Emphasizing “Progressive Control”

Change may always be with us, but sometimes we’re dealing with more change than we’d like. That’s how it’s seemed over the last couple of years for the National Alcohol Beverage Control Association (NABCA) and its members, the control state liquor agencies.


The biggest sign of this, of course, is the recent move to privatize the system in Washington State. (See sidebar.) In addition to the usual new developments in the business of running retail stores, wholesale operations, licensing, enforcement and education, NABCA’s member states have been, like the rest of the country, dealing with a strong anti-government political sentiment and a weak economy, which, in the case of control agencies, have sometimes led to increased interest in privatization in their states. “State legislatures are still looking to generate revenue; they wouldn’t be looking so much at privatization if it weren’t for that,” said Jim Sgueo, NABCA’s long-time chief executive officer (CEO) and president. “And there’s been a much bigger push from large retail stores to get into the alcohol business. So, the stress on control states may continue.”


Patrick “PJ” Stapleton, chairman of the Pennsylvania Liquor Control Board (PLCB) and the outgoing NABCA chairman, said, “While in many states, the situation has calmed down, some are still having discussions about privatization. There is still a general anti-government sentiment – as in ‘the government can’t do anything right’ – and budget problems continue for a number of states.”


Getting The Word Out


Stapleton, whose theme for his chairmanship was “Acknowledging the Benefits of Control,” said the continuing challenge for NABCA and its members is to get information about those benefits of control systems out there, to both citizens and legislators. “There is a general lack of understanding and an unwillingness to face the fact that there are health and social implications to consider – and that control is a positive thing,” he said. Stapleton believes that Mark Bodi, the incoming NABCA chairman, is uniquely qualified to continue the conversation about control and about how to improve it.


“Mark has incredible experience in marketing and public relations and the New Hampshire Liquor Commission is a cutting-edge operation,” he said. “If anyone can get the message of modernization out and, more importantly, the message about the value of control itself, it’s Mark.”


Bodi was appointed a commissioner and the chairman of the New Hampshire Liquor Commission (NHLC) by Governor John Lynch in 2007. Before that, he had been president and partner of Griffin, Bodi & Krause, the largest advertising agency in Northern New England. “My firm had extensive experience with wine and spirits marketing,” he explained. And it had been the advertising agency of record for the NHLC for over 16 years before he became a NHLC commissioner. “Starting long before I joined the commission, I was fortunate to have over 20 years of experience with the beverage alcohol industry,” he said.


And before all of that, he even served as a state legislator. In fact, he was, at the age of 19, the second youngest legislator ever to serve in the state of New Hampshire. (The youngest was 18.) After serving three terms, two of them while still a college student, he turned to his advertising career. “But I’ve always maintained a strong interest in government and public policy,” he said.


And Bodi has experience running what is commonly considered one of the most progressive and modern control operations in the world. “New Hampshire, in many ways, is considered one of the most modernized agencies,” said Peter Cressy, president and CEO of Distilled Spirits Council of the United States (DISCUS). “It has excellent advertising and marketing, pricing, stores and very well-trained employees. In our view, New Hampshire is one of the best models of a pro-active control state.”


Bodi: “Progressive Control & Modernization”


Bodi has decided that, for his NABCA chairmanship year, he will focus on the association’s continuing efforts to help its control state members to become and stay modern. “My theme, the thrust of my activities, will be on developing a new era of progressive control, with the emphasis on the modernization of the control state system,” he said. “What that means, speaking broadly, is to show that we, in the control states, recognize that control does not mean stagnation or constraint, that control is not a ‘no’ word.”


That modernizing, progressing and improving, even while in a challenging environment, is a good and necessary idea applies not just to control-state liquor agencies, said Bodi. “The reality is that all components of government, not just alcohol control, need to reflect contemporary society. We should not be running things as if it were 75 years, 50 years, or even a decade ago. State agencies need to run their operations for today’s world, and always with an eye toward the future,” he explained.


