This is the tenth straight year that StateWays has contacted top control state officials in the 19 jurisdictions and asked them to provide an overview of recent initiatives in their respective states. As we have seen in the past, several common themes emerged from the state overviews, including the fact that virtually all control state executives continued to report year-over-year sales and revenue increases, though several of them referenced the slowing economy as a damper to even greater sales growth. According to these reports, the beefing up of enforcement and education initiatives remains a driving force for combating the abuse and underage misuse of beverage alcohol products through the control states. System-wide modernization, store upgrades and new store openings also continue apace. And this year, a number of officials referred to “green,” environmentally responsible initiatives that have begun in their states.
Several states have enacted – or are in the process of enacting -new legislation, which will affect the rules and regulations of these various control states. And, as usual, there have been changes in key personnel. Overall, we hope that the following comments provide a meaningful snapshot of the activities taking place throughout the control states. Once again, we’d like to thank the various commissioners, chairpersons and administrators from the control jurisdictions who took time out from their busy schedules to respond. -Richard Brandes
Alabama Alcoholic Beverage Control Board
With the economy sputtering and energy prices continuing to rise, sales in Alabama’s ABC stores have taken a downturn. Although the stores are still making money, they are not making as much as this time last year. Revenues are expected to increase 4.6%, down from last year’s growth rate, as the weaker economy forces people to tighten their budgets for going out.
The Alabama ABC Board has experienced some major changes this past year. With the death of the Assistant Administrator, Mr. Chester Weeks, Captain John E. Richardson has been appointed to take his place. Capt. Richardson has worked for the ABC Board for over 20 years, previously as a Captain in the Enforcement Division.
With the retirement of Enforcement Director Roy Houlton in February, Jeff Rogers was appointed Chief of Enforcement. Chief Rogers brought into effect many new ideas and goals. The License section is switching to a totally automated system. The renewals are currently in a test market for online renewals in two counties and statewide within the ABC Enforcement District offices. This transition involves training, testing, and the reprogramming of renewal software. The system is functioning better than expected and we plan to have online application processing in place by the beginning of the fiscal year. The application and the renewal system will tie in together and once completed, will make an automated license package. This will move the Licensing Section to total automation. Also new to the Enforcement Division is a Mobile Command Vehicle. This vehicle is equipped with the latest law enforcement equipment to include cameras, computers, and a wireless network, along with a mobile certified breath testing instrument. The vehicle is state-of-the-art and will be used for special investigations, natural disaster response and special event activities.
The POSICS (Point of Sale/Inventory Control System) has been successfully completed and all ABC Store cash registers have been replaced with each point-of-sale system having a camera overhead. The warehouse phase, which includes wireless scanning of incoming product, wireless physical inventory process, and integration with our automated conveyor system, was completed in May 2008.The project began in September 2006.
A major shortcoming for this agency is beginning to be addressed. Disaster recovery has become prominent over the last few years. We have identified a data backup site at one of our enforcement district offices, physically distant from the central office, which will allow a quick recovery in the event the central office is destroyed or unavailable for any reason. Equipment is currently being procured and placed in the backup site and should be completed by December 2008.
Idaho State Liquor Dispensary
While enduring many of the same economic issues that have taken center-stage nationally, the Idaho State Liquor Dispensary (ISLD) continues to experience healthy growth in revenues. We are constantly working to maximize profits for the citizens of Idaho, and reduce potential social issues related to alcohol beverage consumption.
Although the state’s general population has risen to nearly 1.5 million residents, the rate of growth has slowed, resulting in less pressure on the ISLD to add new stores in an effort to satisfy consumer demand. Still, seven new stores were opened in 2007, and two more new stores are opening in the Boise and Idaho Falls Metro areas during the summer of 2008. Two smaller contract stores (one each in North and Southwest Idaho) will be transitioning to state-owned facilities this fall. These additional stores will add customer convenience and better product selection in those urban areas.
Revenue from sales finished FY08 at a still healthy 7.6% over sales of the previous 12 months (a cumulative 95% over the past 7 years), with a record $130.8 million. Net profits exceed a record $45 million, generating a valuable financial return to Idaho’s General Fund, cities and counties, and other special programs.
