine Green Friendly Lizard so that people might forget how big dumb and slow you are. That should help, they say. and also you should pay some attention to what the other lizards are doing and not just wander off and do whatever you want to any more.

I'm a dinosaur too!

But you're the biggest dinosaur in the land, and nobody can tell you how to do things! You've been doing the same thing forever, and in your mind it has worked just fine. (Remember that dinosaurs have little tiny brains for their size). So while the other dinosaurs finally figure out what all those bothersome little ants want (the customers), you continue as you were, because you know best. And you never see the comet.

And so it goes with the PLCB.  For example, the other control states (why can't we be more like New Hampshire?) finally figured out what the new hot brands of vodka are, ones that the people want to try, and put out a list. Now I can't imagine how long it takes a bunch of bureaucrats to figure out what is "hot" compared to the free market (maybe they chipped in and got a subscription to Market Watch), but they did and published it in the March 10th issue of the control state magazine (18 readers and dropping!).

You won't be surprised to learn that the PLCB has ONE of the five hot brands listed. Is it something new and unusual that their buyers discovered? Of course not. It is Elyx, a high-end variant of Absolut, and while it's admittedly excellent and quite different...it's garnered a ton of press, and is a variant of the largest selling imported vodka in the PLCB inventory. I bet that took some real effort on the part of the PLCB to pick it out.

The PLCB knows whats hot!

If you are curious, the "hot" vodkas picked out by the control states (except PA) are:
1. Goral Vodka Master.
2. Absolut Elyx Vodka
3. Bombora Vodka
4. Black Death Vodka
5. Danzka Vodka

Remember how the goal of the PLCB is to be better than Utah?  Utah carries two of these. Want to guess how many are available in the private stores across the Delaware river?

When Macy's doesn't have the color you want: you go to another store.
When Boscov's doesn't have the style you want: you go to another store.
When Giant doesn't have the meat you want: you go to another store.
When Mattress King doesn't have the mattress you want at the price you want to pay: you go to another store.
When the PLCB doesn't have what you want...you have to (illegally) go to another state!

Private business, private retail, is how America shops for everything else. When will Pennsylvania see booze normality?

Pennsylvania isn't even a good Liquor Control State

Seventeen states are considered "Liquor Control" states with only two, Pennsylvania and Utah, fully controlling wine and liquor sales from warehouse dock to retail counter. Pennsylvania is by far the largest system, mainly because of the wine monopoly, and because it has the largest population; not because the PLCB is doing anything special or inventive, or God forbid, efficient.

In fact, even their peers in other control states say they aren't doing anything special or innovative. In December StateWays Magazine* gave out their first ever "Control States Best Practices Awards" and the winner of the "Best of the Best" was not the PLCB, It was the Virginia Department of Alcoholic Beverage Control. The winner for "Best Technological Innovation" wasn't Pennsylvania either even after the millions spent in cost overruns; it went to New Hampshire and Iowa. Iowa won for their web portal ordering system, which is sorta like the one that the PLCB is working on rolling out, only theirs is in place and working. Kind of like the way SEPTA keeps promising a farecard system (like the ones other transit systems have had for decades); maybe it's a Pennsylvania problem.

The PLCB pretty much got smoked. They didn't win "Best Retail Innovation," that was Idaho who didn't spend over $4 million to come up with "TableLeaf" like PA did; or "Best Enforcement Program," which went to little Montgomery County, Maryland. Probably never having your state stores checked for underage compliance by the police had something to do with that one. The PLCB did tie for "Best Responsible Consumption Program" with North Carolina, but hasn't achieved the results that NC has so far. That could be because North Carolina spends a lot less on advertising and more on education than PA for their size.

Want the best wines? Better figure on taking a trip.

StateWays also has their own Best Wines of 2015 listing. They don't say 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 #1 Rose, but only SLO (minimum quantity 12) and priced 7% higher than the magazine lists.
• Do have the #2 Rose...in five of the 603 stores at only 9% higher than the magazine lists.
• Don't have the top 2 American Cabernet Sauvignons
• Does have the #1 Merlot, but as SLO only (minimum quantity 12) at 71% higher ($50 ea) than the magazine price.
• Doesn't have the #2 Merlot

So this quick look shows that the PLCB stocks 1 in 10 (at 5 stores) and can get 2 others if you want to pay more, sometimes A LOT more. (We're always told by the State Store Apologists that these SLO and allocations are set by the suppliers, not the PLCB: really? Then why don't they set them for the other control states?)
 
Of course, the free market doesn't think PA is up to snuff either. The The American Wine Consumer Coalition ratings show PA ranked 47th with an "F" grade for Consumer Access To Wine, joining the large group of control states at the bottom of the ranking. All our border states rate  higher, though, including the two bordering control states, Ohio and West Virginia. Who would have thought getting wine is easier in West Virginia?

Simply, we deserve better, and to be clear: better is not more PLCB, or a different flavor of PLCB, or a "modernized" PLCB. Better is NO PLCB. Tell your legislators: full privatization, no half-measures.


*StateWays is written for commissioners, board members, headquarters personnel, and retail store managers responsible for buying beverage alcohol in the control states, according to themselves.