Working Smart

“We look at how everyone else does business – other control states, other businesses in the alcohol industry, Wal-Mart, Kroger – and if we see someone getting more bang for their buck, we’re going to steal their ideas,” declared Pam O’Berry Evans, chairperson of the Virginia Department of Alcoholic Beverage Control (ABC).


Virginia ABC also comes up with ideas completely on its own. Its three commissioners – Evans along with Esther Vassar and Susan Swecker – have each chosen an area of ABC’s operations in which to specialize. Evans formerly worked as a trial lawyer for nine years, both as a prosecutor and in private practice, and most recently was the general counsel for the Richmond Police Department. In her role as commissioner, she has focused her attention on ABC’s Enforcement Bureau. Vassar, who was an English professor and college administrator for 20 years, is focusing on ABC’s educational efforts, and Swecker, with more than 25 years of experience in government relations, public relations and political-campaign management, focuses on ABC’s legislative work as well as its retail side.


All three commissioners see part of their role at ABC as generating ideas to improve how the department functions.


Virginia’s Department of Alcoholic Beverage Control is the sole wholesaler and retailer of spirits in the state and employs approximately 1,800 people. ABC operates 331 state stores, which sell wines from Virginia in addition to almost 2,000 spirit items. In 2007, these stores grossed $607.4 million. ABC also handles licensing and has its own Enforcement Bureau, with 99 ABC special agents, who have full police powers, scattered across the state. In 2007, ABC’s revenue, from the taxes it collects as well as the profits from the state stores, was over $290 million.


The role of commissioners, or board members, at Virginia ABC is different from many other control states. First of all, in Virginia, the only state that does not allow its governor to serve two consecutive terms, the ABC commissioners, appointed for a fixed term at the pleasure of the Governor, likewise generally only serve one, four-year term. [Esther Vassar is the exception to the rule: she served as commissioner under the previous governor, Mark Warner, and was reappointed by the current governor, Timothy Kaine.] Secondly, the Virginia ABC commissioners, while they do serve as administrative-law judges, hearing appeals of violation cases, are also agency heads of the department and are full-time state employees.


Chairmanship Rotation


Starting this term, the commissioners share the chairmanship on a rotating basis. Commissioner Swecker served as chair from April 1, 2007 until March 31, 2008.  Commissioner Vassar served as chair in 2006 and will again serve in 2009.  The rotation was Governor Kaine’s suggestion. “It’s a brilliant idea.  It’s a good way to work,” said Commissioner Swecker. “Everyone shares the responsibilities and the burdens of the chairmanship. That builds for a better team,” she said.


For Evans, the current chair, her priority is to “make sure we are looking for and adopting best practices,” she said. At the NABCA Annual Conference in May, she sat in on the Steering Committee’s meeting where the NABCA’s latest “Best Practices” report was discussed. “That was exactly what I was looking for,” said Evans.


Evans has already instituted a number of her own ideas at ABC.  In the ’90s, when Evans was a prosecutor in Richmond and Governor Kaine was a city councilperson, a need was identified for local communities to be able to communicate with ABC. “Councilman Kaine and I saw that it was hard to penetrate ABC as a citizen and even as a lawyer. It was very difficult for the public to have input,” Evans said. “One of my first priorities was to change that.”


She has established a Community Advisory Council. Its meetings, held in all four regions in the state, allow representatives from local public safety, educational and community organizations to meet with representatives of ABC.


Frank Monahan, director of ABC’s Bureau of Law Enforcement, who was a police major at the Richmond Police Department when Evans was its legal counsel, was all for the idea. “With my urban policing experience, I am very familiar with and in favor of community involvement,” he said. “The difference [with ABC] was we were taking what is usually a very localized concept – the local community working with their local police department – and making it statewide.”


Nevertheless, Monahan continued, “The impact was immediate. At the first meeting, we asked what people were interested in and we got an earful.” Attendees told ABC that they wanted to know which businesses in their communities had failed their compliance checks. “They said, ‘We want to know, we want to vote with our dollars,'” Monahan said. They also wanted to know which businesses had been charged with an ABC violation and what their penalties had been. And they were very interested in knowing the status of ABC-related bills being considered by the state legislature.


ABC now posts the results of its compliance checks on its web site [www.abc.virginia.gov] and, in a searchable database, it posts, not only its docket, but also the outcomes of its hearings. Another page on the web site discusses pending legislation and there is even a bulletin board for Community Advisory Council members to communicate with each other and with ABC.


Commissioner Evans’ next idea is for ABC to reach out to other state agencies when it comes to the financial investigations its Enforcement Bureau does as part of its licensing process. Licensees’ businesses are becoming increasingly complex and Enforcement’s investigations of them increasingly complicated and time-consuming. “It’s our responsibility to do this, but with the resources we have, it is very difficult,” said Evans. She envisions a task force of law-enforcement and other state agencies meeting to share ideas and expertise about such financial investigations.


