Competition - It's Hard!

Looks like Gov. Corbett is going to give Pennsylvania another shot at joining the free world, at least in the realm of alcohol. I'm still looking through the details of what's been announced, but it sounds pretty good so far. Anything to privatize the PLCB out of the liquor-sales business is a step in the right direction.

Not everyone agrees, however...
...
Rich Rosella, whose Allegheny 6 Pack and Doghouse in Cheswick sells sandwiches and six-packs, said expanding the number of venues where customers can buy beer would make his license "pretty much worthless."

"If you issue 'X' amount of licenses, you're not going to sell that much more beer," Rosella said. "There's only so many beer drinkers in the state, and all you're going to do is water down the business of the places that have been selling it."

Distributors also worry that few independent business owners will be able to compete against chain stores that can offer lower prices and longer hours.

"We don't want to be legislated out of business," said Vince Altieri, owner of Jeannette Distributing.

Rosella argues that convenience stores, such as the Sheetz located near his business, are at a competitive advantage by staying open for 24 hours and offering products from gasoline to milk to tobacco.

“If Sheetz wants to put me out of business, they can, because they can sell beer at cost,” Rosella said. “There's absolutely no way I can compete.”
...

Source: Trib Live - Beer sellers say governor’s proposal to privatize wine, liquor sales opens new can of worries

Sorry, Vince, but if your business model depends on an artificial, government-created environment, then you're being legislated into business - not the other way around. Corbett's plan will just let the normal competitive market signal where licenses should be allocated.

More Liquor Law Stupidity

Bill Toland has an article in the Post-Gazette on the Pittsburgh Whiskey and Fine Spirits Festival. One of the vendors will be the brand new Wigle Whiskey which is just about to open in the Strip District here in Pittsburgh. Unfortunately, they won't be able to actually let people sample their whiskey. Why?
Wigle Whiskey -- being produced in the Strip District, in Pittsburgh's first whiskey distillery since the Prohibition era -- will not be among the spirits sampled. Though the festival had advertised Wigle's presence in press releases, Wigle won't be pouring tomorrow, because the federal government has not approved Wigle's bottle labels.
Got that? We're not allowed to actually try this local whiskey because at least one federal agency is required to approve the bottle labels.

FFFFFFFFFFFFFFFFFFFFFFFFFFUUUUUUUUUUUUUUUUUUUUUUU!

In addition to Wigle, an Indian whiskey (Amrut, out of Bangalore) is now available in Pennsylvania but, since it's not a regularly stocked item, you have to special order it. And special orders are done by the case!
Amrut brands are now available in Pennsylvania, but only by special-order -- meaning that if you want to try a bottle, you have to buy six of them, because the PLCB doesn't maintain an Amrut inventory.

So, to recap, if you want to take this highly-rated whiskey for a test drive, instead of buying one bottle of Fusion for $67, you have to buy six, for $400.
I have mentioned this before regarding Evan Williams 1783 bourbon and the PLCB is still a bloated train-wreck of government stupidity. It's time to privatize liquor sales in Pennsylvania.

PLCB: Pot, meet kettle

So the debate about kicking the state government out of the business of selling alcohol is pretty heated here in Pennsylvania. Of course, the union (UFCW Local 1776) is lobbying very strongly against privatization and one of their arguments is that, since there is no profit incentive, the government employees are better at preventing sales to minors and intoxicated people.
A 39-year-old Liquor Control Board enforcement officer was charged with driving under the influence after a crash in downtown Pittsburgh late Thursday night.

Tyrribea Flood was drunk when she crashed a state vehicle at the intersection of Ninth and Penn avenues shortly before midnight, according to Channel 11 News reporter Lori Houy.
...
Source: WPXI - Liquor Control Board Officer Charged With DUI After Downtown Crash

Right. Maybe Ms. Flood was just doing work-related research. So what exactly makes the PLCB a better watchdog again?

I'll take 'Best way to run a business' for $200, Alex

In Thursday's Post-Gazette: Liquor store privatization hits major roadblock
...
Talking to reporters this afternoon, Senate President Pro Tem Joe Scarnati was critical of the current plan from House Majority Leader Mike Turzai to auction off licenses for the stores.

