THE SMALL CONTROL STATE THAT MAKES A BIG DIFFERENCE

The Vermont Department of Liquor Control (DLC) is the little control state agency that could.


And does.


The 56-person department oversees the purchasing, pricing, distribution and sale, through 73 agencies, of spirits in this rural, sparsely populated state. It issues approximately 5,000 licenses a year. The DLC is also in charge of enforcement, including tobacco enforcement, and education.


The Vermont Liquor Control Board met at its offices in Montpelier, VT, recently. Seated, from left, are Board Member Lloyd, A. Kelley, Jr., Board Chairman Daniel J. O’Brien, Board Member Harry L. Daniels, and Commissioner Michael J. Hogan.

PHOTOGRAPHY BY ANDREW WELLMAN


Vermont, according to the U.S. Census Bureau, has a total population of a little over 600,000. It also has the highest ratio of dairy cows to people of any state in the country, according to the Internet Public Library of the University of Michigan.


Yet, the DLC runs a highly sophisticated control system.


How about locating liquor stores within supermarkets? Vermont liquor agents have been doing it for years. Or mandatory server training? The department’s been doing that for the last four. “Longer store hours, Sunday sales, credit cards: we started doing those things many years ago,” said Daniel J. O’Brien, chairman of the three-person Vermont Liquor Control Board.


Members of the board are appointed by the governor for six-year terms. The governor also appoints one of them as chairperson every two years.


However, one of the great strengths of the Vermont Liquor Control Board is its longevity and continuity. O’Brien has been on the board, having been appointed by both Republican and Democratic governors, since 1975. Lloyd A. Kelley, Jr. has served for 19 years.


That’s not to say that the board is averse to fresh blood. Harry L. Daniels, who has extensive experience working in the beverage industry — at a beer company, a winery and a distributor — was appointed to the board for the first time in January 2003.


The board oversees the operations of the department and appoints the commissioner. “Mike [Hogan, the current commissioner] is like the CEO of a corporation, and we’re like the board of directors,” explained O’Brien.


The department is broken down into two divisions: business and regulatory. Business operations include accounting, information technology (IT), pricing, warehouse and retail operations.


Historically, the Vermont Department of Liquor Control ran state stores and oversaw the operation of agents in smaller towns. In 1987-88, before conversion officially began, there were 22 state stores and 49 agencies.


Starting the following year, state stores were slowly converted to agencies, with the last state store changing over in June 1996.


Switching over to agencies made economic sense, explained Jan Ciemiecki, retail operations director. “It was just economics,” he said. “We were paying state employees, for those employees’ benefits — and for the store leases. We couldn’t be open on Sunday because we would have had to pay our employees time-and-a-half.”


The conversion process was handled so carefully that every state employee who had been working in a state store either retired or found another position in state government.


How Agencies Operate

Today, the state’s 73 agencies range from mom-&-pop outlets to cutting-edge superstores, such as those from several supermarket chains. Two Rite-Aid drugstores in the state are agencies, as are a number of convenience stores. All agents also hold a license for selling beer and wine, in addition to the contract for selling spirits.


Working in the Vermont DLC warehouse is F. George Moulton, II, the DLC’s Liquor Purchasing & Warehousing Chief.


Vermont agents receive a commission. For the first $100,000 in gross spirits sales, they receive 8%; from $100,000 to $200,000, they receive 7%; and over $200,000 they receive 6%. Most have gross spirits sales of over $200,000 per year.


The department outfits its agents, without charge, with a computerized cash-register system. Spirits purchases are rung up on this PC rather than through the store’s registers. Most agents have just one DLC cash register/PC, though one particularly large agent has three linked registers.


These computers are polled, over phone lines, nightly by the DLC. Sales figures from the previous day and orders flow from the agencies to the department, while price changes and delivery information are sent from the department to each agent. “The right prices, up-to-date inventory, we keep in sync with them,” said Frank J. Perricone, the DLC’s IT manager. The systems record and send to the department the sales each agent rang. The department sends back a notice of how much money the agent should deposit, based on those sales figures.


While each agent decides what to order, they are assisted by sales history information provided by the DLC computer systems at the beginning of every month. The agent then enters the order into the DLC computer system and, in the nightly polling process, the order is sent to the department automatically. Once the truck is loaded at the DLC’s warehouse, the system sends a notice to the agent’s cash register, saying the order is on its way.


Seated at his desk is William J. Goggins, Director of Education, Licensing and Enforcement; entering the office is Tonia Pryce, Administrative Assistant B in the Education, Licensing and Enforcement division.


About half of the agencies, the largest ones, receive orders every week; the rest receive orders every other week. Once the order is received by the department, at its 32,000-square-foot warehouse in Montpelier, a picking list is produced and the order assembled. It arrives at the agency about five days later.


