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 growth in our wholesale business was led by the strong performance of beer sales. After years of stagnant growth in the beer sector, our wholesale beer business grew by 4.35% — fueled by the continuing robust interest in craft beers and micro-brews. Much of this specialty beer growth is driven by our on-premise sector, which is expected to be sustained into the near future.
Creating a Vibrant Nightlife
It was also a busy year for us on the legislative & regulatory front. A few years ago, the Montgomery County Department of Liquor Control launched a community discussion about the future of our local nighttime economy and explored strategies for incorporating responsible hospitality practices within a vibrant and evolving social market. In 2012, we won a National Association of Counties Award for our “Nighttime Economy Forum” program.
Last year, building on this theme, our County Executive created a “Nighttime Economy Task Force” to develop specific recommendations for facilitating responsible growth in this area. Several legislative initiatives resulted from the work of the task force, and DLC was actively involved in drafting and promoting these changes. The laws adopted by the Maryland General Assembly took effect on July 1st, and include: longer hours of operation for some licensees; new license categories; modified residency requirements for license applicants; the ability of salons and other non-traditional licensed retailers to serve alcohol; and increased flexibility and expanded self-distribution rights for local micro-breweries and wineries.
This year also promises to be particularly active with additional legislative initiatives. The work of the task force also predictably stimulated conversations regarding the desirability and expectations of operating a control system in Montgomery County. This public discussion, led by political leaders and industry interests, will continue in earnest in the coming year.
This year DLC also continued to be engaged in two major infrastructure projects. Last July, right at the beginning of our fiscal year, we relocated our offices and warehouse operations into a new, modern facility. Our new home provides significantly more space and is completely climate-controlled. We performed this major relocation “in-house” with our own employees and equipment – and never missed a delivery day in the process.
We have also made significant progress in developing, building and testing our much-anticipated Oracle ERP system, which will go live in early 2015. This project has demanded a tremendous level of dedicated resources – both financial and staffing. Once operational, this system should dramatically improve many of our business processes and operational practices.
New Hampshire
Joseph W. Mollica
Chairman, Liquor Commission
New Hampshire is the best state in the United States for wine drinkers, according to Washington Post opinion writer Reid Wilson. In giving New Hampshire top billing in a report last week, the Post noted New Hampshire’s A+ rating on the American Wine Consumer Coalition 2013 Report Card, and lauded the state’s non-taxed wine, price, availability and regulatory structure.
The New Hampshire Liquor Commission (NHLC) offers more than 7,000 wines in its 77 New Hampshire Liquor & Wine Outlets and has become nationally known for its annual New Hampshire Wine Week, which draws dozens of the biggest names in the wine world and industry experts for a week of consumer-focused events including intimate wine dinners, exclusive panel discussions and tastings and the largest wine event in northern New England.
Wilson referenced the Granite State’s A-plus ranking in The American Wine Consumer Coalition 2013 State-by-State Report Card, which proclaimed, “No state treats wine consumers better than New Hampshire, given its laws that provide outstanding access to wine and its laws that provide wine lovers with great convenience.”
The report cited the convenience of shopping for wine in NH Liquor & Wine Outlets, wine shops, and grocery stores, along with the ability for consumers to ship wine directly to their homes. The report also referenced New Hampshire law, which allows consumers to bring bottles from their personal collection into restaurants to enjoy with their meal and lack of “Blue Laws,” prohibiting the ban of wine sales on Sunday.
We are particularly pleased to be recognized by the Washington Post and American Wine Consumer Coalition as a premier shopping destination for wine enthusiasts. Our staff works extremely hard to ensure that our nearly ten million annual consumers have the very best selection of fine wine and spirits at unbeatable prices. With $278.5 million in wine sales last year, we believe the formula is working.
Record Sales and Accolades
The NHLC recently enjoyed its best sales year on record in FY 2014 with $626 million in total sales, an increase of $23 million – or nearly 4% over the previous fiscal year. The NHLC has consistently and innovatively worked to make sure consumers are aware that New Hampshire is the ideal place to purchase wine and spirits.
Each year in late January, the biggest names in the wine world flock to New Hampshire – not Napa Valley – for a week-long celebration of wine known as New Hampshire Wine Week. For the past 10 years New Hampshire Wine Week has attracted legends like Michael Mondavi, Cristina Mariani-May, Joel Peterson and Merry Edwards, who participate in dozens of events in every corner of the state.
From intimate wine dinners pairing delectable cuisine with fantastic wines, bottle signings, exclusive wine discussions and tastings, and the Winter Wine Spectacular, Wine Week is the ultimate experience for those who appreciate wine. Wine Week was specifically designed with the consumer in mind. We have created an environment where consumers can interact and learn directly from wine celebrities and sample a wide variety of wines – something that only happens in New Hampshire.