Mr. Scarnati, of Jefferson, questioned whether the state would be getting the most profit possible in that sale, given what he sees as constraints on the profitability of those stores.

"I don't think that we have allowed the Liquor Control Board to run like a business," he said. "We're the ones with the handcuffs on them, and then we're out there saying, 'Well, this is an archaic, terrible system and doesn't work.' Well, take the handcuffs off of them, get the bottom line better, and you'll get a better price."

He suggested allowing those stores more flexibility in pricing, based on the product and geography, as initial reforms.
...
I'm going to suggest, Mr. Scarnati, that the best way to let it run like a business is to let it be run BY a business. Let's ignore, for a minute, the fact that the state government should not even BE in the liquor store business. Does anyone think it's a bad idea to have the same Board that is tasked with enforcing liquor laws and reducing liquor consumption also be the Board that is tasked with running alcohol sales like a business?

Pennsylvania has some of the most backward and archaic laws regarding alcohol out of any of the states in the country. Let's work on getting the government out of the sales business once and for all.

PLCB vs Turzai/Corbett - Round 1

Pittsburgh Post-Gazette: That's the spirit! Proposal would get state out of the liquor business

Looks like Pennsylvania just may get a shot at kicking the bloated PLCB dinosaur to the curb! We've tried several times in the past, but the unions were always too strong. This time, however, Republicans have an advantage: a 19 vote edge in the house, a 10 vote edge in the Senate, and a Republican Governor who has said he favors privatizing the PLCB.

Details of Rep. Mike Turzai's bill, HB 11, include auctioning off 750 licenses for large retailers and 500 licenses for small retailers. Beer distributors would also be eligible to bid on the licenses which might be the best part - being able to buy beer, wine, and liquor all in the same store! No more driving all over the place to jump through the archaic hoops the PLCB requires.

The Post-Gazette article focuses on the financial aspect - privatizing the PLCB would likely bring in a significant amount of money up front via the license auctions and would likely continue to bring in a solid stream of tax revenue. This is great news! They also discuss the added convenience to the customers and how this would remove the incentive for people who live near the state border to drive to neighboring states to purchase alcohol. Another great reason to disband the PLCB monopoly.

They overlook the biggest reason I'm in favor of this bill: It's not the government's DAMN JOB! There is no good reason for the state government to be in charge of the sale of liquor - that's rightly the domain of the private market. I'd be in favor of privatizing the PLCB even if there was a loss in revenue to the state. That would just mean the PA residents would be keeping more of their own money and spending less in taxes.

Cheers to Mr. Turzai for introducing this bill and I urge all of our Representatives and Senators, as well as Governor Corbett, to support House Bill 11.

Privatizing the PLCB - Screw the Benjamins, It's all about the principles, baby

In Tuesday's Pittsburgh Post-Gazette Opinion section we find a Letter to the Editor: Liquor price impact
Liquor price impact

Regarding "Defending a Dinosaur: Neither CDC Nor LCB Should Halt Privatization" (April 18 editorial):

Many years ago a dynamic family member shared with me an interesting business fact. That person was employed as a consultant and drew assignments in places as far away as South America, worked in a presidential administration and was working for an international distillery when these thoughts were shared with me. I was told that the distillery's largest customer was the state of Pennsylvania. If that was true then, I imagine it is still true today.

By association, that fact should be true with all those providing products to the Pennsylvania Liquor Control Board. One would think that fact would have an impact on the price paid for the products for sale in Pennsylvania. That being said, how can fragmented privatized operators get better deals on the front end of this business deal? This issue never seems to be mentioned in any discussions on privatization.

If the LCB is not getting a good deal on the products it sells, it should be scuttled. However, if the LCB does get the best deal, good business acumen should follow that the taxes applied to the privatized operators would need to be astronomical to realize the same overall benefits to the consumers and the taxpayers of Pennsylvania.

Will privatization lead to low consumer prices? If not, who do you think is going to absorb the greatest impact of privatization? You got it: the consumers and the taxpayers.