Another idea of Evans’ became law on July 1. It is now an ABC violation for licensees to allow their businesses to become meeting places for gangs. “Incidents I saw in the news struck me,” she remembered. “There was a particularly bad case where a restaurant sponsored a performance by a rapper who flashed gang signs and gang colors. As people were leaving, there were fights in the parking lot and a man was shot.”


 


Head of the Class


Virginia ABC has always been strong on education. It is the sponsor of the oldest (22 years), continuously operating annual college conference on alcohol-related topics in the country. And it is constantly tackling new topics and reaching out to new audiences and partners. “We have the philosophy that, if we’re in the business of regulating and selling alcohol, we have a responsibility to educate the public about what we do, to educate young people about this unusual product called alcohol and also to focus on parts of the community that aren’t usually served in educational efforts,” said Vassar.


Last year, Vassar worked on an effort to reach out to the elderly and their caregivers. “Everyone knows someone who is elderly and drinks,” she said. “And there are issues to be aware of. For example, many elderly people are on medications that can interact badly with alcohol.” The ABC’s Alcohol and Aging Awareness Group (AAAG), which is made up of ABC, various state agencies that provide services to the elderly and several private organizations in the health and senior-advocacy fields, now meets on a monthly basis. On April 29, the AAAG sponsored a one-day seminar, which was open to anyone who provides care to the elderly, called “The Hidden Epidemic: Alcohol, Medication and the Older Adult.”  Educational brochures are also being distributed through ABC stores statewide.  The agency recently won a National Best Practices Award from the National Conference of State Liquor Administrators for its innovative Alcohol and Aging initiative. Vassar has also reached out to the commanders of military bases in the state. Many members of the military are in the 18- to 20-year-old age range. Also, the commissaries on military bases in the state can sell liquor, the only other off-premise entity, besides the state stores, that can. “It makes sense for us to partner. Both bases and ABC have established programs and created all these wonderful materials; there is no need for duplicated efforts,” explained Vassar. ABC has put its materials in the base commissaries, and in the fall, ABC will also participate in educational fairs held on military bases.


 


Enforcing Tobacco Laws


Vassar was also able to strike up a partnership with two tobacco companies, Philip Morris and Lorillard. ABC has been charged with enforcing the state’s laws on tobacco sales to minors. The two tobacco companies have agreed to withhold product incentives from retailers who have been cited for selling to people under the age of 18. “This is big, big, big,” said Vassar.


In addition to leading the department’s recycling efforts (see sidebar), Commissioner Swecker also focuses on ABC’s legislative work. This was, given her background in government relations and politics, a natural fit for her. One law that went into effect on July 1 expands the areas where ABC can choose to open its stores on Sundays to include any city in the state with a population of 100,000 or more. Another piece of legislation that ABC wanted to see passed but which died in committee was a bill that would have made an assault against an ABC agent a felony.


Though General Assembly sessions vary, ABC generally follows 10 or 12 pieces of proposed legislation closely. Curtis Coleburn, in his position as chief operating officer and secretary to the board, also works on legislative matters. “During the General Assembly sessions, we’re there every day,” he said.


Coleburn is also in charge of the day-to-day operations of the department. Several divisions and bureaus within the department, including Enforcement, Wholesale/Retail and Administration & Financial Services, report to him.


“One of the issues we’re facing currently is how to maintain profit margins in a tightening economy,” he said.


There are also three statewide initiatives to improve government performance and transparency. One is called ARMICS, which stands for Agency Risk Management Internal Control Standards. As Swecker wrote in her letter from the chair in the ABC’s 2007 Annual Report, “it’s the state government’s equivalent to the Sarbanes-Oxley Act [a Federal law that imposes standards on publicly traded companies].”


ABC’s Chief Financial Officer Craig Vanderland has led the effort to implement ARMICS in the department. “ARMICS is about being able to prove that you are good stewards of the citizens’ money.  It’s being able to prove you have sound business practices and that you are monitoring the processes critical to your success.  Using your car as an analogy: maps help guide you to where you want to go,” he said. “With ARMICS, we need to document how our business processes work and have controls in place – the gas gauge, the odometer – to know that our business processes are working the way they should.” Vanderland is proud that ABC is seen as one of the leaders in the state for implementing ARMICS practices. “We have been working intensively on it for the better part of a year. It has touched every division,” he said.


 


ABC’s quest to always be improving fits in well with two other statewide initiatives, the Governor’s Scorecard and Virginia Performs, which started in 2006. Virginia state agencies are required to report quarterly on how they are performing certain general management tasks, such as handling human resources, financial management and environmental measures. The reports are called the Governor’s Scorecard. Agencies are also required to report quarterly on certain goals specifically related to their missions. These results are called Virginia Performs.  For Virginia Performs, for example, ABC posts its compliance rates (99 percent for state stores, 91 percent for licensees). Both the Governor’s Scorecard and Virginia Performs results for all state agencies are posted online at www.VaPerforms.virginia.gov.


 


The Retail Store Scene


Virginia ABC currently runs 331 stores statewide, which employ approximately 1,500 people (two-thirds of them part-time). These stores range in size from 900 square feet (for the smallest rural store) to 11,000 square feet (for the newest licensee/dual purpose store). The average store is 2,500 square feet and carries approximately 1,100 items.