Store Upgrades Improve Offerings
With the strategic renovation and relocation of 15 NH Liquor & Wine Outlets since 2012, the NHLC has specifically focused on showcasing its wine portfolio. As part of a $30 million redevelopment of the north and southbound rest areas on Interstate 93 in Hooksett, the NHLC is constructing two, new, state-of-the-art, 20,000 square foot NH Liquor & Wine Outlets to replace existing stores, which will expand the stores’ wine selections by 75 percent and boost total liquor and wine sales by an additional $6 million each year.
The new NH Liquor & Wine Outlet in Bedford, which opened in November 2013, features a specialty wine room containing new arrivals and featured products that are only available on a limited basis. The NHLC also introduced a hand-crafted French EuroCave temperature-controlled wine cabinet for rare finds at the new Bedford store.
Customer service is of particular importance to the NHLC, which has made it a point to ensure NH Liquor & Wine Outlet employees are well-versed in the world’s many wines. The NHLC regularly hosts trainings to give employees the chance to taste and learn about a variety of wines and most recently held a series of trainings on northern Italian wines.
North Carolina
James C. “Jim” Gardner
Chairman, Alcoholic Beverage Control Commission
The North Carolina Alcoholic Beverage Control Commission has focused on reducing underage drinking as a key issue for the agency in the last year. In May 2014, North Carolina Governor Pat McCrory officially launched the Initiative to Reduce Underage Drinking when he signed an executive order creating the Task Force to Combat Substance Abuse and Underage Drinking.
As a part of the commissioned work, six college campuses in the University of North Carolina (UNC) system will pilot a program concentrating on prevention and treatment. The executive order creates a multi-agency task force aimed at reducing substance abuse and underage drinking. The Governor’s Substance Abuse and Underage Drinking Prevention and Treatment Task Force will build on statewide prevention, treatment and enforcement initiatives implemented by the Alcohol Beverage Control (ABC) Commission, Alcohol Law Enforcement (ALE) Division, the Department of Health and Human Services (DHHS) and the University of North Carolina System.
Curbing Club Violence
In addition to the formative work on the initiative, the NC ABC Commission has also raised awareness about issues of violence in private clubs. In September 2013, the Commission sent a letter from ABC Commission Chairman Jim Gardner to the more than 1,000 businesses that operate as private clubs in North Carolina. The letter reminded them of the laws and regulations governing their operation and put them on notice that incidents of violence will not be tolerated by the Commission. In addition, the Commission has increased the period of time businesses receiving new permits are on temporary status, which gives law enforcement additional time to conduct thorough review of their operations.
Operationally, the NC ABC Commission also has had a busy year, seeing increases in numbers of products sold and increases in revenues. Liquor shipments totaled 5,193,612 cases, an increase of 3.57 percent. Revenues generated by ABC store retail sales totaled $868,431,378; an increase of 4.86 percent.
Top sellers for the year included five vodkas, one gin, one rum, one flavored whiskey, one blended whiskey and one bourbon whiskey. North Carolina’s own product shelves continue grow. The state now boasts 15 producing distilleries with an array of 49 products including moonshine, vodka, rum, rye, whiskey, brandy, cordials and liqueurs. To help promote the state’s distilled products, the Commission has worked with the NC Department of Agriculture to introduce the “Got to Be NC / Goodness Grows in NC” branding in our price book, tapping into the farm-to-table movement to better attract the interest of leading restaurants.
Ohio
Bruce D. Stevenson
Superintendent, Division of Liquor Control
Fiscal Year 2014 was an extraordinary year for the Ohio Division of Liquor Control. We experienced many significant and positive changes in the industry and achieved record sales. Our accomplishments reflect the Division’s renewed mission to move at the speed of business by modernizing operations for improved efficiency, providing exemplary service to customers and stakeholders, and taking a common sense approach to regulations helping Ohio businesses grow and create jobs.
Celebrating Record Sales
The dollar sales of spirituous liquor exceeded projections and reached a record level of $916.7 million in Fiscal Year (FY) 2014. This was an increase of more than $48 million over last year. Ohio is the third largest control state, but this increase in dollar sales represents 5.4 percent growth, which made Ohio one of the top control states for growth in the country. Dollar sales grew 1.4 percent faster than the combined growth of all control states and 0.5 percent faster than all states.
It’s also notable that dollar sales grew at a higher rate than consumption. The total amount of spirituous liquor sold in FY 2014 was of 12.4 million gallons, an increase of only 3.1 percent over the previous year.