As for modernizing this Depression-era dinosaur, are there legislative restraints preventing the LCB from modernizing? If so, you should be railing against those obstacles instead of beating the victim, the LCB. Business-wise, what you are saying does not seem to be grounded in reality.

OLIVER F. JEDLICK JR.
Brookline
I can understand Oliver's point. I don't agree with it, but I understand it. Whether he's right or not, however, is immaterial to the situation. While I have a strong feeling that privatization will result in better selection, better hours, cheaper prices, and little negative impact on the state budget, my strong support of privatizing the PLCB is not based on the costs or savings for consumers, taxpayers, or the Commonwealth of Pennsylvania. Those are just side effects of privatization.

I ultimately support privatization for one reason alone: I do not think the government should be involved in a state-run monopoly in the liquor business. That's it. I want the government out of the liquor business. Let them regulate it (though I probably don't agree with the amount of regulation, we can debate that later) but get them out of the sales business and have them stop prohibiting private citizens and companies from engaging in regular commerce.

PLCB - Another Option

Now that Tom Corbett has been sworn in as Governor of Pennsylvania, the unions are ramping up their saber-rattling.

The January 19, 2011 Pittsburgh Post-Gazette, in an article titled Liquor clerks to fight privatization:
The Pennsylvania Liquor Control Board's unionized clerks have declared "war" on Gov. Tom Corbett's plan to dismantle Pennsylvania's government-operated wine and spirits sales operation.

On Monday, PLCB employees met at four hotels in Western Pennsylvania to discuss their game plan going forward and to vote on a temporary dues increase.

On its Facebook page, the United Food and Commercial Workers Local 23 asked employees to "spend your Martin Luther King Jr. holiday saving your job. ... This is no time to 'sit back and see what happens' -- this is WAR!" At the meetings, leaders asked members to "fight the threat" of privatization.
...
So they're starting to build a battle chest and their usually over-the-top rhetoric is getting even more strident. The article continues on about the possible budget impact of privatization:
...
State Rep. Mike Turzai, R-Bradford Woods, and others say the sale of wholesale and retail licenses could net the state a one-time windfall of $2 billion.

The UFCW says that estimate is based on faulty data -- to get $2 billion from the auctioning of 850 retail and wholesale licenses would mean each license sells for almost $2.4 million even though "comparable licenses have not been shown to be worth anything close to that anywhere in the nation."
...
No surprise there - both sides seem to be exaggerating the positive or negative effects.

So, is there another option that might be considered? I think so. First, let me get my biases out on the table: I'm completely in favor of 100% privatization of the liquor sales business in Pennsylvania. And I'm in favor of that regardless of whether it is a net gain OR loss, financially, for the state. I realize that if private stores do not generate the approximate $100 million per year in revenue that the current stores do, the state government will likely raise taxes in some other area to cover the difference. I do not believe the government has any reason to be running a business that could, and WOULD!, be run by private entities.

Now that my biases are out in the open, let me propose another alternative to privatization. It can be summed up as "Get rid of the government monopoly."
  1. Let the PLCB continue to operate its state liquor stores.
  2. Offer, at no charge, an equivalent number of licenses for private businesses.
  3. Make the each state-run store operate, financially, as an independent business (pay for its own advertising, pay for its employees' salaries, etc).
  4. Institute a policy that any state-run store that does not generate a profit for a full year is permanently closed and a new private license is offered the following year.
  5. Get rid of the onerous sales laws that require separate stores for purchasing six-packs of beer, cases of beer, and wine/spirits as well as the laws that restrict which out-of-state beer/wine/spirits can be sold in the state.
This will force the state stores to compete against private stores. If a state store can hack it, then it can stay open. If it can't, it ceases to be subsidized by the better performing stores. If state stores truly can compete on price/selection/service, they should have nothing to worry about. If they can't, they'll privatize themselves. The private stores will either (worst case) fold or (best case) allow citizens of Pennsylvania more alternatives for purchasing beer, wine, and spirits.

I'm sure there are some deficiencies in this plan, so feel free to point them out. It may not be (in fact, is probably not) the best plan, but it's an option and it would force the state-store unions to put up or shut up.