All this has been accomplished during a time of astronomical increases in energy costs and other operating expenses. This success is due in great part to the dedicated efforts of more than 300 employees of the Central Office and Warehouse, and 65 State liquor stores. Record sales and profits have been achieved, even as ISLD came in well under the averages nationally among all states, and NABCA member states, for per-capita consumption of alcohol.
Sunday sales continue to grow steadily in dollars as well as in the number of participating counties, with more than $3 million in revenue (double the FY07 total). The Idaho Legislature, this past session, continued the modernization of Idaho liquor laws, approving Election Day sales for the first time in 75 years.
Continued sales growth has led to an ongoing need for more warehouse space to house inventory. ISLD received approval from the Idaho Legislature to move forward with the final phase of a 3-year, $7.5 million expansion that will increase the central warehouse from 57,000 to 75,000 square feet. More importantly, this expansion will modernize the present facility with a state-of-the-art Warehouse Management System (WMS) and automated pallet storage, through the use of an Automated Storage/Retrieval System (AS/RS). The warehouse project has been under the direction of Bill Applegate, Product General Manager. The three-year project has remained on schedule and under budget due to Bill’s keen attention to detail.
All stores, particularly the far-flung legion of smaller contract stores, will benefit from an expanded Single Pack capability, through the use of a new and expanded single-pack pick module and other warehouse improvements. This will result in better product availability for consumers, giving stores the ability to bring in many more expensive or special category bottles in small quantities, where they might have been reluctant to do so with the demand of full case orders. This creates a win-win for consumers, as well as ISLD, as more product remains in bailment for longer periods of time. The goals of this project are improving efficiency, as well as effectiveness, through automation, utilizing technology to keep abreast of growth, and establishing a plan for organized growth through 2025 and beyond.
The Idaho State Liquor Dispensary, like other NABCA members, is continuing to be more active in sponsoring and supporting numerous alcohol education programs. This summer, I and Deputy Superintendent Larry Maneely helped Governor C.L. “Butch” Otter launch a campaign to educate Idahoans to the dangers of Fetal Alcohol Syndrome (FAS). Working in conjunction with members of the state legislature who championed the cause, as well as Idaho Health and Welfare Director Richard Armstrong and his staff, ISLD was able to distribute cautionary decals to each state and contract store for prominent placement on check-stands, doors and windows. The decals will alert everyone to the dangers of alcohol consumption at any level during pregnancy. Additionally, the decals were made available to the more than 4,000 on-premise licensees throughout the state for their help in sending a strong message of the fully preventable dangers involved.
ISLD also continues to support the efforts of the Idaho State Police Alcohol Beverage Control Bureau (ABC) in its attempt to curb the epidemic of underage drinking that has become such a problem nationally. Anything we can do to reduce the irresponsible sale of alcohol to underage persons is our goal. A $5,000 grant from NABCA was awarded to the Boise Police Department which hosted a mid-July, two-day Northwest Alcohol Conference. Several hundred law enforcement, health and regulatory representatives were on hand to discuss a variety of topics, and hear from a long list of informed speakers, including Idaho Attorney General Lawrence Wasden.
The Control State System continues to function well in Idaho. Policy makers and citizens have been very supportive. The Liquor Dispensary will work toward more modernization with customer services as a top priority. Possible legislation for the upcoming session may include a bill to allow in-store product sampling opportunities. These positive changes in Idaho could not have taken place without the support of ISLD employees, the Governor, legislators, NABCA, DISCUS, the Century Council and other industry related organizations.
Iowa Alcoholic Beverages Division
Despite the economic downturn, liquor sales in Iowa continue to rise. For the 12th consecutive year, Iowa set a new sales record in Fiscal Year 2008 (FY08). With wholesale sales topping $188 million – an increase of $11 million over the previous fiscal year – the Division’s transfers into the state’s general fund topped $87 million. Simply put, the Division has been earning green, but also going green.
In the past five years, the Division has seen double-digit or near double-digit increases in liquor sales. Sales this year were not up at the recent historic rate, closing at 6.38% above last fiscal year. Several explanations are offered for the slowdown.
First and foremost, beer’s gain has been liquor’s loss. While beer sales were only up 1.5%, that trend is a significant increase over several years of flat beer sales, especially given beer’s share of the market. Iowa is a beer drinking state, with the average adult consuming 37.23 gallons of beer per year, compared to 1.98 gallons of spirits and 1.69 gallons of wine.
