Apples to Apples

Philadelphia is a city of 1,550,000 people, with a metro area population of a hair over 6,000,000, making it the 7th largest in the country. 

San Francisco has a population of  864,000 (56% of Philadelphia's), and a metro area population of  4,656,000 (77.5% of Philadelphia's), making them the 11th largest metro area.

As anyone can tell you, they are very different cities geographically, historically, and culturally. One of the few things they have in common is that they both have whiskey festivals. One is controlled by unelected, unqualified bureaucrats who decide what the entire state is allowed to buy; the other is guided by the free market, where access to new and different products in response to consumer demand is the norm.

Which Whiskey Fest would you rather be at?

So how do they compare? The Philadelphia festival has 251 listed items of which 156 are whiskies of some form or another. That is about 62% whiskey and 38% other spirits. The San Francisco whiskey festival has 393 whiskies by my count. Nothing else needs to be said.

No PLCB means better selection: PERIOD. Full privatization is the only way it can be had. Accept no substitutes.

PLCB Provides Value? Don't Bet On It

The Wine Spectator put out their list of the top 100 value wines broken down into 6 categories.  You can see the lists here. Who wants to guess how well the PLCB at selecting those wines?

Read on.

Now I didn't check all 100 but took the top five of each category and went from there.  Even with the PLCB's new and improved search function I checked most of them multiple times to be sure but that doesn't mean one or two were entered in some weird way that only the PLCB can understand. I will say this, only a few were above the suggested retail price.

1. Light White

• 1 in stock,  Don't get too excited the one in stock is in less than 20% of the stores
• 2 available SLO
• didn't stock 2

2. Rich White

• 1 in stock (at 5% of the stores) 
• didn't stock 4

3. Elegant Reds

• 1 in stock
• 1 maybe in stock but the PLCB didn't list the vintage
• 1 available SLO
• 2 not in stock

4. Big Red

• 1 maybe in stock but again, the PLCB didn't list the vintage
• 4 not in stock

5. Rose

• 1 in stock
• 4 not in stock

6. Sparkling

• 2 in stock!
• 3 not in stock

Remember that in PA not in stock means your are never going to see it not that they happen to be out at the moment.

Extrapolate that out and our State Controlled Monopoly with all that buying power and supposedly well trained (but under certified) buyers would have managed to stock maybe 25%, might be able to get an additional 10% and for 65% of the wines listed missed the boat completely.

If you hurry there is still time to get these well rated value wines......out of state.

Have a great New Years!

What modernization can do.

Modernization may improve this:

But it will never get you to this.

30 years of progress – You’re kidding right?

The PLCB's "Store in a store" modernization idea: 
the Future through (the failures of) the Past

In the early 1980s the PLCB first came up with the idea of putting a State Store inside a real regular store. Boscov’s in Wilkes Barre and Joseph Horne Co., Pittsburgh were the two selected. It didn’t last as the Wilkes-Barre Store closed in late 1991 and the Pittsburgh one in 1993.

However, like most bad ideas that occur to the PLCB, the concept wouldn’t die, and on December 23, 2003 the PLCB started the first State Store inside a grocery store as part of the “modernization” of that time. Some of them are still around. The PLCB has managed to place about 16 stores within stores in over ten years of trying to convince grocery store owners of the value of this concept (and kept them in longer than the wine kiosks, but that's not saying much).

So here we are, 30 years after the original concept, ten years after the second attempt...and this kludgey idea is part of the PLCB's “modernization” plan. Thousands of grocery and retail stores ain’t buying it, and after 30 years of trying, at the rate the PLCB is getting stores in stores, it will take over 110 years to get up to just 10% of the state stores being 'more convenient' (unless they close more stores as they have been, that will make 10% easier to hit!), if you define 'convenient' as being able to walk into a different store and make a separate purchase.

Einstein's widely misquoted as saying that insanity is doing the same thing over and over again and expecting different results. No matter who actually said it -- and we know there aren’t any Einsteins at the PLCB -- the core is solid. That's what makes the latest 'modernization' idea from Representative Gene DiGirolamo to put 400 square ft. State Stores in grocery stores...a little nuts. But his plan is endorsed by the clerks union (even if the plan essentially is a wine kiosk without the automation, though there will still be a PLCB employee there to make the sales, just like there was when the wine kiosks didn't work). This goes to show how out of touch the PLCB really is.While national trends in alcohol retail are toward larger stores, the brain trust at the PLCB wants to do the opposite. Must be that lack of retail experience, or maybe the fact that they know we can't go anywhere else that lets them make these bad decisions.