Change Is In The Air


And all aspects of government, in the U.S. and even the world, are facing similar challenges. “Never in the modern history of government have we had such phenomenal unrest and uncertainty, as shown by what happened in the auto industry, the financial industry and the debt crisis in Europe,” Bodi said. “As a result of those forces, we’ve seen phenomenal political whiplash that will continue to affect all government agencies, whether it’s the alcohol control boards or motor vehicle departments or fish and game agencies.”


And all change is not dire. “There has been an enormous amount of positive change, too, though people forget this other side of the coin,” said Bodi. For example, there are many more [distilled-spirits] products available. This results in a tremendous amount of visibility and excitement for the beverage industry, but also means that control agencies find themselves dealing, to degrees and in ways they have not had to in the past, with issues such as SKU optimization, inventory control, listing and delisting.


Better, Quicker, Faster


Another change is that everything, especially in retail, has speeded up. “Consumers live in an era today of instant access to information,” pointed out Bodi, “and that means people have a much shorter attention span and less patience for government operations.” Control agencies need to fully leverage technology at every level, believes Bodi. “Our agencies need to harness technology to do things like give licensees access to the information they need. We have to look through the prism through which people see the world today. Everything needs to become better, quicker and faster,” he said.


Making these adjustments can result in further good. As Cressy of DISCUS pointed out, “Much of what we do, on behalf of our industry, the principles of operation we try to adopt, are beneficial to everyone. Likewise, modernization is good for the state, it enhances its revenues, but it also provides better service and improved convenience to customers. Making changes to be more well-organized and effective often means that everyone benefits.”


Continuing NABCA Efforts


Of course, the NABCA has always strived to help its members run effective, cutting-edge operations, with its Best Practices campaigns, where agencies learn from each other, and with the educational trips it sponsors, such as the ones to warehouse trade shows. “Mark wants to shine a light on what we have been doing,” said Sgueo, “and on what the different control states have been doing.” Michigan, for example, has been working to improve its licensing process, shaving a significant amount off the time it takes for a business to get its license. “I must say that, in many ways, control states have led the charge when it came to modernizing with Sunday sales and with tastings,” said DISCUS’s Cressy. “Pennsylvania and Oregon made changes early on and Virginia just passed legislation to allow all of its stores, rather than just one-third of them, to be open on Sunday.” John McDonnell, current DISCUS chairman (and chief operating officer of Patron) added, “Idaho, for example, has also really focused on modernizing is stores.” In Pennsylvania, the Pennsylvania LCB just launched an iPhone app (and has an Android app in the works) that allows customers to scan a bottle’s UPC code, for example, the bottle of wine they just had in a restaurant, and see PLCB information on it, such as its price and which stores have it in stock. The PLCB is also hopeful that its legislature will pass a bill that allows it to take further steps to modernize its operations. Senate Bill 1287 would allow the PLCB more freedom in its hiring, its pricing and its procurement of supplies, allowing it to be more nimble and more like a private business.


New Hampshire Liquor Commission: Responding Quickly


The New Hampshire Liquor Commission had a similar bill passed in 2009. The Liquor Commission Modernization Act allows us “to respond more quickly, by eliminating a whole tier of bureaucracy,” explained Bodi. “It allows us to respond more quickly to consumer demand.”


And, he said, the process continues. “Change is a process, not an event,” he explained. “This kind of change is not radical change; it is evolutionary change.”


At the NABCA, Bodi wants to highlight and improve the association’s role in helping its members with modernization by establishing a special modernization task force. This task force would get input from representatives of the distilled-spirits industry, the members of NABCA’s industry steering committee. “The task force, made up of NABCA directors, would assist all of the states to achieve the goals that the states themselves develop,” explained Bodi. “All control states want modernization. It’s just a question of degree, of what is possible in each state’s unique situation, and each state will determine, as they should, what their goals are. The task force will serve as change agents, giving the member states the knowledge and technical assistance they need.”