Moreover, the Iowa Alcoholic Beverages Division has witnessed a consumer tendency in recent years to trade-up in the market. However, the numbers for FY08 suggest that the economy may be serving as an impediment to top-shelf liquor purchases.
Lastly, consumer demographics that have supported the recent wave of liquor sales, a third factor, may be starting to wane. The offspring of the baby boom generation that has been coming of legal drinking age, has reached its peak and is no longer having the full impact it once had.
While other factors obviously impact the trend, the three I’ve identified seem to be the most critical. That said, it’s hard to argue with a 6.38% annual growth rate.
It seems like everyone is “going green” these days and the State of Iowa is becoming eco-friendly as well. In February, Governor Chet Culver issued an executive order setting the groundwork for the state to become a leader in “environmental protection through increasing the use of renewable energy, alternative fuels and energy efficient technologies.”
The Division has already started on its journey to become a sustainable, environmentally friendly site. In an effort to be more efficient and reduce the Division’s carbon footprint, many changes have been made to the operation. The initiatives have ranged from replacing an outdated HVAC system and installing T5 florescent light bulbs, which use half the energy and have twice the life of the old bulbs, to adding R34 insulation to the new roof. A broad recycling program has been implemented and the Division’s fleet now uses biodiesel and E85 fuel.
During fiscal year 2008, the focus of the Iowa Alcoholic Beverages Division was on green: earning green and going green. The Division has succeeded in both areas and will continue to expand the efforts to go green and earn green in the coming years.
Maine State Liquor & Lottery Commission
The Maine Bureau of Alcoholic Beverages works in cooperation with its wholesale liquor distributor and 350 privately owned liquor stores across the state.
Sales for distilled spirits in Maine for 2008 are up 4%. Case sales are up approximately 2%. Allens Coffee Brandy continues to enjoy tremendous success as the state’s number one selling product. Grey Goose Vodka sales are up 8.4% and Jagermeister continues its steady growth with sales up approximately 7%. Canadian Whisky products have seen their sales increase by 5% on average.
Captain Morgan Spiced, Bacardi and Smirnoff are big sellers in the state but there continues to be a market for “value priced” products. Orloff Vodka, for example, which is ranked second in sales, is known as a locally distilled product that has a strong regional following.
Earlier this year, the Bureau of Alcoholic Beverages worked together with the Office of the Attorney General, the Department of Public Safety, the Office of Substance Abuse and Maine’s Higher Education Alcohol Prevention Partnership to engage college leaders in a dialogue regarding the development of environmental community-based strategies to change the social norms and expectations around underage college drinking and to permanently reduce high risk drinking by college students. The Bureau led a “call to action” meeting which was attended by more than two dozen university and college presidents. The state partners developed a “tool kit” for participants that included self-assessment tools, best practice model policies, and information about recommendations made by the Surgeon General and NIAAA’s College Drinking Task Force. State partners have committed to attending individual community meetings across the state to further support the adoption of environmental strategies to meet the “call to action” recommendations.
Maine continues its mission to effectively regulate the beverage alcohol industry, ensure responsible business practices and create a favorable economic climate while prohibiting sales to minors.
Michigan Liquor Control Commission
While all reports regarding the economy indicate Michigan as having been hit hardest with staggering numbers for auto sales, job losses, home foreclosures, gas prices, grocery bills, utility costs, etc. – I’m here to tell you that Michigan is still open for business and thriving in many areas when it comes to being a hospitable state.
We were delighted when the National Alcohol Beverage Control Association (NABCA) announced that their Board of Director’s Meeting will be held at the Grand Hotel on Mackinac Island in September of this year.
With the bottom line on everyone’s mind when it comes to revenue and sales figures, for the current fiscal year, our off-premises licensees (SDD outlets) accounted for 79.2% or $708.9 million of total liquor sales, and on-premises licensees, such as bars, restaurants, hotels and clubs accounted for 20.7% or $185.0 million.
