The More Things Change

More than 2,000 years ago, an ancient Greek philosopher said, “The only constant is change.” Nowhere is that more true than at control-state agencies. Governors and legislators come and go. Economic conditions continually cycle. Restaurants and bars go into and out of business. Suppliers are always introducing new products. And there is always a new generation, itching to turn 21.

The challenge for control state agencies is to continue to fulfill their missions even as conditions change. And these days, for state agencies of all types, across the country, the biggest challenge is budget cuts. The Oregon Liquor Control Commission (OLCC) is no different. In its next two-year budget, it is facing cuts of $4 to $4.5 million, even as its sales increase by rates of more than 4 percent per year.

“Everyone’s facing budget problems, the possibility of staff reductions, and are looking for efficiencies,” said Rudy Williams, one of the two deputy directors at the OLCC. “But though things are tough and the budget is bad, our mission has not changed. We are still committed to public safety – that will never change.”

The OLCC, based in Portland, has the exclusive right to sell packaged distilled spirits in the state of Oregon. It oversees the 246 liquor agents it has contracted with. The stores these agents run are the only entities in the state that sell packaged distilled spirits to licensees and consumers. The OLCC runs a two-warehouse distribution center in Portland to keep these agents stocked. It issues licenses for the on-premise, or by-the-drink, sale of distilled spirits, beer and wine to restaurants and bars, and also licenses businesses that sell packaged wine and beer. It trains and issues permits to every server, every person working on-premise who sells alcohol beverages to the public. And its staff of 37 enforcement officers, called inspectors, enforce the state’s liquor laws.

Technically, “the commission” is the five-person policy-making body of the OLCC. The commissioners, each of whom resides in one of Oregon’s five congressional districts, meet every month. During these meetings, which alternate between face-to-face and phone meetings, the commissioners make decisions on rule changes, contested cases of liquor-law violations and the appointment of new liquor-store agents.

What people at the OLCC refer to as “the agency” is the entity that runs the day-to-day operations, from the distribution center to the licensing operation to the enforcement officers out in the field. The agency is headed up by an executive director, Steve Pharo, who reports to the commissioners. The agency is divided into three “programs.” Administration and Support Services includes human resources, communications, information technology and financial services. Distilled Spirits handles the purchasing of distilled spirits, the operation of the distribution center and also, with a division called Retail Services, oversees the liquor agents. The third program, Public Safety, encompasses licensing, enforcement, the state’s alcohol-server education program and a division called Administrative Policy and Process, which handles the agency’s legal needs.

The two larger programs are Distilled Spirits and Public Safety. Each of these is headed up by a deputy director: Rudy Williams at Public Safety and Merle Lindsey at Distilled Spirits.

Distilled Spirits has 67 employees, including five district managers who work with liquor agents across the state. Two of these district managers work out of field offices in the eastern and southern parts of the state, while the other three work out of Portland, whose metro area accounts for a lion’s share of the state’s population and, hence, liquor agents.

These district managers are the liquor agents’ first point of contact with the agency. “Each district manager has a group of agents whom they meet with at least monthly,” said Merle Lindsey, deputy director of Distilled Spirits. “They are who the agents turn to if they get bad product or have an issue with ordering.”

The liquor agents of Oregon represent a cross-section of the state’s population. They are male and female, white, African-American, Asian, Middle Eastern and Hispanic. The vast majority run one store, though there are provisions for an agent with an exemplary record to apply to open a second location, something a handful have done.

An agent’s liquor store can either be “exclusive” or “non-exclusive.” Exclusive stores, which are generally located in more densely populated areas, such as the metro area of Portland, sell only distilled spirits and a short list of related items, which the agent obtains separately, such as mixers and glassware. Non-exclusive stores are stores that are actually another business and have added on a distilled-spirits component. These stores are generally located in the small, rural towns which abound in Oregon. “These are outlying areas that wouldn’t support a store dedicated to just distilled spirits,” explained Lindsey. These non-exclusives include hardware stores, pharmacies, small restaurants, even a gun shop.