Sgueo pointed out that each state agency faces a unique set of circumstances when it comes to determining what changes it can make. “Some states can’t advertise, by law,” he pointed out. “Others don’t have the funding to modernize stores.” However, “there is always a cast of control state officials doing something well, and all states can learn from the experts: from other control states, from industry, from people in public health. We want to elevate every control state operation as much as possible,” Sgueo continued. Areas of focus include everything from the practical (implementing online license renewals, for example, and adjusting delivery times to help keep costs down for suppliers and licensees) to the legislative (such as Sunday sales and spirit tastings). “There are a myriad of issues, as there is in any business or agency. There is no one silver bullet,” said Bodi. “Our agencies have a lot of moving parts that all need to be moving in tandem, cohesively, for the agency to be a well-operating organization.”


Though the times remain more challenging than usual, Bodi is optimistic about his year as NABCA chairman. “While these are very challenging times, I can’t think of another time with more and better opportunities to improve,” he said.


Store of the Future


In July 2011, the New Hampshire Liquor Commission (NHLC) opened its largest store ever: a new 20,000 square-foot emporium that replaces an older store, in Nashua, NH. It features the biggest assortment of products of any of the New Hampshire state stores, with over 1,200 spirits and 2,500 wines. The store features a full restaurant kitchen, the better to handle events, as well as a tasting kitchen and bar area topped with local granite which is being used for weekly tastings.


“It is the most modern and largest beverage store kind of its in the country,” said Commissioner Bodi proudly.


The store is also mostly likely the most green. It attained the Leadership Energy & Environmental Design (LEED) Gold Standard, one of the highest standards awarded by the independent rating system begun by the U.S. Green Building Council in 1998.


Forty percent of the new materials used in the construction of the building were recycled, with 31 percent of them coming from within a 500-mile radius. Ninety-five percent of all the construction waste generated in its building was recycled. The building is equipped with energy-efficient lighting, a renewable geo-thermal heating and cooling system, photovoltaic roof panels, which generate seven percent of the building’s electricity, and daylight-harvesting light fixtures, which automatically adjust based on how much daylight is available, saving electricity. As a result, the Nashua store uses a full 45 percent less energy than a building built to regular building code. The store is landscaped using local plants that don’t need irrigation and uses 48 percent less water inside because of its low-flow plumbing.


It is, indeed, a store of the future.


Which Way Washington


The privatization of the control system in Washington State, the first such complete privatization since the end of Prohibition, is, as of press time, looking like a done deal, despite two pending lawsuits.


But it may not be the deal Washington citizens think it is going to be. “People think that they’re going to have more choices when shopping and that prices are going to go down,” said Patrick “PJ” Stapleton, the outgoing chairman of the National Alcohol Beverage Control Association (NABCA) and the chairman of the Pennsylvania Liquor Control Board (PLCB), “but I don’t think it’s going to have the positive impact they think. I think product selection is going to decrease and prices are going to increase, by as much as 25%. At the end of the day, I think there’s going to be a lot of buyers’ remorse.”


In Washington, Initiative 1183 passed in November, allowing the privatizing of both the retail sale and the distribution of distilled spirits. All the state stores are scheduled to close on June 1. The Washington State Liquor Control Board (LCB) will lay off more than 900 people.


Jim Sgueo, president and CEO of NABCA, pointed out that the decision in Washington State flies in the face of recent advice from the Community Prevention Task Force of the Centers for Disease Control (CDC), which, in a February 2011 report, recommended against any further privatization of the retail sale of alcohol in the U.S. It based its advice “on strong evidence that privatization results in increased per capita alcohol consumption, a well-established proxy for excessive consumption.”


However, other states will be watching closely what happens in Washington. “The voters in Washington were led to believe things that aren’t true,” said Stapleton. “And other states are going to be taking a long, hard look at what happens there.”

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