The stores get their products from ABC’s own warehouse in Richmond, which has a staff of 73 employees.


According to ABC’s latest Customer and Stakeholder Survey (which the department conducts every two years), 91% of state-store customers are very satisfied with the overall service they receive at the stores, 95% feel they get prompt service and 93% feel that state store employees are knowledgeable, the store layouts make it easy to find products and the stores are conveniently located.


But even these great stats don’t tell the whole story.


Virginia ABC has opened 80 new stores in the last eight years “to catch up with Virginia’s ever-growing population,” said Virginia Adams, director of ABC’s Wholesale/Retail Operations.


And three years ago, the warehouse underwent a major renovation. “The entire picking process changed radically from a one person/one store, manual picking process to an automated, conveyor-driven, team approach to picking,” said Adams. Under the old system, the warehouse staff was able to pick about 11,000 cases a day. Now, they routinely pick 14,000 cases a day. During peak times of the year, they can pick 20,000 cases a day. The average warehouse inventory is 416,080 cases, worth $40,336,568.


      When it comes to selecting locations for its new stores, ABC uses a Geographic Information System to sift through the data. The Real Estate Committee is made up of representatives from Policy, Analysis and Support Services; Property Management Services as well as Virginia Adams and others from Wholesale/Retail Operations and Craig Vanderland, ABC’s chief financial officer. “It’s like an analytic version of MapQuest – only better,” said Vanderland. Click on a spot on the map and it will tell you how many miles it is to the nearest ABC stores (or how many minutes it would take to drive to each, if you prefer) as well as statistics on population and other benchmarks.


“While analytical data is the basis for decisions, we supplement that by talking with our store and regional managers about practical business concerns and their knowledge of the local area.  One of our recent rural stores is a good example of qualitative input.  The data indicated that a store would have marginal returns.  After a site visit and input from local citizens and store employees about new homes and tourism, the decision was made to open the store on a trial basis.  The store has proven to be successful beyond our initial projections,” said Vanderland.  ABC has developed and continues to refine its system by studying how other states and other businesses, such as 7-Eleven and McDonald’s, choose where to place their locations.  ABC is willing to share, having provided copies of its store business-planning model to several other control states.


Eight years ago, when ABC started opening an increased number of new stores, “they were so far behind, especially in Northern Virginia,” said Commissioner Swecker. For those eight years, ABC was opening roughly 17 stores every year. But now, “having somewhat caught up with Virginia’s growing population, we have scaled back to four to five [new] stores a year,” said Adams.


“Now that we are slowing down on new stores, attention is being turned to [the] modernization of existing stores,” she continued. “Our current plan is to modernize 16 stores per year.” The stores will receive upgraded flooring, energy-efficient lighting, upscale fixtures and enhanced display areas.


 


The Enforcement Agenda


In March of 2007, the Enforcement Bureau of the ABC announced that it was hiring agents for 10 new positions. It received a record-breaking 1,562 applications.


“ABC agents are well-respected in the law enforcement community,” explained director Monahan. “It’s a great job: you have an unbelievable amount of authority with both criminal and regulatory enforcement, a one-two punch for impacting on a problem.”


And the tasks of the ABC’s 99 special agents, all sworn police officers, do run the gamut. In addition to investigating license applications, they each carry a caseload of 150 to 220 licensees, whom they formally inspect once a year and visit informally more than that. They each handle a caseload of complaints. They do compliance checks: 5,368 of them in 2007. They oversee beer and wine wholesalers, they handle any in-house investigations needed at the state stores (such as for suspected employee theft, although they are not “first responders” for something like a robbery, which would be local police).


They even hunt down moonshine stills and nip joints (unlicensed bars), something that resulted in their being featured on a National Geographic special called “Moonshine Today” in March 2007. “Yeah, the stills are a part of what we do,” sighed Monahan, “and they do capture people’s attention.” He added that the stills ABC agents find aren’t what people usually envision; they’re not just an old man distilling liquor on the cheap for himself in the woods. They tend to be fairly large, commercial operations, making $200,000 to $300,000 a year.


And the nip joints? “People always say to me, ‘Aw, come on, how much trouble can they cause,'” said Monahan. “But in my 28 years of policing, I’ve never seen one that did not cause surrounding crime, like fights and theft. They infect their neighborhoods.”


The bureau maintains a speaker’s bureau and provides training sessions for licensees and their employees. A staff of six within the bureau is in charge of the ABC’s educational efforts.


The ABC Bureau of Law Enforcement is also in charge of enforcing the direct-shipping laws, making sure the businesses doing the shipping have the right kind of permit and the carriers are getting someone of legal drinking age to sign for the package. “Believe it or not, one of the ways we check is by ordering wine, beer and sometimes even liquor [which is never legal to ship in Virginia] online and having it shipped to headquarters,” said Monahan. “Then, we verify that the shipper followed all the regulations, had the appropriate markings on the package, etc.”

So goes the control arm of the mission at Virginia ABC, an agency charged with successfully balancing control, service and revenue.

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