Recently, the Commission held one of its two annual public hearings to provide a forum for airing complaints and hearing comments with regard to the administration of the Liquor Control Code. At the hearing, topics of concern expressed by representatives of the liquor industry included items such as a request for the ability to move off-premises liquor licenses within counties; the modification of MLCC document processing procedures with regard to Server Training; liquor delivery issues; the need for training of local law enforcement in liquor law; and the need for mandatory server training for all “special license” holders operating beer tents at festivals.
From our regulation standpoint, despite the 40% cutback in our investigative staff over the past 20 years, the MLCC enforcement division wrote 60% of the 2,578 violations received in 2007, which contributed $1.1 million to Michigan’s General Fund from fines and costs. The enforcement division continues to conduct controlled buy operations, which resulted in 282 of the violations last fiscal year.
In January of this year, the MLCC and the Michigan Authorized Alcohol Distribution Agents issued a report to the Michigan Legislature stating that the state of Michigan loses $14 million annually due to the illegal importation of alcohol and outlined a series of steps that should be taken to combat the state’s loss of revenue, including:
• Increasing penalties for the illegal importation of alcohol and appropriations for law enforcement;
• Forming stronger partnerships with local law enforcement agencies to reduce the illegal importation of alcohol;
• Using available technology to detect illegally imported alcohol products;
• Enhance education and training programs for law enforcement officers and retail licensees on this topic.
Smuggling, or bootlegging, has been an issue since the days of Prohibition; however, the dangers of illegal importation have increased significantly as the hijacking for product, cash, and delivery vehicles has become a serious matter of life and death. In the past few years, several delivery drivers have been held up or shot in attempts to steal alcohol.
Enforcement surveillance teams have tracked smugglers bringing in $30,000 or more in product across state lines on a regular basis. One agent stated that smugglers were using plain cargo vans with no windows or blacked out windows to transport the alcohol in one to sometimes three trips per week. To view the report, please visit our website at www.michigan.gov/lcc.
As the end of the year approaches, we (along with everyone else in the liquor industry) will celebrate our 75th Anniversary. We continually work to improve our service to our customers by frequently reviewing rules for possible modification or rescission with the express purpose of making the processes of the agency less cumbersome and more efficacious in providing those who do business with the Commission more intelligible and direct paths to fulfilling their legitimate needs. We also continue to expand access to information and Commission records to all who have a stake or an interest in the Commission’s business through development of an improved and enhanced website.
When the Michigan Liquor Control Commission conducted a report following the first five years of operation, Governor Frank Murphy then (in 1938) stated that his one demand of the Commission was “Do a good job, efficiently and honestly – I’ll be satisfied with nothing less.” “Efficiency and Honesty” became the watchwords carried by his Commission. I believe the Honorable Frank Murphy would be proud of the very good job of the current-day staff of the Commission … I know I am.
Mississippi State Tax Commission
Alcoholic Beverage Control Division
Fiscal Year 2008 has proven to be a good year for the Mississippi ABC, although one which saw many changes. Physically (not fiscally) the state replaced the roof on our Liquor Distribution Center including the administrative offices. Due to the age and construction of the roof, we not only had to remove the roofing material, but all of the overhead ceiling in the entire warehouse. For several days we had a “sunroof” in the warehouse, as portions of the roof were removed and replaced. Luckily we experienced no weather related inventory problems (i.e. rain) during the construction.
Patsy Holeman was selected as the new ABC Director in February. Patsy has been with the Tax Commission for 26 years, most recently serving as director of Motor Vehicle Licensing. Although ABC was a totally new field for her, Patsy has come up to speed quickly. She is responsible for the operations of our warehouse, purchasing, sales, and accounting. Chief Mark Hicks continues to handle regulatory matters including law enforcement and permitting.
Fiscally, sales of spirits and wine increased by 94,485 cases in FY 2008. Although shipping costs continue to escalate, our net operating profit rose by 7.1% this year. We distributed just under $88,000,000 from the sales of alcohol beverages.
ABC Enforcement had a productive 2008. With a focus on underage drinking, our agents issued more than 546 citations statewide for minors in possession of alcohol beverages. We participated in the “Save a Teen” program during May. We received a $40,000 federal grant to work a special initiative dealing with rural area enforcement. The target of this grant was rural areas such as reservoirs and waterways where kids normally feel they are able to hide from law enforcement while consuming alcohol beverages.
