Control States Executive Forum

This is the 15th anniversary of the StateWays executive forum, a place where we approach leading officials among the control states and ask them to address key issues and developments that have affected their operations over the past year.


Their commentaries reflect changes in the way control states are run, embracing modern technology and business strategies. Privatization continues to be a talking point among certain state executives and some agencies may ultimately be affected as Washington was; however, no realistic privatization efforts are likely to go through as of this writing.


Based on these reports, sales revenues have once again increased nearly universally. Control states continue to embrace new responsibility initiatives to encourage responsible alcohol use among adults. Control states are also using business best practices to create time- and money-saving efficiencies across all elements of the industry; from back office functions to warehouse management to retail outlet design and structure.


The officials also touch on a variety of modernization initiatives, including the upgrading of POS and security systems, redesigning and enhancing merchandising programs, updating online ordering systems for licensees and developing new compliance technology.


We’ve also learned about the latest legislative changes affecting several state agencies, as well as ongoing enforcement efforts and new legal initiatives.


We’d like to once again thank the control state commissioners, chairpersons, administrators and other officials who took time from their busy schedules to provide this information for StateWays readers. Here’s to another 15 years of hosting the executive forum!


 


Alabama


Mac Gipson


Administrator, Alcohol Beverage Control Board


If you haven’t heard about or seen Alabama’s new tourism campaign, you are missing a real treat. “Sweet Home Alabama” is now our official welcome to visitors and reinforcement to our citizens. From the welcome signs on our state highways to the billboards in major cities all over the country, Alabamians everywhere are transforming that proclamation into a way of life. We at the Alabama Alcohol Beverage Control Board are doing just that in our stores and at the central office.


I mentioned in this same space last year that “southern hospitality” was spreading throughout Alabama’s 176 state stores and that customer service was going to be our focus. Well, we’ve spent this past year evaluating our business techniques and practices. We assessed everything from store layout and lighting to spirit selection and employee product knowledge.  All of this was done in an effort to make sure we provide our customers with the very best shopping experience possible. From all indications, it’s working!


As we close out Fiscal Year 2014, ABC store sales are more than $15 million ahead of last year at this same time. It appears that our stores will generate more than $420 million this fiscal year and return more than half of that amount to state coffers to pay for other state programs and services.


The Distiller’s League of Alabama recently hosted its sixth trade show for our licensees. Our store employees from both retail and wholesale outlets, as well as clients from package stores, bars and restaurants really enjoyed the show and the discounts that were offered. When the total sales are tallied, we expect the show, which was held at the Renaissance Birmingham Ross Bridge Resort, to generate more than $2 million. In just three short years, this trade show has become one of the most anticipated and well-attended events in our business. The event is an exceptional and innovative way to get in front of clients, demonstrate and launch new products, and talk face-to-face with prospective customers in a relaxed, fun atmosphere. Additionally, the show helps foster and cement the essential relationships between the distillers, brokers, product management staff, and customers.


Integrating Enforcement Efforts


Our enforcement division continues to be integrated into the Alabama Law Enforcement Agency. The Alabama Legislature in 2013 required that nearly all law enforcement activities be consolidated into one cabinet-level agency by January 2015. While we’ll no longer have sworn officers on staff, enforcement officers will be on-call and ready to respond as needed. Obviously, the reorganization does present some unique challenges for us, but I’m confident that our employees are more than up to the task.


Another challenge we expect to face next fiscal year is a legislative effort to privatize our stores. A state senator has publicly stated that one of his primary goals for the 2015 session will be “getting the state out of the retail liquor business.” What is equally disappointing is that the senator chairs the committee that oversees the very budget that benefits from the revenues our stores generate. Since our operation is wholly owned by consumers, costs the state nothing – and with a general fund budget of a little more than $1.8 billion – privatizing our stores is a tremendous financial gamble in these uncertain times. However, we do look forward to the discussion and raising awareness about how efficient and effective the Alabama ABC Board is for the citizens of our state.


 


Idaho


Jeffrey R. Anderson


Director, State Liquor Division


The Idaho State Liquor Division (ISLD) continues to responsibly implement our strategic plan for the benefit of the People of the Gem State. Fiscal Year 2014 was another very successful year for the ISLD.   Sales for FY14 increased 2.8%, generating a distribution increase of 5%.  Nine-liter case equivalent volume increased 0.5%. 


Distributions of $63 million to our good causes – Idaho’s cities and counties, the general fund, education, court services, and substance abuse and treatment programs – demonstrated we are Citizen-Owned for the Benefit of All. These resources, along with National Alcohol Beverage Control Association (NABCA) grants, enabled us to engage with the communities and programs we support. 