PLCB - Now Employs Pro-Corruption Morons

Today's Pittsburgh Post-Gazette has a Letter to the Editor from a guy named Fred Steare Jr. Fred is an employee of the state store and also, it would seem, a moron.
One-time solution

Regarding "Cheers to the Poll: Most People Want to See the End of the State Stores" (Dec. 24 editorial): So, Quinnipiac University says 66 percent favor state store privatization. This sounds more like a figure you would get from a real-life Delta House at Faber College in the movie "Animal House."

Sorry, folks, but all the smoke and mirrors can't erase the fact that the nearly half-billion dollars sent to the General Fund each year by the Pennsylvania Liquor Control Board is still a nice, hefty sum, which would be very hard to replace year after year once the state stores are gone.

The so-called "one-time cash infusion" is just that -- a one-time solution.

Once the money from the sale is frittered away (don't blink your eyes, you'll miss it), guess what? Higher taxes!

Incidentally, do all you legislators who are in favor of privatization ever think of the fact that the steady stream of money and goodies you receive from businesses that would benefit from privatization would dry up for you once their purpose is served? Plus the fact that taxes will be much higher to make up for what the stores used to bring in every year.

Better give it some thought, folks! I know the public will, too, when election time rolls around.

FRED STEARE JR.
Bellevue

The writer is a state store employee.
So Fred Steare, a PLCB state-store employee, thinks that there are two good reasons to NOT privatize the PLCB.

1. We'd lose the $500 million a year that the PLCB puts into the state budget.
2. Lawmakers would lose "steady stream of money and goodies" that privatization lobbyists give them now.

First, the PLCB actually DOES contribute around $500 million to the state's coffers every year and, as Fred Steare says, that's a nice, hefty sum. What Fred doesn't mention is that $400 million (plus or minus a bit depending on who you ask) comes from sales taxes on the liquor. That $400 million will continue to be sent to the state as the private stores will continue to collect and remit sales tax.

The remaining $100 million will likely be covered by a variety of sources, including liquor store business licenses and additional sales tax revenue from the likely increase in sales due to better service and better selection. But, and here's the kicker, even if that $100 million is no longer generated for the state's budget, I DON'T CARE. The government has no business being in the liquor sales business.

Second, Fred Steare actually makes the argument that legislators should NOT privatize the PLCB because that will cause "the steady stream of money and goodies you receive from businesses that would benefit from privatization would dry up." At least he's making his pro-corruption argument public - it's always good to see a person's true thoughts on an issue.

Fred Steare Jr, you are a douchebag, a moron, and if I could fire you myself, I would.

Quote of the Day - Hophammer Edition

It’s also precisely what I like in a hophammer IPA — it bludgeons the drinker about the palate with hops, has an aftertaste measured in minutes, and doesn’t ruin the effect with anything extraneous.

- Blunt Object in beers of milwaukee, vol. 27
What an awesome way of describing a really good IPA. He's reviewing Moylan’s Hopsickle Imperial Ale out of Novato, CA. He also talks about two others but this one is the one that really makes me want to run out and buy a six-pack.

Of course, since I live in Pennsylvania, the moronic liquor laws enforced by the PLCB mean that, if it's available, I'll have to buy it by the case as I doubt it's popular enough for a restaurant to stock it in six-packs. Thanks PLCB - you still suck.

Reinventing Stupidity

Looks like the PLCB is shutting down the wine kiosks due to glitches.
Despite the shutdown, Mr. Lesser [CEO of Simple Brands, the company providing the kiosks] said most of the machines were working -- the malfunctions occurred in one of every 150 to 170 sales, he said.
One out of every 150 or so sales failed? And he calls that working?
The real bad timing for the kiosk glitches is not the holidays but rather the incoming Corbett administration, which has advocated privatizing the state store system. One of the leaders of that effort, state Rep. Mike Turzai, R-Bradford Woods, has said the kiosks (which just started operating in June) would be ended if privatization were successful.

The machines are "a silly type of an idea that only government bureaucracy could come up with," he said last month.
Bravo, Mr. Turzai! And I wish you, and Governor Corbett, luck in privatizing the system - hopefully you'll get it done in 2011. The state has no business being in the liquor sales business.