Educational efforts are also important, as our Enforcement Agents disseminated over 10,000 educational brochures and posters to high schools and colleges warning about the risk of using fake identification. This was in response to statistics showing almost 25% of our minors were in possession of fake I.D.’s. We also produced a DVD for law enforcement on how to detect false identification. These DVD’s are currently being disseminated to every law enforcement agency in the state and agents are providing training to these agencies when requested. This program was approved by the Mississippi Board of Law Enforcement Officers Standards and Training so local departments can receive in-service credit for the training. We just received notification from the National Liquor Law Enforcement Association (NLLEA) that we have won the 2008 Innovative Law Enforcement Program of the Year award for this program. This Fake Identification Education and Law Enforcement Training Program was made possible by a grant from NABCA.
Liquor Control Division
Montana Department of Revenue
The Montana Department of Revenue’s Liquor Control Division has made notable progress in its operations and sales in the last twelve months. Working as a control jurisdiction, we have made significant improvements to our wholesale, customer service and educational outreach programs, while continuing to ensure that liquor is available to those adults who choose to drink responsibly.
Liquor Control Division provides beverage alcohol wholesale distribution services to 95 contracted agency stores, who service over 1,400 licensed establishments.
Fiscal Year 2008, which ended on June 30, was a very successful sales period for us. Total sales showed an increase of approximately 7% over FY 2007, with our gross sales of product reaching $98.5 million. Our volume of sales also increased, up 4% (24,000 cases) from FY 2007.
Montanans benefit from liquor sales, with nearly $29 million in liquor revenues going into the state’s general fund and local government coffers. Liquor revenues from product sales and taxes help to pay for important citizen services in the state.
In FY 2008, the division implemented some notable pieces of alcohol-related legislation passed by the 2007 Montana Legislature.
The legislation brings Montana’s liquor laws into compliance with the U.S. Constitution’s Interstate Commerce Clause. Out-of-state residents are now allowed to apply for Montana liquor licenses. In addition, wineries and breweries located outside of Montana now have the opportunity to “opt-in” and become licensed. Once licensed, they may ship limited amounts of wine and beer directly to a Montana licensed retailer.
The quota system for restaurant beer and wine (RBW) licenses was in essence doubled in most Montana cities. The division conducted 17 RBW license lotteries across the state last summer. We had 524 lottery entrants for 124 available licenses. We have received 79 complete RBW applications to date. Of those, 41 licenses have been issued and 5 applicants have been granted conditional license approval while awaiting completion of their proposed premises. The average length of time for these licenses to be processed and issued was 85 days.
With Montana liquor sales continuing to increase year after year, it is important that we help ensure consumers are using the products responsibly. The goals of our educational efforts are to promote the responsible use of alcohol beverages by adults, reduce the underage demand, prevent underage access and positively mold the norms of the community.
We have placed a direct focus on responsible alcohol sales and service training with a major revision of the Let’s Control It responsible alcohol sales and service program. The new program provides sellers and servers with the tools they need to help their establishment stay in compliance with Montana law. The new program covers refusal skills, effective server responses, techniques to evaluate a customer, identifying false identification, and secondary sales and liability issues.
The division has partnered with the liquor licensees and community partners to promote the message of controlling access to alcohol by underage youth. We are educating the public on how kids have access to alcohol along with Montana’s statistics of underage use of alcohol.
As part of our improved customer service, we have enhanced our online services. The State of Montana has implemented electronic reporting and payment for beer, wine and cider tax; provided agency liquor store access to their account to view, print invoices, coupons and make payments; provided the ability for vendors to access and manage account information; and added on-line renewals for distilled spirits vendor licenses, distilled spirits vendor representative licenses and winery importer registration.
To prepare the state for success in 2009 and years to come, we are focusing on operational effectiveness to keep up with historical 5% growth; to add years to the life of current building space and to control labor costs. By adding barcode scanning, additional racking and optimizing warehouse layout to reduce the number of steps taken by each warehouse worker, we hope to sustain labor costs with future growth.
In addition, we are working to improve energy efficiency of our building and looking at sustainable energy alternatives for the future. We are upgrading our current lighting system, starting new recycling programs for cardboard and shrink-wrap and determining how best to make cost effective capital inve