The significant social benefits of Idaho’s model of spirits distribution beyond our record distributions were enhanced by partnering with NABCA to provide grants and sponsorships of important programs focused on prevention, youth education, and law enforcement initiatives.



After-Effects of Washington Privatization


The ISLD cycled through the second anniversary of Washington State Initiative-1183 taking effect, which dismantled the model of spirits distribution in the Evergreen State.  The added taxes and fees resulted in higher retail prices in Washington and led to significant Idaho sales growth last fiscal year at our outlets near the Washington border as consumers sought out our uniform, state-wide, lower prices and consistently superior selection. 


Our associates and valued business partners continue to deliver on strategic initiatives – transforming the customer experience at retail and with the Division in general with upgrades to retail stores, improved product selection, optimized shelf sets, logistics improvement initiatives, and secret shopper programs. 


A new consumer-focused website — MixBlendEnjoy — was launched for enhanced customer service.  It’s mobile-enabled and allows our patrons to explore new products and recipes, find our conveniently located stores and hours, search for hard-to-find products, and learn about responsible hosting and use of distilled spirits. 


Supporting Craft Spirits


Like much of the country, Idaho is seeing a proliferation of new, in-state craft distillers beginning production.  This year, Governor C.L. “Butch” Otter signed SB 1335 into law, which permits Idaho distillers to begin wet sampling on their premises beginning July 1, 2014.  The ISLD was instrumental in creating a legal framework that permits Idaho distilleries to provide samples as well as selling their bottled products at their distilleries.  Our distillers finally have equal footing with wineries and breweries in their ability to sample and sell their locally produced products. 


Going forward, we will continue to rigorously focus on Caring for the Customer by continually adapting our business practices for our customers in order to improve: responsible service; product optimization; store and warehouse innovation; nurturing relationships with our valued suppliers; and delivering a world class shopping experience. 


Finally, we’ll continue to partner with NABCA and community partners to guarantee we have a prominent role in responsibly supporting the communities we serve.


 


Iowa


Stephen E. Larson


Administrator, Alcoholic Beverages Division


May 1, 2014, marked the beginning of my second four year term as the Administrator of the Iowa Alcoholic Beverages Division. Reappointment by Governor Branstad to serve the citizens of Iowa in this capacity is an honor and a privilege. I am proud of what has been accomplished by my staff and anticipate an exciting future with more improvements on the horizon.


Record Sales


The Division had another record setting year, with over $263.5 million in liquor sales in fiscal year 2014. Overall, sales increased 3% from a year earlier. While the Division has continued the trend of contributing record revenues to the state’s General Fund, we have also been busy in several other areas.


Operational Efficiencies


The record profits and other trends in Iowa precipitated the need to enhance operational efficiencies in order to maximize the return to the State. Last year, the Division conducted a comprehensive review of Iowa’s distribution model and we have executed numerous projects based on the recommendations. These projects include installing racking in the warehouse, changing the direction of the flow of picking, prioritizing pick slots and expanding truck parking for better flow of inbound and outbound traffic.


Leveraging Technology


The Division has also invested substantial resources to implement systems that will drive operational improvement in the areas of inventory management, warehouse productivity and the ordering process. To that end, the Division has launched EDI (Electronic Data Interchange), an e-commerce interface allowing customers to instantly transmit a liquor order from their computer directly to our warehouse management system. Other improvements include a vendor product management portal, consolidation of operating platforms to increase efficiency and an investment in fiber optics for better security of data and additional bandwidth.


Credibility and Predictability


In 2010, the Division implemented an education and outreach campaign to strengthen existing relationships with industry members and stakeholder associations in order to engage in solution-oriented conversations about alcohol related issues. Fast forward to today and the Division has made great strides toward creating more open lines of communication with our partners.


In addition, the Division has continued its mission to increase regulatory clarity and has made compliance with Iowa’s alcohol laws and regulations a key element of our strategic plan. The Division remains focused on ensuring all stakeholders are able to conduct their business on a level playing field within the boundaries of the law. To this end, the Division has committed to creating credible, predictable and sustainable regulatory, education and compliance programs for Iowa businesses.


Trade Practices Matter


During the past four years, the Division has significantly increased our contact with industry members and our understanding of their issues.  They, in turn, have expressed a desire for the Division to clarify the sometimes confusing state and federal trade practice regulations. Based on this feedback, the Division is taking a proactive regulatory stance by addressing “gray” areas in a black and white fashion.


 


Maine


Gregg Mineo


Director, Bureau of Alcoholic Beverages and Lottery Operations


A new day has come to Maine.  Over the last two years, the Maine Bureau of Alcoholic Beverages and Lottery Operations worked with the Governor of Maine and the Maine Legislature to undo the privatization of the spirits business in Maine.  This work culminated with the award of a new 10 year fee-for-services contract for administration, warehousing and distribution that became effective July 1, 2014.  With this new agreement the State of Maine will enjoy a more favorable profit arrangement, associated with top of the line services.  The Bureau’s new partner, Pine State Spirits, was the warehousing and distribution subcontractor for the previous vendor. 