The OLCC controls the number of liquor stores in the state, a key component to fighting the problems of alcohol misuse. “Public-health studies have proven that controlling the access to alcohol helps to prevent the problems of overuse and use by minors,” said Phil Lang, who recently retired as the chairman of the Commission. (See sidebar.)

Once the Commission has determined that there is an opening for a new liquor agent – for reasons ranging from the retirement of an existing agent to growth in population – the OLCC advertises the opportunity in the Sunday edition of the state’s main newspaper, The Oregonian, in the newspapers of the community where the vacancy exists and also on its own website, Information about vacancies can also be heard by calling the Retail Services hotline.

People interested in becoming an agent fill out an application. They undergo a credit and a criminal background check. They are evaluated on their background and work experience. “We look for some retail experience,” said Brian Flemming, retail services director. “While they don’t absolutely have to have it, we are looking to see that they understand that agents are serving customers.” Questions are asked about their business plan. Their ability to finance this new business venture – agents pay for their own operating expenses – is evaluated. The top applicants are invited to a first interview at the OLCC. “And we rank them,” said Flemming. The applicants who receive top rankings by the Retail Services staff are then invited to prepare a presentation to give to the commissioners, who are also given notes on how Retail Services had ranked them. The final decision is the commissioners’ to make.

Agents do not own the distilled-spirits inventory they sell. “They only own it if they lose it,” joked Flemming. The suppliers own the liquor when it is in the OLCC’s distribution center. The state owns it once it is shipped to the agents and put on store shelves. And the ownership of it transfers from the state to the consumer when it is purchased.

The money the agent makes is a combination of a base allowance and a variable sales commission and depends on what type of liquor store, exclusive or non-exclusive, they run. The smaller non-exclusives make a higher commission.

Most agents deposit the money made from the sale of distilled spirits to a state account daily. (Some of the smallest, most remote stores do this weekly. “Some places literally have no bank in town,” explained Flemming.) The agents file, electronically, monthly sales reports.

The Distilled Spirits Program at the OLCC makes maintaining its relationships with its agents a priority. Agents serve on committees which meet regularly, such as the Retail Partners Council (RPC), which meets quarterly to discuss operational issues, and the Business Partner Committee, which includes licensees and beer and wine wholesalers as well as agents.

The OLCC in particular has been working on encouraging agents to make upgrades to their stores. This might mean moving the store to a better location or renovating. The OLCC can only encourage agents, since it is the agents who will be making the financial investment. One way is to write up the success stories of agents who have taken the plunge. “We’ve seen agents make a $100,000 investment in upgrading their stores and have their sales increase by 30, 40 and even 50 percent,” said Flemming.

Last October, the OLCC began to require its liquor agents to use a program to train every employee in their stores. Liquor-store employees learn how to identify VIPS (“very intoxicated persons”) and how to check IDs, in part by watching a video entitled “It’s Your Job.”

The Distilled Spirit program is also responsible for ordering the spirit products the system sells. Currently, the OLCC has over 1,800 regularly listed products. That number keeps growing. “If you can imagine it, the distilled-spirit industry can make it,” said Deputy Director Lindsey. “We carry 18 different flavors of vodka from one distillery.”

The OLCC is proud of its ability to handle such a wide and ever-changing selection. “We are always researching to keep on top of trends,” said Lindsey, “and on a daily basis, our purchase manager meets with local reps, who often want to trade out one of their products and replace it with something new.”

A Listing Committee also meets regularly. Until fairly recently, the mid-1990s, it was the commissioners themselves who made listing decisions and they based it on tasting the product. Phil Lang, who became the Commission’s chairperson in 1998, said, “That was shocking to me.” Before Lang took the position, he sat in on a commission meeting. “At the end of the meeting, someone rolled a shopping cart in, lined the bottles up and the commissioners tasted them all. That’s how they were deciding,” he said. Changing how listing decisions were made was one of the first things Lang did.

