This is the thirteenth consecutive year that StateWays has approached leading officials among the control states and asked them to address the key issues and developments that have affected their operations over the past year. And one overriding theme is clear from all these well-thought-out commentaries: the control states continue to move forward successfully on a variety of fronts. Interestingly, while the specter of privatization dominated last year’s accounts, that fear seems to have dissipated somewhat this year, although a few executives still referred to the issue. Perhaps the aggressive talk among some politicians has abated, with more scrutiny being paid to the possible ramifications of privatization.
Based on these reports, sales revenues among the control states have almost universally increased, and a wide range of responsibility initiatives continue to progress, from new efforts to combat college binge drinking to alcohol compliance training programs to help personnel identify false IDs. The officials also touch on a variety of modernization initiatives, including the upgrading of POS and security systems, redesigning and enhancing the look of stores, improving warehouse efficiencies, updating online ordering systems for licensees and developing new technologies for increasing compliance with agency regulations. There has also been a recognition of the ongoing efforts to improve retail merchandising programs across various platforms. These state snapshots also note important personnel changes within the agencies, as well as highlight pertinent legislative changes affecting the working of the agencies.
We’d like to once again thank the control state commissioners, chairpersons, administrators and other officials who took time out from their busy schedules to provide this information for us…and you.
ALABAMA
H. Mac Gipson, Administrator, Alabama Alcoholic Beverage Control Board
The State of Alabama and its beautiful Gulf Coast is back, and better than ever! After devastating tornados, hurricanes and the largest marine oil spill in history, revenues are up; especially those from the sale of alcohol. Last fiscal year the Alabama Alcoholic Beverage Control Board distributed more than $200 million to state and local governments after paying its own expenses and, so far this year, we are enjoying a sales increase of 6 percent. We have been able to control operating costs to the point that net operating revenues exceeded prior years.
This year marks the 75th anniversary of the Alabama ABC Board. To commemorate this special occasion, William Thigpen, Assistant Administrator, Randall Smith, Product General Manager, Nick Ketter, Product Management Director, and I took a trip to the Buffalo Trace Distillery in Frankfort, Kentucky to select a 75th anniversary bourbon. Fourteen barrels were tasted with eight being selected; three barrels of Buffalo Trace, three barrels of Eagle Rare and two barrels of Blanton. These bourbons were bottled in commemorative bottles highlighting our diamond jubilee.
The Alabama ABC Board has recently been involved in two trade shows and a third one has been planned for Wednesday, August 22, 2012, at the Marriott Renaissance Ross Bridge Golf Resort and Spa in Birmingham. These trade shows have been hosted by the Distillers League of Alabama and provides a unique platform for brokers and representatives from the alcohol industry to showcase their products and innovations. Many industry representatives use this opportunity to promote new merchandise. Tastings are allowed as long as they are within the regulatory guidelines. Representatives from the ABC Board Responsible Vendor Program were also on hand to help answer questions and give advice about selling responsibly. Just in time for the holidays and for the first time in many years, value added products are available for retailers and on-premise accounts.
Students at the University of Alabama have started an anti-binge drinking campaign consisting of advertising and public relations. LessThanUThink Campaign has been a huge success and focuses on college campuses reaching out to students through humorous messages that emphasize the negative social consequences of binge drinking. One such message is “you think you won’t embarrass yourself through social media, and you wouldn’t. Four drinks ago.” This campaign is funded by The Century Council with additional funding from NABCA on behalf of the Alabama Alcoholic Beverage Control Board.
On October 14, 2011, Alabama Governor Robert Bentley signed an Executive Order directing agents of the ABC Board to immediately take possession of synthetic marijuana which is also referred to “spice” and “K2”. The Executive Order cited potential medical problems that are linked to synthetic marijuana and that a number of Alabama residents have suffered severe and harmful physical effects as a result of inhaling, consuming, ingesting or otherwise coming into contact with such products. On April 30, 2012 he signed Act No. 2012-267, making “spice” and “K2” Schedule I controlled substances. Agents seized 40,572 packets of synthetic marijuana, from stores throughout the State of Alabama; a market value of over $3.9 million.
IDAHO
Jeff Anderson, Director, Idaho State Liquor Division
Greetings from the Gem State!
