Pay no attention to the man behind the flexible pricing...

Back in October of last year, PLCB Chairman Tim Holden (a political appointee, with no major business experience)  put out this piece of propaganda, trying to fool us into believing that the PLCB's new "Flexible Pricing" was good for them. (We've been telling you for years it's a bad deal for consumers, but the Legislature handed it to the PLCB.)

Holden gets off to a bad start by using an example of Pennsylvania's "top selling Bourbon," Jack Daniel's. It isn't Pennsylvania's top selling Bourbon...it's Tennessee Whiskey, says so right on the label. A small strike, but the kind of product ignorance that's typical at the PLCB.

But it's what he has to say about Jack that's interesting. "In February 2016, Virginia’s price per bottle from the supplier of this product was $12.14, while Pennsylvania’s was $14.46. The retail shelf price on June 1 in both states was the same: $24.99." This just shows that the PLCB was too incompetent or lazy to negotiate better pricing for 82 years, and despite what they might claim about their new flexible pricing powers, there was nothing in the liquor code that prevented them from doing deals on pricing.

Now he gets to the flexible pricing shim-sham. "If Pennsylvania had been able to obtain Virginia’s lower price – $2.32 less per bottle – we would have achieved an additional $2.1 million in profit on that one product, based on the volume of sales in Pennsylvania. Or we could have reduced the retail price, or even a combination of the two." (emphasis added...for emphasis)

And here it is, nine months later...and Pennsylvania's #1 selling "Bourbon" hasn't changed price at all. They are keeping every penny of every negotiated price to the top ten selling wine and liquor brands, all but one: Nikolai vodka pints (the alcoholic's favorite), which have gone down 30 cents. Hey, thanks. Really appreciate it, PLCB.

It's all too clear: the PLCB (owned by YOU, they say) is screwing the citizens on a daily basis, over-charging on numerous items, especially their lottery items. A prime example is the 60% average price increase they charged for this year's Van Winkle releases, and the extra $570 they charged for the 3 bottle 'package' and the extra $860 for the 5 bottle 'package' on top of that. Or maybe the extra $100 they charged for the Buffalo Trace Antique Collection? Make no mistake, you as a consumer come in last in the PLCB's quest for survival. The Chairman even admits it "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."

"Charge what the market will bear" is a cornerstone principle of the free market, especially on "luxury items" like booze. You can see it in the beer market, for example, where craft beer prices continue to rise mainly because customers continue to pay them (so far). But those prices are kept in check by the knowledge that another retailer may sell for less and get the sale.

As a police-enforced monopoly, though, the PLCB can raise prices and the market - meaning you and me - has no other choice: we can't go to another retailer (or another state...), we have to bear it. Bet you didn't know that it was fine for a government agency to gouge you. Imagine if the Turnpike Commission had "flexible tolling." When did things change so that the government would treat you fairly and justly IF they made enough money from you?

So how will you know if the PLCB is cheating you?  You won't, because they don't have to tell you their secret pricing decisions. While they don't have any problem outing Virginia, the PLCB no longer lists the price they paid for their products. The official PLCB excuse is:

"Act 39 of 2016, which became effective in August 2016, granted the PLCB authority to negotiate product acquisition costs with suppliers for the most popular wines and spirits carried in Fine Wine & Good Spirits stores. The goal of these negotiations is twofold: to maximize revenue the PLCB generates for the commonwealth and to offer consumers fair and competitive prices. Subsequently, the PLCB removed product cost and retail price information from Board agendas and minutes in the interest of optimizing supplier negotiations. Additionally, now that the PLCB can act more like a traditional retailer with regard to pricing, it is not in our financial interest to give other alcohol retailers advance notice of our prices and sales."

But a traditional retailer has competition, not a police enforced monopoly! I'd like to know what other alcohol retailers are they talking about. Do you really think that Mondavi doesn't know what Gallo is charging, or Buffalo Trace doesn't know what Beam wholesales their bourbon for? If the PLCB knows what Virginia is paying, don't you think the distillers have a pretty good idea of what their competition is doing? I know that competition is a foreign idea to those at the top of the PLCB, but that is what keeps prices down for everything else you buy, not allowing some entity to charge whatever they want and then MAKE you pay for it.

Being the Chairman of the PLCB is the bizarro version of being Harry Truman, without the ethics or personal responsibility. "The buck passes here," is that right, Tim? Nothing is ever their fault no matter how idiotic (wine kiosks), misogynistic (date rape ads), anti-PA  business (Tableleaf et al), anti-consumer (any monopoly is anti-consumer) or just plain stupid (whatever happened to the PLCB Savor magazine, and the drink recipes that need things the PLCB doesn't sell?) Any Chairman claiming any responsibility for any of those things?  Didn't think so, and Mr. Holden is certainly not going to be the first.  

Stop being fooled.  The PLCB does not exist for the benefit of the citizens, it exists for the benefit of the PLCB. Anything to keep the pigs at the trough is what they are for and anything that resembles real business with real competition is what they are against. Starting at the top with the Chairman..