Kind of what the store in a store would look like...minus the video.

I was told by a clerk that larger towns will have more selection and that little towns will have less selection and all I could think of is that a little selection in a little town beats NO selection in a little town.  With only 600 stores there are a whole lot of little towns without a state store and there are entire counties in PA with only one state store but but they have a number grocery stores.

However...remember that the PLCB and the Union threaten that if the State's monopoly were broken up and privatized, you will only see one aisle with only the most popular items in grocery stores and they won’t have the full selection of a State Store. Now I have to ask: if one side of a 50’ (which is short for a grocery store) 4 shelf aisle is a minimum of 300 square ft and you don’t have to have room for a cashier or baskets or office or safe...how is this "store in a store" going to provide any better selection? And you still can’t buy a case or a sixpack of beer there, so the three trip problem (that ONLY Pennsylvania has) is still there. Maybe they think that 2 1/2 trips are an improvement: go to the PLCB store in a store (with separate checkout), walk to a different part of the store to the 'cafe' to buy a sixpack (with a separate checkout), and then drive to the beer distributor to get a case. Such an improvement!

Here's a thought. How about we privatize the whole damn system and make it truly easier for the consumer by having just one place to go when shopping for a legal product? How about we get the state out of subsidizing the sale of alcohol like they do milk? How about if we take the totally unqualified board out of retail, since they know nothing about it anyway (none has any experience in retail and that has been true for decades) and turn it over to people who do know retail business i.e. private businesses? How about if we allow the people the freedom of choice that most citizens who don’t live in Utah or PA enjoy? If you are a legislator, how can you not want this for your constituents?

Real Modernization IS Privatization!

Ohranj - We got no stinking Ohranj.

I was contacted by a licensee about why there is no Stolichnaya Ohranj Vodka in Lackawanna county.  Being a bit skeptical I looked and saw that the PLCB lists 4 different bottles available. #7188 is a closeout and the system says there are 0 in the county which makes sense. The replacement for #7188 is #3060 which is shown to be in 2/3rds of all the stores in the state....unless you live in Lackawanna county which has 7 bottles listed for the entire county but the licensee says there isn't any. I called one of the stores and sure enough the inventory says they have 2 but the physical check says they don't.

Next up is #9562 which is a 1L size bottle that the PLCB purposely fucks the citizens of the state over by not having it available anywhere but the border stores that are designed to keep people from going out of state for better prices and selection.  Not having a outlet store Lackawanna county doesn't get these so the licensee is out of luck there. Lastly there is the 1.75L size #6906 which is shown to be in 280 stores unless you live in Lackawanna county where there is none. 

Now the PLCB went 158% or $66 million over budget to get this spiffy inventory system in place so orders could be processed better and inventory tracked. They use a socialist system where everything is centrally planned out of Harrisburg and the stores are told what they will be getting so it really isn't the stores fault the product isn't available it is the PLCB's.

I understand that stores run out of product but we are talking about all 13 stores in an entire county.  This would NEVER happen in a private system. Chalk yet another one up under the FAIL column for state control.

Modernization wouldn't do what the consumer wants -- Part II

Today we are going to look at some other parts of so called “modernization;” increasing the licensee discount from 10 to 18% and variable pricing.  Notice that there is nothing mentioned for the consumer, even though they spend 2.8 times as much as licensees. Why?  Because licensees contribute larger sums than regular people, and since they don’t complain too much, you don’t have to pay as much attention as you do to what the citizens want. Pretty much saying, “to hell with standard practice, no case discounts for you!”

Based on last year’s PLCB sales numbers to licensees, an additional 8% discount would come to around $24,250,000. Where does that money come from?  It isn’t taxes since they are added in before the discount. Everything else stays the same since the discount doesn’t affect inventory or salaries or other costs...so it has to come from what the PLCB calls "profit" (what we know to be taxes that they just hadn’t happened to spend yet). Let’s look how that $24 million ties into the big scheme of things. To do that we have to do some math.

The PLCB had “profits” of $128,356,057.00 after the transfer to the PA State Police, but before the General Fund transfer. I'll be rounding the numbers from here on so they may not match exactly.
According to the PLCB talking heads “modernization” will increase this amount by $75-125 million depending on who you listen to.  Since there is a 66% difference between those two numbers, I’m not sure how accurate their guesswork is. In any case, let's use $100 million and add to that the $24 million that has to be made up from the proposed additional discount for the licensees to bring it to almost as much as they make now. The new total for operating income after PSP transfer is $252.4 million. Add to that number $387.6 million in operating expenses and you get $640 million in gross revenue from sales needed if this happened this year. 