We are proud to announce another record year at the Idaho State Liquor Division (ISLD) as we distribute over $63,000,000 (+26%) to the cities, counties, general fund, and substance abuse and treatment programs in Idaho. This distribution included a one-time $8,000,000 transfer. Adjusted distributions from operations in FY2012 were $55,100,000 (+9.7%). We saw a 7% increase in sales revenue on a 4% increase in volumes in our 66 state stores and 97 contract stores. In addition, we remain engaged with the communities we serve in efforts to prevent underage and binge drinking.
Going forward, we’ll be focused on: 1) the effect of deregulation of spirits in Washington State on our ability to serve consumers; 2) deregulation efforts in the Idaho Legislature during the 2013 legislative session; 3) continuing our modernization improvements (iMOD) at Idaho state-run and contract stores; and (4) expanding our work with community groups and vendors in the area of social responsibility.
In June 2012, the first month of a deregulated market in Washington, our eight border stores saw a 33% increase in sales versus June 2011. In Post Falls, adjacent to the Spokane Valley, our two stores were up 58%. The trend continues into July at press time. Our statewide uniform pricing is highly competitive, particularly so with the deregulated market in Washington State. We work to continue to provide the best shopping experience possible, so we’re making inventory and personnel adjustments as necessary.
We’ve formed a rapid response team to help educate the citizens and our stakeholders on the true facts about what may be proposed and what the consequences would be of deregulation changes proposed during the 2013 Idaho Legislative session.
Last year at this time, we were launching iMOD, the Idaho Modernization Project. We’re focusing our efforts on every element of our store operations including the look, size, technology advances in POS and security systems, and, in certain instances, actual location changes for stores. To date, the changes have been well received from our associates and our customers. We are continuing this project with the launch of a new brand mark, new dress attire for store associates, a new consumer-focused website, and enhancements to our online ordering system for licensees. This has become a positive culture shift for our organization and our customers.
Finally, we’ve expanded our efforts in the area of social responsibility with the help of NABCA. In July 2012, we were a major volunteer and funding partner for the Fifth Annual Northwest Alcohol Conference in Boise. It was a tremendous success with participants from around North America, included nearly 100 youth attendees.
As we look forward to 2013, the ISLD continues to refine our new initiatives: liter sizes, new consumer-friendly branding, on-line training tools for our associates, automated ordering for stores, and iMOD.
Our focus is on delivering high performing, responsible customer service retail locations for the benefit of all Idahoans.
MAINE
Gerry T. Reid, Chairman, Maine Bureau of Alcoholic Beverages & Lottery Commission
I joined the Bureau in Maine about six months ago after a long private sector career in marketing, sales, and general management. We have a great team in Maine who look after both the spirits business and lottery operations including monthly meetings with our Commission. On the spirits side, the state has a strong relationship with separate private sector partners for wholesale operations management and retail consumer sales.
My goal is simply to focus on the basics of commerce to create a stronger, healthier business for all stakeholders in the state. Here is a brief summary of some of the things we are doing to ensure achievement of this goal.
First, we are trying much harder to eliminate out-of-stocks in the warehouse and the agency store shelves. This requires closer attention to volume forecasting and inventory management, particularly on our monthly sales specials. This can happen when we are communicating frequently with the brokers and staying on top of sales trends. But this opportunity is also influenced by retail store space management. We owe it to our agency stores to list what their consumers want so that we please the most consumers possible. This is where the tried and true “80/20” principle comes in. We are encouraging all our stakeholders to focus their resources on the 20% of the SKU’s [stock-keeping units] that drive 80% of the business. By focusing more attention on both forecasting and space management on these items, we win with consumers and yield better returns on inventory investment.
Second, we are striving for more and better spirit retail merchandising programs. To deliver this we are spending more time listening to our retailers and planning with the distillers and their brokers. This sounds quite obvious, but it requires tremendous time and commitment to do well. In our state, it also requires us to work more effectively with our legislature to modify some regulatory constraints that are depriving our consumers of basic value to which they are entitled.
Third, we are just beginning to think about on-premise brand merchandising opportunities. This will be a big culture shift in our state, but a necessary one, because great spirit brands are built in the on-premise channels. For us, this has regulatory implications as well as distiller and broker planning energy and resources.