Now, the Listing Committee, which almost always includes at least one liquor agent, bases its decisions on data. “We look at their marketing plan, at the money they’ve committed to doing events on-premise. It’s a facts-based approach,” said Flemming.

The increased number of products being carried has a significant impact on how the OLCC runs its distribution center. In 2007, the OLCC bought a second warehouse around the corner from its first. The agency now has a total of 230,000 square feet of warehouse space. “As product lines continue to grow, we have to cannibalize our bulk storage to create more pick locations,” explained Bill Mallon, distribution center manager. The OLCC began to need to rent additional warehouse space for bulk storage, at least during busy periods, such as the holiday season, starting in about 2001.When it added its warehouse management system (WMS) in 2002, it converted more bulk storage into pick locations as it changed how it processed orders – which continued to increase in complexity with the growing number of products available. “By 2003, we were renting space on a full-time basis,” said Mallon, “so when the opportunity came up to buy a warehouse near us, we did.” The second warehouse, which is 106,000 square feet in size, is located only about 500 feet from the OLCC’s original warehouse and is used entirely for bulk storage. The OLCC has two trucks and a half-dozen trailers that it uses to bring product back and forth between the two. “It’s just like a forklift operator going to another part of the warehouse,” explained Mallon. “It makes no difference to the WMS that it’s a different building.”

Every weekday, the OLCC ships orders to about 45 of its agents. “We are shipping over 12,000 cases today,” said Mallon. “Twelve of them are in orders of over 400 cases; ten of them are for orders of less than 50 cases.”

And some of those cases are split. “Let’s just say, allowing split-case orders requires a lot of effort,” said Mallon, but he pointed out, it is necessary to ensure that agents, with both large operations and small, are carrying the inventory consumers want to buy.

Processing split-cases requires that one of the main warehouse’s four conveyor systems be dedicated just to that task. Assembling the split-case part of an order also requires a lot more time than assembling the full-case part. It takes the OLCC’s distribution center only about 20 minutes to put together an order’s full cases as opposed to more than a day to put together its split cases.

To accommodate this difference most effectively, the distribution center has recently changed the sequence in which its daily orders are processed. Now, the first step is to start assembling the split-case part of the orders that have to travel the farthest. This assures that all agents, no matter how far they are from the distribution center in Portland, will receive their order no later than the second day after they place it.

The Distribution Center is continually making adjustments such as these, to keep up with the increased number of products it is handling, in the most efficient manner, with the space it has. “Pallet rollers, case-flow racks, tall racks, push-back racks, we are constantly moving things around,” said Mallon, “and of course, adding more pick locations. We have 1,600 pick locations just in the split-case area. Things constantly change and we find ourselves continually asking, ‘OK, now how do we do it?'”

Like other control-state agencies, the OLCC is, as Rudy Williams, deputy director of the OLCC’s Public Safety program, put it, “two unlikely partners working together.” On the one hand, the control-state agency is charged with making distilled spirits available to legal consumers. On the other, it is licensing and controlling the use of that alcohol so that it doesn’t become misuse.

The 109 employees in the Public Safety program handle licensing, the OLCC’s relationships with licensees, including the education of all the licensees, their managers and their employees who mix, serve or sell alcohol, and enforcement, which includes the OLCC’s minor decoy program.

The licensing division’s 40 employees work with about 14,000 licensees in the state, about half of whom are on-premise accounts selling distilled spirits and half are off- and on-premise establishments selling beer and wine.

“We are the front end of Public Safety,” said Farshad Allahdadi, license services director. “We want to get safe, qualifying businesses up and running.” Allahdadi explained that the approach to licensing is a little different in Oregon than it is in other states. “In Oregon, the presumption is that everyone gets a license unless there is a problem with their application,” he said. So, once an applicant’s license application has been reviewed by investigators in the licensing division, a license is issued, before an inspection of the premises has been done.