Taking Back Control


Also as part of this new day, in July 2013, the liquor licensing and enforcement program area was transferred under the Bureau’s authority.  The transfer of this program area was another major accomplishment over the last two years.  This program area had previously been under the Maine Department of Public Safety for 12 years, and the enforcement team is now working out of the BABLO offices.


The Bureau works in cooperation with all of its stakeholders, including Pine State Trading, our suppliers and brokers, along with its essential business partners (the 500 privately owned agency liquor stores across the state). We also collaborate with the Maine Attorney General’s Office to evaluate our spirits business processes, licensing and enforcment issues, programs to educate the public on the issues of furnishing alcohol to minors and more generally, the challenges of illegal consumption by minors


YTD through June 2014, case sales in Maine are flat while total sales are up 2%.  Allen’s Coffee Brandy continues to be our number one selling product, and represents 8% of overall sales (down from 10%).  Canadian whiskey, NA whiskeys and the vodka categories continue to drive Maine’s growth, while the rum category has lost nearly 300,000 9L cases YTD, based on our NABCA data.


Focus on the Future


The Bureau will be putting forward a number of legislative initiatives in the next legislative session:


On-premise data collection:  This has been an area where Maine’s data has not been available to industry for analysis or planning.  There has been significant push back from the association representing bars and restaurants on this matter in the past.


Increased Staff for enforcement:  Currently, there are only 5 inspectors who cover this large geographical area in Maine.  Each inspector has over 1,500 licensees to manage. 


Aligning of liquor laws with new enforcement vision:  Maine’s liquor laws are in need of revision and updating.  The Bureau will work with the Legislature to establish a working group to evaluate Maine’s liquor laws in their entirety.  This is a two-year project, and in the meantime, the Bureau will initiate legislation to fix areas of urgent need including on- and off-premise tastings and the process to approve agency liquor stores.


Over the last two years, our Online Seller Server Training has certified over 2500 seller/servers.


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.  The Maine Bureau of Alcoholic Beverages and Lottery Operations is poised for the future.


 


Michigan


Andrew J. Deloney


Chairman, Liquor Control Commission



In 2013, the Michigan Liquor Control Commission (MLCC) implemented process improvements to ensure faster service to its customers. A process that once took 275 days to complete now takes less than 100 days on average. The customer now fills out 63 percent less paperwork, allowing the MLCC to process liquor license applications 64 percent faster and provide the customer with their liquor license more than 175 days sooner on average. The MLCC was also able to achieve a 92 percent reduction in its licensing backlog and save nearly $8,000 annually in printing costs. These improvements impact more than 3,400 business customers each year.


New in 2014


To kick off 2014, the MLCC started out with a faster and easier way to renew liquor licenses, electronically!


The MLCC mailed letters to all license holders, which detail the new procedure and provide a new personal identification number (PIN) for online liquor license renewal, thus creating a new access point for MLCC staff to interact with current license holders.


The past practice required a license holder to submit a written form and wait for a password to be assigned and then mailed to them to gain access to the MLCC website to renew their liquor license. With the ever increasing demands of businesses even the simplest task, such as requesting a password, seems monumental when trying to prioritize the issues most critical to their business. In fact, during the 2013 renewal period, only 11 percent of liquor licensed businesses took advantage of the online renewal process due to the waiting period of receiving their PIN. Staff is now automating the system to generate a password for each licensed business.


New License Type Now Available


The MLCC is now providing Conditional Licenses to qualified applicants throughout the state of Michigan. The new law became effective on May 22, 2014.  A Conditional License can be issued to a qualified applicant to operate a licensed establishment during the time the permanent license application is being processed and investigated.


Timeliness is critical to any small business getting their doors open for the first time, and with this Conditional License, businesses in the hospitality industry will be able to begin selling and serving alcoholic beverages while their application for the permanent license transfer is being processed. If the applicant meets all the requirements set forth in law, this license will allow a business to hire employees and start impacting their local economy. This is a true “game changer” for licensing businesses in Michigan.


Under this law, the Commission has 20 business days to issue a Conditional License to a qualified applicant seeking to transfer an existing license to sell alcohol for consumption on or off the licensed premises, or an applicant seeking a new Specially Designated Merchant license to sell beer and wine for consumption off the licensed premises. In addition to a completed application for the permanent license, an applicant requesting a Conditional License must provide the application form, Proof of Financial Responsibility, an executed property document, and a Conditional License fee totaling $300.