Fourth, Maine still lacks a pricing formula which is something we are committed to adopting in the near future. This raises an issue of significant concern to us, given our stated goal at the beginning of this article which is the aggressive pace of distiller price increases. Our concern is that we doubt the consumers’ ability to pay because of the weak economy, jobs picture, and weak personal discretionary incomes. It would be very unfortunate if pricing actions produce unintended negative effects on general demand. History has shown how easy it is to stifle impulse purchases, reduce on-premise occasions, and motivate consumers to trade down to lower-priced beverage alternatives. We believe the big opportunity right now is for innovative, high quality, brilliantly packaged and designed value brands. Superior consumer value is one of the “basics” that will receive more support in the state of Maine.
I will conclude with a few comments on privatization. As stated above, our system in Maine already uses private sector partners for warehousing, shipping, and all spirits retailing activities. Like any business system, ours can certainly be improved; however, it is broadly meeting the needs of multiple stakeholders. As a result, our intention is to improve what we have rather than start over with a completely different business model. We are having a pretty good year in the business and look forward to many more in the future.
IOWA
Stephen Larson, Administrator, Iowa Alcoholic Beverages Division
This past year the Iowa Alcoholic Beverages Division (IABD) focused on implementing the vision laid out in the agency’s four-year business model and strategic plan. Many large, long-term projects were completed including launching online reporting of beer and wine taxes, initiating a comprehensive alcohol compliance program, and providing an alcohol server eLearning training course. All of these and more were accomplished while having another record-breaking year in sales and funds generated for the State.
Increase compliance and regulatory clarity
As part of the strategic plan, IABD has been developing technology and educational programs that will result in increased compliance with the regulations that are the framework for the agency’s mission and the sale of alcohol to consumers. In accordance with that goal, an electronic application for reporting beer and wine taxes was recently implemented. The reporting and payment process is completed through the existing eLicensing program, which wholesalers already use to renew licenses. Test groups gave very positive feedback; the process is user-friendly and self-explanatory.
One key component to increasing compliance is to also increase regulatory clarity. IABD has finished a complete review of all its administrative rules. Staff has now begun the process of revising existing and writing new rules where necessary.
Restructuring of IABD for efficiency and greater return on investment
IABD’s Regulatory Affairs Bureau has initiated a comprehensive alcohol compliance program to increase compliance through education, voluntary adherence and punitive regulation. During the inaugural year of the compliance program, more than two-thirds of routine checks found licensees to be in compliance; however 54 percent of complaint-initiated investigations found violations. The top three offenses were bootlegging, improper book and record keeping, and retailers purchasing product from businesses not licensed for wholesale.
Cultivate relationships and build partnerships
Staff is actively strengthening partnerships with law enforcement throughout the state. Alcohol compliance training, education, and assistance in investigations has been provided to dozens of law enforcement agencies throughout the state. Additionally, IABD is now part of the curriculum for the Iowa Law Enforcement Academy.
Education and outreach programs
A new eLearning course for on- and off-premises licensees was launched in February. The Iowa Program for Alcohol Compliance Training (I-PACT) focuses on the Alcoholic Beverage Control Act, identifying elements of the Iowa driver’s license, valid forms of identification, and how to spot altered and fake IDs. Participants also learn techniques for refusing the sale of alcohol with minimal confrontation, how to legally confiscate an altered or fake ID, and tips for offsite delivery of alcohol. The intent is to help prevent underage sales and sales to intoxicated patrons.
The IABD published the manual “Iowa’s Alcoholic Beverages Laws and You” as a quick reference guide for licensees to achieve and maintain compliance with laws addressing the manufacture, distribution and sale of alcoholic beverages. Each licensee and local authority received one free copy of the 88-page book; additional copies are available for sale and the electronic version can be downloaded for free by any interested individual. A companion manual, “Enforcing Iowa’s Alcoholic Beverage Laws,” aimed at Iowa’s law enforcement, will be published later this year. Both publications were paid for through an educational grant from the National Alcoholic Beverages Control Association.
Comprehensive review to maximize revenues through the efficient delivery of services
Restrictions on selling spirits were removed for convenience stores and gas stations during the 2011 legislative session. That, combined with the addition of numerous non-grocery chains such as pharmacies and discount stores also adding spirits to their offerings, has lead to the IABD experiencing a rapid growth in delivery points over the last year. In line with the strategic initiative to conduct a comprehensive review to maximize revenues through the efficient delivery of services, we have issued a Request for Information to study the existing and potential alternative infrastructure models including warehousing and delivery. The goal is to identify and implement the most efficient model for the next decade.