The licensing division has been working at streamlining its process to get licenses to businesses more quickly. “Two years ago, it used to take an average of 111 days to be issued a license, and in Portland [where most of the applications come from] it was 150,” Allahdadi said. “Just by looking and making modest changes in our process, we have been able to bring that number down dramatically, to 75-80 days in Portland.”

And that’s in an environment where, despite the economic downturn, there have been more applications, not fewer. “And there has been a lot of creativity in the business models,” said Allahdadi. “There’s a trend of food carts becoming little micro restaurants – and wanting a license – and there are the Pedal Pubs [which are businesses that take their customers on pub crawls and winery tours using bicycle/bars built for 16].  It’s a challenge in licensing to sort that all out.”

Once a license has been issued, an inspector, one of the enforcement officers, is dispatched to do an inspection of the premises. This inspection has been modified to be, not only an inspection, but also the start of a long-term relationship.

Called First Call, the visit happens within the first 90 days. Started last fall, this new kind of inspection is a meeting where the licensee’s assigned inspector introduces him- or herself and “tells [them] all the things they need to know so there are no violations,” said Deputy Director Williams. “We want to help our licensees be successful, not fine them. Our goal is not to give out tickets; our goal is for there to be no violations.”

First Call was created in direct response to a licensee suggestion. The Public Safety program of the OLCC, likes its Distilled Spirits program, is very pro-active in reaching out to the businesses, in this case licensees, it oversees. “We started a program called Outreach almost two years ago,” said Williams. “We travel to all regions of the state on a quarterly basis. We don’t have an agenda.” The OLCC changed its food rules and table-size rules for restaurants and bars, based on licensee feedback. Another licensee said he wanted some kind of notification when the OLCC made rule changes that were important to him. Though those types of changes are posted on the OLCC website, he did not, this licensee pointed out, have time to always be checking. The OLCC instituted a digital-subscription service. Anyone – licensee, agent, journalist, citizen – can now sign up to receive email or text notifications when the OLCC posts news about topics they are interested in. There’s even an OLCC blog to visit, where OLCC personnel answer questions in the comments section.

The enforcement officers, or inspectors, continue to maintain their relationships with licensees after their First Call visit. “Licensees know who their inspectors are and we get a lot of calls and questions from them: ‘Is this legal?’ ‘Can we do this?’ We try to be proactive and help them,” said Pete O’Rourke, who is serving as the OLCC’s enforcement director pro tem, after the recent retirement of the agency’s long-time enforcement director, Linda Ignowski.

The OLCC’s inspectors are peace officers. They have the authority to enforce the state’s liquor laws. They do not carry guns. They sometimes will work the door of a high-volume licensee with the doormen, citing minors on the spot who are trying to lie about their age. They will also work special events that have high-volume crowds and a high-youth appeal, such as rodeos and big concerts. “We help the licensees to check IDs,” said O’Rourke. “Often, we are the only law enforcement there to help them.”

The OLCC’s inspectors also run its minor-decoy program. Again, the idea is to work with licensees rather than be adversaries. “If we do see them sell to the decoy, it’s a violation, but if they don’t, we send them a ‘great job’ letter,” said O’Rourke. “We’ve watched the sell rate steadily decline.”

The people at the OLCC keep an eye out for changes on the horizon – and also are constantly thinking of ways to change themselves, in order to improve. Extending its server education program to clerks working in off-premise establishments is a possibility. So is incorporating more information technology into the licensing process within the next couple of years, to further streamline the process. Other possibilities on the horizon might be allowing corporations, such as ones that own retail chains, to apply to be agents, also perhaps allowing exclusive liquor stores to sell beer and wine as well as distilled spirits. But, as Deputy Director Williams said, the twin missions of the OLCC, to provide access to distilled spirits for the legal consumers who want them, while limiting the social costs of alcohol misuse, will remain the same.

