Whether they classify themselves as a liquor commission, a control board, a state department or something else, each of the members of the National Alcohol Beverage Control Association is a unique entity with its own problems and solutions. But the Montgomery County Department of Liquor Control can rightly claim to stand out among its peers. It’s the only one of the NABCA’s 19 members that does not have a statewide mandate. Geographically, it’s the smallest of the control jurisdictions, encompassing an area of only 490 square miles, but it has a population of 890,000, which is more than some states can claim. It’s also an entirely suburban area with a well-educated and, in many instances, materially well-off population. Although the economy continues to be cause for concern, retail sales in the Department’s 24 retail stores have been strong. “For this year, our stores are up over 8.5% compared to last year. And that was the best year we ever had,” said George Griffin, director of the Montgomery County Department of Liquor Control. (In fiscal 2002, Montgomery Country ranked 12th in sales out of the 19 jurisdictions reporting in StateWays annual review.)
George Griffin (center), Director of the Montgomery County Department of Liquor Control, along with Gus Montes de Oca (left), Chief of Operations, and Richard J. Duthoy, Director of Administration.
“We’re a vertical operation here. We’re the only wholesaler of spirits, wine and beer to all the licensed accounts in the county. In recent history, about 40% of our sales have come from our stores and about 60% from the warehouse. It’s drifted a little this year. It’s more like 42% to 58% and our warehouse sales are only up a little over 1%. And beer sales are level.”
Beer isn’t a topic that usually comes up when talking about the control states. “That’s another one of the reasons why we are different than all the other control jurisdictions,” Griffin continued. “Our stores carry liquor and wine and some beer. Although we are the only beer wholesaler in the county, beer is only about 5% of total sales in our stores.” The beer carried in the county stores tends to be from micro and craft brewers. And, as a concession to licensed establishments, the county stores don’t sell any chilled beer.
One thing that Griffin does share with his control jurisdiction counterparts is the ongoing challenge of being both the head of a governmental agency and the chief operating officer of a wholesale and retail business. “We’re the largest jurisdiction in Maryland, with almost 900,000 people,” he said. “We’re bigger than Baltimore. After Prohibition, Congress let the states decide how they were going to handle alcohol. Maryland legislators in turn allowed for the counties to decide. So all liquor laws are state laws, but they contain different provisions for each county. Montgomery County has been a full control jurisdiction since the end of Prohibition.”
Although talk of privatization arises throughout the control system from time to time — both for philosophical reasons and because of the infusion of cash that would accompany such a move — there have been no such rumblings recently in Montgomery County. “Periodically there has been talk of privatizing the retail operation,” said Griffin. “I know it comes up in a lot of other places because of the budget crunch, but the last serious look at it here was in 1996. There was a study done to investigate the feasibility of franchising out the retail stores. But that would require a change in the state law and the measure was soundly defeated. The administration that we have in the county now has taken the attitude that if we’re in this business, then let’s run this business properly.”
At the Kingsview Liquor Store in Germantown, MD: Diane Wurdeman, Assistant, Retail Operations, Montgomery County Department of Liquor Control; Philip Jameson (right), assistant manager of Kingsview Liquor Store; and Ben Mangus, manager of the store.
Far from moving to private retailing, the county is stepping back from its limited experiment with the private sector. Three of the stores currently operating are managed under contract by private companies, which are paid a percentage of sales. The building still belongs to the Department of Liquor Control, as does the product until it’s purchased. “What we really did was contract out the staffing. It’s an invisible barrier to the customer, and those stores look just like all our other stores. But I believe that is going to eventually end. There’s been a state restriction placed on contracting.
“We’re now contributing $20 million to the general fund, which is a substantial amount for a local government. During a tough fiscal time, selling the system will give you a one-time hit rather than kicking money in every year,” he continued. “This is a pretty sophisticated constituency with high expectations of local government. They see the value of the control system. We don’t see any sentiment in favor of liberalizing the liquor laws.”
The only dissatisfaction with the system seems to come from brewers. “We’ve always had good relationships with the spirits and wine suppliers because they deal with the control system in so many other states,” Griffin said. “But we’re the only government entity that serves as a beer wholesaler and that’s been somewhat difficult for some companies to deal with. Our relationships have been improving though.”
THE RETAIL CHALLENGE
Being in the midst of a metropolitan area that includes parts of two states as well as the District of Columbia certainly gives the department some retail challenges. Montgomery County is far from isolated, and if county residents are inclined to shop elsewhere, they certainly have numerous options. Griffin is well aware of the surrounding competition and sees to it that the Department’s stores can hold their own against all comers.
“This is a pretty sophisticated constituency with high expectations of local government. They see the value of the control system. We don’t see any sentiment in favor of liberalizing the liquor laws.” – George F. Griffin
“It’s interesting,” he said. “How we stand competitively depends on the product and it depends on the time. That’s another of the things that makes us unique. We are in a large metropolitan area. Our daily local newspaper is the Washington Post.”