Legislative news
During the 2012 session, the Iowa legislature passed a bill allowing the storage of mixed drinks, cocktails and infused spirits for up to 72 hours for on-premises licensees. However, the new language stipulated the IABD must write rules to establish requirements for storage, labeling and record keeping. The IABD filed and adopted emergency rules which were effective July 1, 2012; rules were simultaneously filed through the regular rule making process in order to allow for public comment.
Revenue
While the IABD spent the year focused on the above strategic initiatives, it also had a record-breaking fiscal year. Nearly $237 million from the wholesale of spirits broke last year’s record by $15 million, representing a 4.6 percent increase in sales. In addition to revenue from spirits profits, funds generated by excise taxes on wine and beer, license fees and civil penalties translated into a general fund transfer of over $114 million for the first time in a single fiscal year. The majority of this money will be used as general funding to be appropriated by the legislature for a variety of state programs. A portion of the funds is earmarked for substance abuse and local programs. The remaining funds will be used for Iowa native wine and beer promotion.
MONTANA
Shauna Helfert, Administrator, Liquor Control Division, Montana Department of Revenue
The Liquor Control Division, Montana Dep-artment of Revenue completed another positive fiscal year. Along with obtaining optimal results from the business operations, the division had two noteworthy events during the past twelve months. A Responsible Alcohol Sales and Service Act of Montana was passed and implemented in the past year and a successful personnel transition was implemented within the Montana Liquor Control Division.
Responsible Alcohol Sales and Service Act of Montana
The Responsible Alcohol Sales and Service Act was passed during the 2011 legislature. The law had the following main requirements:
Anyone who serves or sells alcohol, their immediate supervisor or manager, and the licensee if they serve themselves, must obtain server training through a state approved program; Training must be received within 60 days of hire; and Training must be repeated every three years thereafter.
With the passage of the Responsible Alcohol Sales and Service Act, administrative rules were adopted to help implement and refine the requirements of the law. Through administrative rule, curriculum guidelines were developed regarding outside service providers who wanted to provide training in Montana. Currently there are 11 training providers, including the state’s own program called Let’s Control It, certified to provide server training in the state.
By the end of 2011, the state of Montana’s program had trained 16,436 people. Previously, the most people trained through the state’s program in a year were 3,326. Needless to say it was a very busy year. At this point in time we do not know how many people were trained through the other ten approved programs, but it’s a safe bet it’s a few thousand more. In the next few months we will be able to better determine the exact numbers trained throughout the state.
With the passage of the Responsible Alcohol Sales and Service Act, Montana is taking a step in the right direction to help protect its citizens through a well trained workforce in the alcohol industry.
Position Changes
The department was pleased to announce personnel changes within the Montana Liquor Control Division. Effective May 9th, Steve Swanson assumed the role as the division’s Management Analyst and LaNor Stigen has assumed the role as the Liquor Distribution Bureau Chief.
Steve Swanson has worked for the Liquor Control Division for the past eleven years. He was initially hired as a purchasing agent and later transitioned into a management position for the distribution bureau in 2008. In his new capacity as the Management Analyst, Steve is tasked with quality assurance, internal controls, project management, facility management and supporting the administrator with functions including policy, procedure and legislation for the division.
LaNor Stigen joined the Liquor Control Division five years ago as an accountant. In her new capacity as the Liquor Distribution Bureau Chief, LaNor is tasked with overseeing the day-to-day operations of the liquor distribution processes. This includes warehouse shipping and receiving, accounts receivable and payable, inventory management, liquor order processing, agency contract management and customer service.
These changes enhanced our management team by broadening the in depth knowledge and understanding of the division to allow for to better service the citizens of Montana.
MICHIGAN
Andrew Deloney, Chairman, Michigan Liquor Control Commission
The Michigan Liquor Control Commission (MLCC) prides itself on being a high performance agency excelling in economic development, revenue generation and public safety. Holding a license to sell alcoholic beverages can be considered an important component of being competitive and profitable within the hospitality industry.
The highest priority this past year at the MLCC is the reinvention of our licensing process, with the goal of creating a smoother, faster, fairer, and more certain licensing process, so that applicants can get considered for licenses and permits quickly so they can get into business, or expand their businesses, and have success here in Michigan. Much work has been done, but there is still plenty to do. It took many decades for the process to become what it had become, but we’re working on a daily basis to identify the problems with the system and develop solutions.