Are Your Prices Variable Enough?

Just how much is the PLCB screwing us with "variable pricing"?

A good question, and one that the PLCB doesn't really want to answer. There is no sunshine at PLCB HQ; their mission is to hide as much as possible, keeping as much information away from the citizens as they can. And why? It's not like they have any competition to worry about, no business secrets to keep: no one else is in their business, they've made sure of that. They do it for one reason: to keep the owners — that's you, and I, and the Legislature — ignorant of what they're really doing; of how they're desperately shuffling prices and margins around to try to look "profitable."

Would the wine kiosks have passed if the citizens, if the press, knew about them, knew that the PLCB had been advised against implementing them...by their own people? Would Joe "Da CEO" Conti been brought back after having been found to have committed ethics violations if the citizens knew, and could do something about it?*(Correction: please see below.)  Maybe anti-competitive branding and placement wouldn't have taken place with citizen involvement. But that all did happen, mainly because the PLCB kept it all hidden away and secret, to the point of having records destroyed, to the point of appearing to have had secretive off-book meetings to make decisions that are supposed to be discussed in public.

Now they don't want you to know how much of a shaft you are getting on variable pricing, the one thing they wanted more than anything else from "modernization." Remember, the PLCB said that they couldn't negotiate prices for 82 years, even though there was nothing in the Almighty Liquor Code that prevented it, and then they said that they did negotiate on some things, but not most. ACT 39 changed that, and supposedly allowed the PLCB to do something they could have been doing all along...only now the game is rigged to benefit the PLCB and not the consumer. That sounds fair.

In the PLCB meeting minutes, you used to be able to see what new products were going to show up, and the cost for those products. Not anymore. The PLCB doesn't want you to know what they are paying and what they are going to charge,  because it will raise questions about why the consumer isn't seeing benefit from "variable pricing." They don't want you to know that they are making an extra $1.16 for every bottle of Jack Daniel's sold while you see no change** on the shelf.

Now, a real retailer wouldn't tell you this either. But the PLCB isn't a real business; they have a police-enforced monopoly to ensure their market share! A real business doesn't tell you this stuff, but their competition keeps them honest, and you can be sure that they're passing along savings to you; if they don't the competition will.

But the State Store System has no reason to benefit the consumer by lowering prices in order to increase market share or maintain their customer base. They don't have to worry about that, and there's nothing in the Almighty Liquor Code that says they do. Remember the founding principle of the PLCB, as stated by Governor Gifford Pinchot himself: “to discourage the purchase of alcoholic beverages by making it as inconvenient and expensive as possible.”

So what does the PLCB tell us about the effects of variable pricing? The Chairman said that they will not raise prices across the board, but with having to dip into reserves to pay more into the general fund, and trying to prevent privatization by making it look like they contribute more than a piddling amount to the state (not including the taxes, which would still be collected in a private system!), and having to pay off $260 million in pension debt...what do you think they are going to do? Keep their sinking ship afloat in any way they can, or benefit the consumer?

Last year the PLCB charged an average of 45.36% above cost for every product sold.  For the first eight months of this year it has risen to 45.46%, and I guarantee that will continue to climb as time goes on. If you remember, the Democrat's modernization plans said that the PLCB will make an extra $75-100 million because of this alone. That would mean they'll have to raise the charge above cost to over 60% — such a deal!

The choice comes down to this. Do we want to continue to have limited selection, limited convenience, Harrisburg bureaucrats selecting the booze for the entire state, and anti-consumer pricing? Or do we want the freedom of choice that the private market brings?

Privatize - all of it. Retail and wholesale. Why wait one variably-priced month longer?



*Correction: Conti was ruled to have violated the state's ethics code about a year after he was brought back as an 'emergency consultant' and paid about $67,000 more of your booze dollars. Our error, which we own up to...unlike Joe The Ethics Violator, who is currently on the faculty of the Fels Institute of Government, and a lobbyist with Triad Strategies. Great places for a known ethics violator.

** Since the PLCB hides all of their purchase information now, the $1.16 is just my best guess, but it is an educated guess...and it is most likely more.

What happens when you "Free the Market" ?

When you don't have a police enforced state monopoly that needs to be "loosened up" for the Democratic convention you have this:

While not a real ad from Total Wine it is the reality of the difference between PA and the freedoms enjoyed by most states. The PLCB is why we can't have this. The PLCB is why we don't have the selection other places enjoy. The PLCB is why we will never have the convenience wanted by the majority of the citizens. Do you really think that being able to buy 4 bottles from a bar (since 95% of the licensed prerequisite places are bars) is the same as having 2400 real liquor stores?  And the PLCB is why we will never have the service found in stores that specialize where the owners livelihood depends on the customer coming back not because they have nowhere else they can go but because they want too.

In real stores the customer is king, not the clerks. Privatize.