Permit Me

In 1989, Oregon became the first state to require mandatory training for the on-premise servers of beverage alcohol. Today, about 135,000 people in Oregon hold a valid server’s permit, with more than 30,000 a year going through the process to get one.

To receive a permit, a server, manager or licensee must take a course through one of the OLCC’s approved vendors. The class can be live, in a classroom, but it can also be taught through a webcast or online. At the end of the course, participants take a test and the results are sent to the OLCC.

The course is the same whatever the venue. Servers learn about checking IDs, alcohol in the body, how intoxication impairs a person’s ability to drive, how to intervene with an intoxicated person and about the server’s legal responsibilities when it comes to serving alcohol.

“This information is not conceptual; it is concrete and straightforward,” said Williams. “And we believe it is successful. We may still be giving tickets, but better that they be for not having a valid server’s permit than for serving intoxicated people and minors.”

Not a Wasted Effort

As part of its education efforts, the OLCC has begun making videos. And two of the latest have been nominated for awards.

One, called “It’s Your Call,” shows four volunteers drinking themselves to .08 BAC or legal intoxication, with a voiceover pointing out the subtle body language that red-flags their impairment. “It’s targeted to servers but also parents and adults who are throwing parties,” said Rudy Williams, deputy director of the OLCC’s Public Safety program. It was nominated for an award at the National Conference of State Liquor Administrators, which will be held in late June.

The other video, called “Wasted,” tells the tragic story of a high-school girl who was killed in a drunk-driving accident. It goes back to her school, showing interviews with her stricken friends, and shows her tearful mother begging kids to “Be a hero” and take away the keys when they see a friend who might drive while intoxicated. This video, in competition with investigative-reporting pieces from area television stations, was nominated for a regional Emmy by the National Academy of Television Arts & Sciences.

“We sent a copy of ‘Wasted’ to every school district and archdiocese in the state of Oregon, as well as to every legislative member. We blanketed the state,” said Rudy Williams. “We also sent it to every state. In West Virginia, it is being used in the curriculum of the public schools.”

The Lang Boomerang

Talk about being used to change.

Phil Lang, who recently retired from the chairmanship of the Oregon Liquor Control Commission, has had multiple careers in his lifetime.

First, there was the three-year stint in the US Air Force, where he was stationed in Japan doing intelligence work immediately after World War II.

Then, he came back to Oregon and went to college, where he pursued an

interest, sparked by his Air Force intelligence training, in criminology.

Then, he became an Oregon State Trooper for several years.

Then, he went to law school at night while working as an insurance claims adjustor during the day.

While he was doing that, he submitted his resume for the position of county sheriff. That position had been vacated when the current sheriff, Terry Schrunk, was elected mayor of Portland. Lang did not get the job of sheriff.

But then, “out of the blue,” Lang remembered, Schrunk, who had, up until that point never met him, asked Lang to be his chief of staff. Lang was, at this point, only 27 years old.

His position with the mayor piqued an interest in government and politics. He ran for the state legislature in 1960. He served for 18 years, the last four of them as Speaker of the House.

Oh yes, and while serving in the Legislature, Lang also pursued “his day job,” a career in the insurance industry. He retired, after 35 years, in 1995.

“But the governor couldn’t stand that I had time on my hands,” joked Lang. In February 1998, Lang was appointed to be the chairperson of the Oregon Liquor Control Commission, where he served “for 13 years and three months,” the longest anyone has held that position.

When he retired this month, Lang, 81, said, “The current governor asked me what I was going to do next. I told him, ‘I’ll get back to you on that.'”

[While a new chairman has not yet been named, Michael E. Harper, Sr., the former center-forward for the Portland Trail Blazers, has been appointed to be the OLCC’s newest commissioner. Harper, who, like Lang, also works in the insurance industry, has experience as a high-school basketball coach and extensive experience in public speaking. “He is a very nice man and is going to bring some very positive things to the OLCC,” said Lang. “I look forward to keeping in contact with him.”]


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