The Office of Regulatory Reinvention (ORR) publicly released its report to Governor Rick Snyder containing 72 recommendations for improving Michigan’s liquor control system while continuing to protect Michigan’s citizens. Governor Snyder has reviewed the ORR recommendations and believes the ORR report is an important step in the process of reinventing Michigan government.
The ORR formed the recommendations after a comprehensive review process, including convening an Advisory Rules Committee of stakeholders that included representatives from law enforcement, substance abuse prevention organizations, retailers, tourism promotion organizations, chambers of commerce, craft breweries, wineries, distilleries, distributors and restaurants, as well as MLCC Chairman.
The ORR identified several ways to improve the liquor control system to encourage business growth and job creation. The ORR’s recommendations cover a wide range of topic areas, including improving state licensing processes and encouraging economic development in our micro-brewing and winemaking industries, which are important to the State’s economic development and place making efforts. The ORR worked closely with the MLCC in reviewing existing administrative rules and developing the recommendations through the Liquor Control Advisory Rules Committee.
There are also some new additions to the Commission. Governor Rick Snyder announced the appointments of Ed Clemente, Dennis Olshove, and the reappointment of Ed Gaffney to the Commission. Clemente will serve a full four-year term as a Hearings Commissioner, and Olshove will serve the remainder of the term of former Administrative Commissioner Don Weatherspoon, which expires June 12, 2014. Gaffney has been reappointed for a full four-year term.
The future holds great promise for increased efficiencies and customer service here in Michigan. The amount of information available on our website has grown in depth and range in the areas of license and permits status check, product availability, sales totals and online ordering. We are excited to begin new programs like alcohol education, underage prevention, and communication efforts giving our agency a “business minded, customer driven” feeling.
MONTGOMERY COUNTY, MD
George F. Griffin, Director, Montgomery County, MD, Department of Liquor Control
The Montgomery County Department of Liquor Control enjoyed a very successful year on a number of fronts, but we won’t spend too much time looking back at our accomplishments. We already find ourselves extremely busy in the new fiscal year implementing several major infrastructure projects that will serve us well into the future.
For the Fiscal Year ending June 30, 2012, experienced sales growth of 4.81% (in dollars) over the previous year as DLC rang up total sales of $251,743,620. Our wholesale warehouse sales totaled $131,485,161, which represented an increase of 3.89%. (Wholesale warehouse sales are full-case shipments to licensed businesses.) DLC retail stores total sales experienced a growth rate of 5.83%, having total sales of $120,258,459. These retail sales are primarily individual retail customer purchases (along with some transfers of smaller orders to licensees.) Not only was this a record year for gross sales for Montgomery County; we also saw an increase in one of our key target measurements. We attempt to maintain a “Gross Profit Margin” of 28% of total sales revenue. That gross profit margin accounts for factors such as cost of goods sold, freight, taxes and credit card financing fees. By maintaining a gross profit margin of 28% and managing our operating costs, we are able to transfer an amount of net profit to the County’s General Fund that we anticipated in the budget. For FY12, I am pleased to report, our Gross Profit Margin actually came in above target at 30.37%, meaning that not only did sales increase, but we were more profitable with those sales. The growth in the retail sector and the profit margin indicates there is some movement among consumers in returning to more “premium” products in our market.
During the coming year, we also have a full calendar of special projects that will require creative management and flexibility from all of us at DLC. We are preparing to move into our new warehouse/headquarters facility later this year, as the construction activity is in its final phases. We anticipate occupying our new offices before the end of this calendar year, and plan to begin operations out of the new warehouse early in 2013. This is a long-anticipated, major project for DLC, and our “new and improved” physical plant will allow us to better serve our customers for many years to come.
We are also preparing to implement “Phase II” of our Point-of- Sale system upgrades, which will include gift cards and electronic check verification among other features. DLC is also launching the implementation phase of the Montgomery County ERP system that includes warehouse and transportation management that directly impacts our daily business operations. This is a major, multi-million dollar, county-wide effort that will require significant investments of time, energy and resources for more than two years. At the same time, we are moving forward on efforts to replace our case management/tracking system for our regulatory and enforcement functions.
DLC is also continuing to take the lead among