On May 27, 2014, the Commission received its first application under MCL 436.1525(5) for issuance of a Conditional License.  The requirements for a completed application were satisfied by the applicant on Thursday, May 28, 2014 and on Tuesday, June 3, 2014, the application was considered and approved by the Commission – 4 business days after the Conditional License application was complete.


MLCC Moved Headquarters


Another big move is literally just that. The MLCC office (Commission, Enforcement, Licensing, Hearings and Attorney General) moved from the Secondary Complex, General Office Building in Dimondale to Constitution Hall, 525 W. Allegan Street in downtown Lansing on June 13, 2014. The MLCC is now located closer to the Department of Licensing and Regulatory Affairs (LARA), which the MLCC is housed under.


 


Montana


Shauna Helfert


Administrator, Montana Liquor Control Division



Montana’s Liquor Control Division, administered under the state’s Department of Revenue, have seen some changes over the past year in how businesses apply for liquor licenses, how wineries sell directly to individual consumers, and how we provide alcohol awareness training to servers and sellers.


Apply Electronically for Liquor Licenses


In line with the Governor Steve Bullock’s Main Street Montana Project, the division is focused on providing the most efficient and effective services to its customers. That is why the division made it possible in the past year for applicants to apply online for all liquor licenses. This includes on-premises consumption licenses, alcohol beverage manufacturer and importer licenses, wholesaler and distributor licenses, special permits and a variety of miscellaneous license types.


Based on the selections the applicant makes, the program calculates the required fees and generates a list of supplemental information that must be submitted with the application for the division to start the processing. Existing licensees can annually renew, pay and print their licenses and make several account- type changes.


Direct Shipment of Wine


The 2013 Montana Legislators enacted a new direct shipment endorsement for in-state and out-of-state wineries to directly ship wine to individuals within the state for personal consumption. The endorsement allows the licensed or registered winery to sell and ship up to 18 nine-liter cases of table wine annually per individual. The endorsement costs $50 per winery, per year and places the tax-reporting requirement on the winery.


Since taking effect on October 1, we have approved more than 450 wineries for the direct shipment endorsement. We maintain a list of wineries with a current direct shipment endorsement on its website. We encourage Montana consumers to review this list prior to purchasing wine to ensure winery compliance.



Education


In 2011, Montana passed the Responsible Alcohol Sales and Service Act, which required that anyone who serves or sells alcohol receive alcohol-awareness training from a state-approved program within 60 days of hire and every three years thereafter. A year after implementing the act and learning that more servers and sellers are trained through the state’s “Let’s Control It” program than through any of the other 13 state-approved programs, we decided that changes were needed to maintain fidelity to the act, increase effectiveness, and enhance the professionalism of the program.


We first changed the delivery format of the program from instructor-centered to learner-centered. The learner-centered method involves activities that allow participants to practice ‘saying’ and ‘doing’ what they have learned, helping them retain the information. Moreover, we created a new companion server guide with information on the skills and techniques servers and sellers need to stay in compliance with state liquor laws.


We educated all current and new state certified trainers on the new delivery format, conducting 15 “Train-the-Trainer” sessions across the state and certifying 225 volunteer trainers with a set of criteria.


The division also developed additional tools for law enforcement agencies to help them with their responsibilities. We created two ticket-book cards, one listing the most common liquor violations an officer may encounter on duty and the other listing the different privileges certain licenses do and don’t include.


With a supplemental grant from the National Alcohol Beverage Association (NABCA), the state collaborated with the National Liquor Law Enforcement Association to host two liquor law enforcement-training sessions that covered a wide variety of training, including over-service operations.


 


Montgomery County, Maryland


George F. Griffin


Director, Department of Liquor Control


This past year has been an active and important time for the Montgomery County Department of Liquor Control. Much was accomplished in several key areas: operational, administrative and legislative/regulatory. Some of the events of this last year have also created the opportunity to consider potential changes to the structural framework of the DLC, our operations, and our mission.


From a financial standpoint, the fiscal year ending on June 30, 2014, was another in a string of successes. DLC total sales were $265.8 million. This represents growth over the previous year of 3.47%.  (That total sales figure only represents revenue directly generated through operations; Montgomery County does not collect any excise, sales or other taxes on alcohol). Our Montgomery County DLC-operated retail liquor & wine stores rang up sales of $127,350,541 – an annual increase of exactly 4%. Our warehouse/wholesale sales amounted to $138,432,855.


These sales to licensees (both on- and off-premise) were up nearly 3% over last year. It is gratifying to see this growth in the licensee business, led by a resurgent on-premise sector. Our community for the first time now has well over 1,000 licensed, privately owned and operated businesses, and this increased number of licensees is directly due to growth in the restaurant sector. It is also interesting to note that the gro

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