But it didn’t happen this year so let us estimate what next year might look like.  I’ll say that sales will increase 5% to $2.28 billion which means that Sales Tax and Local Taxes will be about $135.8 million leaving $2.14 billion.  From that the 18% liquor tax ($327.2 million) will come out giving us $1.82 billion as sales net of taxes.  Historically cost of goods sold is about 69.5% so I’ll use that. COGS would be $1.26 billion leaving us with $554 4 million

However we needed $640 million leaving us $85.6 million short and I’m being generous since I didn’t put in any increase for expenses. Now the PLCB just can’t raise prices of X number of products by $85 million and call it even.  They have to raise prices enough so that after all expenses and taxes come out they have $85 million extra left over. Remember they had to sell almost $2.2 billion last year to get $128 million, so working off of that, they need to sell $3.8 billion worth of product to get to $252 million and we know that isn’t going to happen. They could raise the markup 65% or they could reduce costs by closing 25% of the stores and I don’t see that happening either. So they have to get the money from somewhere and “Variable Pricing” is one of the places they say it will come from. Not all of it but certainly a large portion.

Just what is the PLCB version of variable pricing?  Unlike a pure model the PLCB has to keep the prices the same state wide instead of regionally, by neighborhood or even by store. Also, unlike other variable pricing models of commodities, the consumer has no negotiating power other than to drive to New Jersey (which they probably should have done to begin with). Think Airline tickets if you need another example of variable pricing.  The price changes by demand, time of day, competition and other factors so while you may pay $200 for that round trip to Orlando, the next person could pay more or less.  

Now I don’t give the PLCB credit for being able to change pricing in real time as the airlines do.  They don’t have a good history with computerized things. The intent is the same though.  Lower prices on slow moving items to get them out or move a specific volume of items, and stores may strategically raise prices on more popular or high demand items when possible to increase profits.  A good overview is here. Something the PLCB should pay attention to: “When variable pricing can be tied to differences in costs of doing business, different prices can be justified; otherwise, brands run the risk of being seen to be opportunistic and unfair, likely damaging their reputations.”

I don't have any idea how many or how much prices will have to go up to get near that magical $85 million extra (and I don't think Senator Ferlo really does either), but it isn’t a small amount, considering that the PLCB only clears an average of 92 cents per bottle and it would have to go up to $1.80 per bottle if applied evenly and we know it isn't going to be applied evenly. Maybe some other things will reduce that or maybe not.  I’ll look further into some other “modernization” statements in another installment.

Privatization IS Modernization, accept nothing less.

Modernization wouldn't do what the consumer wants

We've been told that what the State Stores, the PLCB, and the whole police-enforced monopoly really needs is a good dose of "modernization." No need to dismantle this freak of nature; just "modernize" it!

Hey, how about some perks?

Let's look at one part of “modernization,” Direct Wine Shipping, and see what is being offered compared to what Pennsylvania citizens really want. Representative Costa said recently that direct shipping would be, and I quote, a “perk” for consumers. Why after all this time do the politicians and PLCB even care about direct wine shipping? Is it because they suddenly thought it would be good for consumers? No, it is because the Supreme Court Of The United States told them they had to allow all wineries, in-state and out, the same freedom in shipping. That was the Granholm decision, almost NINE YEARS ago, and our legislature still can’t comply. Strictly speaking, in my opinion, the failure of the legislature pretty much means it is currently legal to have wine shipped to your door since the section of the PA liquor code imposing restriction was deemed illegal and therefore unenforceable.

Representative Costa, 8 years later, decided he wants to support direct wine shipping and the bill he co-sponsored (HB 121) lists a fair amount of requirements to allow that in PA. Here are some of them.

(1) File an application with the board.
(2) Pay a one hundred dollar ($100) registration fee.
(3) Provide to the board a true copy of the applicant's current alcoholic beverage license issued by the board or another state, if applicable.
(4) Provide documentation to the board which evidences that the applicant has obtained a sales tax license from the Department of Revenue.
(5) Provide the board with any other information that the board deems necessary and appropriate.

Now that doesn’t seem too bad. But read on.