The Vermont DLC handles its own distribution with four drivers and a fleet of six tandem-axle trucks, each of which can hold about 1,000 cases. The DLC is also responsible for picking up and recycling empty liquor bottles, under the state’s redemption law. The DLC currently recycles about 80% of all empty spirits bottles generated in the state.


Supervisors Assist Agents

In addition to the computer system, the DLC tries to help its agents in every way possible. Three agent supervisors — one for each region of the state, north, south and central — monitor and assist their agents. Each has access to a full-sized pick-up truck with a cap. “Supervisors use their trucks to move stock around,” explained Ciemiecki. “Maybe an agent is moving to a new location. Or the supervisor can take back overstocked product to the warehouse, move delisted items or bring the agent supplemental orders as needed.”


Supervisors also help train an agent’s employees. It is not uncommon for a supervisor to support a new agent for two to three months, doing such training and offering other assistance.


Sales through the Vermont DLC are brisk — and interesting. “Sales have been phenomenal this year,” said Commissioner Hogan. “We are projecting sales of $46 million for 2004. Sales for April were up 12% over last year.”


The interesting thing is that dollar sales are up far more than case sales. “From February through June,” said George Moulton, liquor purchasing and warehousing chief, “case sales were up by only 3.8%, while retail dollar sales were up by 8.3%.


And that was with a 1% increase in the state’s mark-up, which became effective in February. “We projected a 2% decline in case sales [because of the increased mark-up,]” said Moulton, “but it didn’t happen.” Instead, people in Vermont are actually spending 2% more.


Buying More, Buying Better

And, as is happening across the country, people are buying better.


“In the news, you hear a lot of doom and gloom [about the economy,]” said Moulton. “And in my 30 years here, whenever the economy was tight, you’d see the sales of low-end products go up and the sales of high-end products go down. But that’s not what we’ve been seeing now. There’s been a 3% upswing in case sales and an even bigger increase in dollar sales in the last 18 months.”


The hottest spirits category in Vermont? “The superpremium vodkas are flying,” reported Moulton, “with Grey Goose number one. Also flavors, not just of vodka, but also rum, are exploding. Big brands there are the Bacardi flavors and Captain Morgan.” Even in categories that are stable, such as whiskey, Moulton sees a shift from mid-priced to premium brands.


When it comes to the retail pricing of its products, the DLC’s biggest competition is a sister control state. In 1974, the state of Vermont changed how it taxed liquor, going from a gallonage tax to a percentage-of-price tax. The result was that Vermont’s prices were no longer competitive with New Hampshire’s. Vermont’s spirits sales declined, due to “border bleed.”


Successful Sales Programs

In 1995, the Liquor Control Board, working in conjunction with George Moulton, instituted two sales programs to make Vermont’s prices competitive — and keep Vermont citizens buying their alcohol in-state. The Prime Focus program runs during the 13 largest volume weeks of the year, such as during holidays. Five items are given really deep discounts, while the DLC passes along discounts from suppliers and brokers on 10 other products. During the “off” weeks of the year, the DLC runs its Super Savings program, with three products offered at a discount, which, while not as steep as those for Prime Focus, is large enough to attract attention. In addition, up to 20 more items are offered with supplier discounts.


The DLC’s efforts to be competitively priced for its region have paid off. People from bordering states now come to Vermont to shop for spirits. The DLC even advertises out of state, in Massachusetts and New York.


Regulatory Responsibilities

The regulatory side of the department, with a staff of 23, including 18 sworn law-enforcement officers, handles licensing, enforcement and education.


Bill Goggins has been the director of enforcement, education & licensing for three years. He has been with the department for 13. “That’s pretty much the norm,” he said. “Nine times out of ten, when people come to work at the department, they stay.” He is a law-enforcement officer and started as an investigator for the department in the north-central part of the state, near the Canadian border.


At one point, Vermont led the nation in the number of teenage alcohol-related fatalities. There were many reasons for this. In a rural state, teenagers organize their own alcohol parties, often in wooded areas, and drive to get there. Vermont also borders Canada, where the drinking age remains 18. The bars of Montreal serve as a magnet for Vermont youth. In 1997, five Vermont teenagers died in an alcohol-related crash on their way back from Canada.


“When someone dies like that, you ask yourself, ‘Where did we fail?'” said Goggins. After that crash, the state of Vermont redoubled its efforts to curb underage drinking, with impressive results.


While the state had been number one in the number of teenage alcohol-related fatalities that year, today, seven years later, it is not even among the top ten. Back in 1997, the compliance rate hovered in the 60% range; it is now in the high 80s and is over 90% for servers and sellers who have attended the DLC’s own new responsible-service seminars.

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