The Post is also the Department’s medium of choice for advertising the prices in its stores, which it does weekly.
“Our pricing on spirits is very competitive,” the director proudly pointed out. “We are as low or lower than anyone else in state of Maryland, and on spirits we’re as a low as anyone in DC — and, on sale, we’re lower. For beer, we go with market pricing and we’re on a par with every one else. Wine pricing really varies. We’re the direct importer on some wine, so we get a very good price. Other wines we get through brokers here in Maryland — those are priced higher than they might be elsewhere in the area. And some allocated wines are going to be higher priced as well. But normally, we keep our markups down so that we’re no higher than anyone else in the area.”
TOP SELLING BRANDS
Bacardi Light Rum
Jack Daniel’s Black
Captain Morgan Spiced Rum
Bacardi Gold Rum
Jose Cuervo Especial Tequila
Mondavi Woodbridge Chardonnay
Kendall-Jackson Vintners Reserve Chardonnay
Beringer White Zinfandel
Sutter Home White Zinfandel
Cavit Pinot Grigio
Bella Sera Pinot Grigio
Carlo Rossi Red
Carlo Rossi Chablis
Corbett Canyon Chardonnay
Griffin explained that the one area where Montgomery County can’t compete with retailers in the District of Columbia is wine pricing. In one of the anomalies of beverage alcohol regulations, retailers in DC can buy wine directly from the source without going through a local wholesaler. “They’re very aggressive on pricing,” he said. “So we’ve been working with our suppliers to improve our acquisition costs to make us more competitive in wine. But on spirits, we’re competitive with anyone in the region.”
The retailing system within the county is especially friendly to restaurants and other on-premise operators. They, as in most jurisdictions, can place their regular orders for items from the Department’s warehouse. In Montgomery County, they also have the option of buying whatever they need, at a discount, in any of the retail stores. So, for a restaurant or bar that unexpectedly runs short of something or is looking for a single bottle of an unusual vintage or spirits bottling, this marks the ultimate in convenience. “The law treats our stores as extensions of the warehouse,” explained Griffin. “They act as a dispensary, and the purchaser still gets a discount as a licensee.”
THE CHALLENGES AHEAD
Griffin was only formally appointed to the position of Director this past February. He had, however, served as Acting Director for two full years prior to his appointment and had held various administrative positions with the county government for the past eight years.
“I think like a lot of people we’re carefully watching economy,” Griffin said. “That’s going to tell us the future of the industry. This year, our stores are selling at a higher rate than on-premise accounts, which tells me people are doing more home entertaining than going out.”
Another challenge that he sees as a retailer comes from the ongoing expansion of spirits categories. “In some markets that puts pressure on the system, in terms of making the right products available,” he said. “Finding shelf space can be a challenge. It happened with single malts, now it’s vodkas. We’re seeing that more and more. There’s the dual pressure of new products and expanding categories that puts pressure on existing systems — selection, warehouse delivery systems, shelf space.”
A changing demographic brings with it another set of challenges. “We have in Montgomery County a large and diverse population and traditionally it’s been a somewhat wealthy population,” Griffin noted. “But the demographic mix is changing. Half the Asian-Americans in Maryland live in Montgomery County as does half the state’s Latino population. As the depth and breadth of the population becomes more diverse, there are pressures for different types of products.”
An ever-expanding wine selection is another concern for Griffin. “As more people become familiar with wine, the demand for a larger variety of wines is rising exponentially,” he said. “There is just so much wine on the market. There’s wine coming in from all over the world.” Montgomery County stores recently ran a special promotion on malbec from Argentina, which, he said, would have been unheard of 10 years ago.
Looking forward, this smallest of the NABCA’s members appears to be facing the same challenges as its control state comrades, and a few of its own. But if recent performance is any indication of the future, the Montgomery County Department of Liquor Control seems more than up to the task.
MONTGOMERY COUNTY DEPARTMENT OF
LIQUOR CONTROL AT A GLANCE
George F. Griffin
Gus Montes de Oca
Chief of Operations
Richard J. Duthoy
Chief of Administration
Retail Operations Manager
Wholesale Operations Manager
Katherine M. Durbin Community Outreach Manager
“We provide efficient and quality wholesale and retail sales of beverage alcohol products while promoting moderation and responsible behavior in all phases of distribution and consumption. We diligently promote and obey all laws and regulations governing beverage alcohol, while generating revenue for the benefit of Montgomery County’s General Fund.”
Montgomery County Population
Montgomery County Area
490 Square Miles
Retail Gross Sales: FY02
CASE SALES OF
(89.1% of the total sold by the DLC warehouse)
(36.8% of the total sold by the DLC warehouse)
(5.3% of the total sold by the DLC warehouse)
Number of stores
24 (3 contract-operated)