Friday, June 17, 2011

PLCB price resistance proves government shouldn't retail

The Pennsylvania Liquor Control Board is the largest of this country's state-run monopolies. It buys all the wine and liquor for the state, sets prices, and has enormous control on what Pennsylvanians can buy without driving to New Jersey.

On Wednesday, the PLCB proved it really doesn't understand wine.

The PLCB paid some money to PR Newswire to trumpet a press release in which it rejected more than 400 price increases from vendors. PLCB chairman PJ Stapleton called it a move to protect consumers.

Stapleton's press-release quote reads: "Too many Pennsylvanians are still living with significant financial strains, given the continued challenging economic environment. Maintaining current shelf prices ensures people can enjoy their favorite wine or spirit without sacrificing their family budget."

This is the problem: What if the producer of my favorite wine decides they'll just sell it to retailers in New York and California who accept their intended price increase?

Regular, non-governmental retailers reject price increases all the time; they stop selling the wine in question. Customers either stay with the store or not. In most cases they do. Costco or Bevmo shoppers who can't find the Cabernet they enjoyed last month will usually just buy something else. And that's fine. Pressure from retailers is a factor that keeps vendor prices in line with economic reality. Plus, Costco can't stop me from shopping at Wally's.

But it's a different story with a state monopoly, especially as it is illegal to ship wine to Pennsylvania and technically illegal for state residents to buy wine from outside the state and bring it in.

Let's say a Santa Barbara County Pinot Noir producer has a difficult harvest and has less wine, so they want to charge more. Or, let's say a Napa producer decides he's tired of his neighbor charging more, so he ups the price by $100.

And let's say I'm a Pirates fan who really likes that Pinot Noir and that Cab. And I have enough money to pay double last year's price. The state government is going to tell me I can't buy it -- not from the store, not from the Internet, not anywhere? Isn't watching the Pirates frustrating enough?

The current Pennsylvania governor is supposed to be trying to eliminate the PLCB. He isn't the first, but the liquor monopoly is a huge revenue source for the state, and has strong union support because the system's employees don't want to lose their jobs.

I doubt that the PLCB will be eliminated any time soon, despite its recent cartoonish debacle with wine vending machines. Despite the disdain for the PLCB among wine lovers, the move to eliminate it faces powerful political forces, including one of the largest neo-Prohibition voting blocs in the country.

But somebody needs to check its charter. Is the PLCB's role to tell Pennsylvania residents what they should drink, or what percentage of their income they should spend on wine?

If not, then let those vendor price increases through, and let consumers decide what they want. Pennsylvania residents aren't as dumb as the PLCB believes. They can't possibly be.


Kent Benson said...

It’s grotesquely ironic that the birthplace of liberty is the home of such command-and-control practices. The PLCB statement that you quoted is dripping with arrogance and elitism. “The state knows best. We alone can take care of the ignorant plebs in their time of need.”

Ted said...

The PLCB goes further into "Bizzaro-land." Their mission is really to protect the citizens of PA from the evils of alcohol. To CONTROL it. So, in that effort they are now protecting us from price increases so we can afford more?

Why doesn't the state control the price of gasoline so we can better afford to drive to another state and get the choice we want in wines and spirits.

PA also controls the price of milk -- so, I guess, this isn't really a stretch.

Anonymous said...

What you're all missing is that the PLCB, as such a huge buyer, can get all kinds of phenominal deals.
Yes, as a supplier I'd like to raise some prices, but the market reality isn't happening for that in any state. No realistic marketer is raising prices anytime soon.
In PA you have opportunities for some incredible deals. Look at the Chairman's Selection category and you'll find many retail prices for quality wines that are below wholesale in some other markets. These may be a vintage behind, but this only means that the wineries held the wine for you in ideal conditions and they're more ready now than otherwise.
Be careful what you wish for...

W. Blake Gray said...

Anon: I'm well aware of the Chairman's Selection program. It's not what it used to be; the buyers aren't as selective. But it's a good idea.

However, that program is all about buying wine that didn't sell elsewhere at a great discount. This is quite different: rejecting price increases for new vintages of wines.

You're simply wrong in saying "no realistic marketer is raising prices." Point one: Bordeaux. Point two: If nobody is raising prices, then where did these 400 rejected price increases come from?

Portland Charcuterie Project said...

As a born and bred PA boy, I'm very happy to say that I couldn't care less about the PLCB now that I live in OR.

That being said... I feel for my family and while I would never illegally mail them phenomenal artisanal pinot noir from Oregon... I think that they should have the right to purchase it themselves and save me the time and aggravation.

I've seen the chairmans select wines and am not impressed.

I'm guessing that PLCB will be gone within 10 years.

thesoulofJapan said...

If the PLCB wants to set the price at a cheaper buy rate, then why not accept this this as positive government intervention...? i.e. They are keeping the price low for you.

Mark Cochard said...

Blake, direct shipping into PA is lega. A winery ore retailer must sign up as a direct shipper with the state. They must pay a license fee of I think $25.00/year they must report sales monthly to the state and collect 18% general liquor tax (used to be named the Johnstown flood relief tax of 1936)6% state sales tax and or an additional 1% or 2%Philadelphia/Pittsburgh sales tax.

They can only ship wine into the state that are not listed by the state. Currently there are over 25,000 wines listed with the state. The real problem here is that wines are listed but consumers will never be able to get them due to allocations earmarking for restaurants.

Consumers may purchase up to 9 liters/month. Then they must pay for shipping and a $4.50 handling fee for the state to receive the wine at a state wine and sprits store selected by the customer.

So here is the problem. You want a bottle of so and so and it is not listed by the state take Ridge ATP bottlings as a good example you order the wine from Ridge at say $25.00 a bottle X 12 bottles that’s $300.00 add the 24% tax that's $372 than add say $50 for shipping and $4.50 s/h and we are talking 35.52/Bottle why not just buy a ridge listed wine like Geyserville for $30 and be done with it.

There currently 45 licensed direct shippers

Mark Cochard said...

Blake, Here is a timely post by Lew Bryson on his blog Why the PLCB should be abolished.