(6) Each month, the board shall publish on the Internet a list of all classes, varieties and brands of wine available for sale in the Pennsylvania Liquor Stores (Apparently all that money on rebranding was wasted, just like we said; if your own pet legislator can't even remember it, what's the point?). A person holding a direct shipper license may ship only those classes, varieties and brands of wine not included on the list at the time an Internet order is placed.
(7) Not ship more than nine liters per month on the Internet order of any person in this Commonwealth
(8) On a quarterly basis, pay to the Department of Revenue all taxes due on sales to residents of this Commonwealth
(9) Report to the board each year the total of wine shipped [into] to residents of this Commonwealth in the preceding calendar year.
(10) Permit the board, the enforcement bureau or the Secretary of Revenue, or their designated representatives, to perform an audit of the [out-of-State] direct wine shipper's records upon request.
(11) Annually renew its license by paying a renewal fee established by the board. (Unknown amount at the time of publication)
(12) A direct shipper may ship wine on the [Internet] order of a resident into this Commonwealth provided that the wine is shipped to a Pennsylvania Liquor Store selected by the resident.

So what we get is "direct shipping" to a State Store, not directly to the customer, and on top of that they want to track what and how much you buy. PA's own little spy network. That is not what the citizens want, no matter how the good representative tries to spin it.

That leads to situations like Arthur David Goldman accused of illegally selling wines not available in PA, providing the goods and services that the PLCB either couldn’t wouldn’t or was too incompetent to provide. Why? Because there hasn’t been any resolution in Pennsylvania of the Granholm decision. If people were able to direct ship then there wouldn’t be the market for somebody to fill with wines not available in the PA system.

How about we do reciprocal shipping, the same way other goods are done within the framework of interstate commerce? We don’t charge unnecessary fees or taxes to out of state wineries whose states don’t charge us any unnecessary fees or taxes. In-state wineries would benefit from increased sales, consumers would benefit because more out of state wineries would decide to ship to PA since they wouldn’t have to go through all the mickey mouse steps that Mr. Costa wants and after all this time PA would finally be in compliance with the Granholm decision.

Direct wine shipping is about 2% of total wine sales except here in PA where it is about nil. Privatizing and removing the PLCB from the equation results in a system that truly benefits the consumer.

We don’t want “perks.” We don’t want crumbs offered by poor half-hearted measures designed to placate and not really improve. We want and deserve better then what is being offered. Read HB 121 for yourself and decide if this is really the direct shipping you want or if a free and private system would do a better job.

Privatization IS Modernization – Accept nothing less.

Why can't Johnny read or do math?

For those of us following such things there has been a trend by some union representatives and clerks to spin or play down the amount of drinkers and thus making our voice seem more like a minority and not as important as those who think they are keeping utter chaos and ruination at bay. 

Specifically, they like to use the 13% number as those who drink once a week. However, as with most things math the clerks and the union have their own way of doing things.  What they seem to fail to realize is that the total is cumulative – i.e. you have to add the everyday, the few times a week and the about once a week numbers to see the TOTAL amount of people who drink at least once a week. This number ranges from 30 to 35% depending what time period you look at.   

In fact, Gallup has shown time and time again that 66% of the entire adult population drink some amount of alcohol.  As they reported in August this year “Thirty-five percent report having had a drink in the last 24 hours and another 29% in the past week.” This works out to 64% of drinkers which are about 66% of the population which comes out to over 42% of the total population (.64*.66 = .4224).  This is higher than what is normally reported because of the holiday included in the survey period which means some special occasion drinkers are added in that normally wouldn’t be.

We 2/3rds of Americans who choose to drink are the majority that the state store system wants to control.  They tell us what, they tell us when and they tell us where – the very antitheses of the freedom an open market brings to the citizens.  Taxation, regulation and enforcement are the role of government, not retail sales. The citizens and the state will be far better off once the aberration of the current state store system is corrected. Every state or province that has privatized some or all of their alcohol system has seen an increase in employment in the industry.  It tripled in Washington and Alberta. Increased in Ohio, Iowa, Maine and West Virginia too.

We are not inventing the wheel again.  Take the best of that the majority of the states do, regulate and enforce what they have problems with and come up with the best system.  That is real modernization not putting lipstick on the state store pig with new names or wicker baskets.

Privatization IS Modernization – Accept nothing less.

Provided for historical data (Gallup)

Every day A few times a week About once a week Less than once a week Only on special occasions Never No opinion % % % % % % % 2007 Nov 11-14 7 13 10 9 29 33 * 2006 Nov 9-12 10 13 11 9 27 30 * 2005 Nov 7-10 5 14 11 10 29 31 * 2004 Nov 7-10 7 13 13 10 25 32 * 2003 Nov 3-5 7 16 13 12 25 27 * 2001 Nov 8-11 7 12 13 14 24 30 * * Less than 0.5%