Record dollar sales were due in part to our focus on better inventory management and improved customer service to meet the needs of Ohio consumers. An important part of that was the Division’s Spirits Innovation Program (SIP).
SIP was initiated to enhance the overall shopping experience and modernize the look and feel of contract liquor agencies that sell spirituous liquor. In FY 2014, the Division and its industry partners, Diageo and Republic National Distributing Company, reset 134 Contract Liquor Agencies to optimize product selection, maximize consumer value and increase shopper satisfaction by providing an improved and consistent store experience. This exceeded the SIP goal of resetting 125 Agencies in the first year of the program.
New Products and Tastes
The 134 reset Agencies represent 48 percent of the spirits business in Ohio; those stores experienced an 8.2 percent increase in sales as opposed to 4.7 percent growth in Agencies that have not been reset.
Another part of this success is attributed to the sophistication of consumer tastes, which is exemplified in Ohioans purchasing more premium products, including the many new flavored items.
Vodka and American Whiskey accounted for almost 50 percent of total sales during FY 2014. These two categories were followed by Rum and Canadian Whisky. The category that experienced the most growth in FY 2014 was Brandy at 15.5 percent, followed by cordials at 14.7 percent and Irish Whiskey at 11.5 percent.
Many of the new products are flavored items and account for much of the growth. While flavored Vodkas kick-started this trend, consumers can now enjoy a diversity of flavored whiskeys, tequilas and rums. The top five flavors in FY 2014 were spiced, herbal, cinnamon, peach and orange.
We are proud of the efforts that helped make FY 2014 so successfully, and expect more great things in 2015 with the continuation of the SIP resets and the help and cooperation of our industry partners.
By taking a fresh look at regulations and our operations, Ohio is a leader and example of what government can do to affect positive change and help improve the economic future for its stakeholders. Business friendly regulations, encouraging responsible consumption with safety in mind and our commitment to excellent customer service will help create jobs and keep Ohio’s economy strong.
Oregon
Rob Patridge
Interim Chair, Liquor Control Commission
Distilled spirits sales in Oregon are higher than ever, breaking half a billion dollars in the first year of the two-year budget cycle. Gross sales for distilled spirits for fiscal year 2014 totaled $518.6 million. This is $21 million (4.2 percent) more than the previous fiscal year. OLCC is expected to generate over $1 billion in gross distilled spirits sales for the 2013-2015 biennium.
As the third largest revenue source for the state, the net profits from distilled spirits sales fund critical programs like education, healthcare, and police. A total of $213.8 million in profits from liquor sales are distributed to the state’s general fund, counties and cities for fiscal year 2014.
The growth in sales is not necessarily attributed to consumers purchasing more spirits. Sales and distribution statistics indicate that an improvement in the economy, customers purchasing more expensive products, and Oregon’s population growth are likely the driving factors in the increase.
Oregon’s Craft Beverage Industry
Oregon is home to a variety of alcohol beverage industries, from flourishing wineries and breweries to burgeoning distilleries and cideries. The success of vintners and brewers has encouraged distillers and hard cider makers to take advantage of the positive business climate available in Oregon.
Lawmakers have brought about a variety of policy changes that help small Oregon businesses get a foothold in the market. For example, a recent change allowing cider to be sold in refillable containers called “growlers” allows cideries to take advantage of the rising popularity of growler fill stations popping up across the state. Another change is that Oregon distillers can have up to five additional locations where they can sell their own craft spirits. This has had a big impact on craft distillers in the state who choose to use it as an opportunity to expand their footprint and distribution.
In addition to a favorable business climate, the high quality of Oregon grains and produce also have an impact on the quality of local products made and sold in the Beaver State. High quality craft beverages in turn affect the growth in Oregon’s tourism stemming from popular events like the Oregon Brewers Festival and the Pendleton Round Up.
Oregon is now home to more than 50 craft distillers and more than 30 companies producing cider.
Retail Innovation
OLCC continues to modernize the retail shopping experience for Oregonians. The OLCC Commissioners voted in favor of expanding the options available to allow corporations to apply for a liquor store contract with the state. Existing liquor stores can apply to add beer and wine sales to their selection of spirits.
Many private liquor store owners have taken the opportunity to make improvements to their business by investing in store upgrades or extending their hours. Some businesses have seen up to 30 percent increase in spirits sales following a remodel or relocation.
A recent expansion to the online tool — OregonLiquorSearch — now features product pictures in addition to helping customers locate in-stock products at their local liquor store.
Pennsylvania
Joseph “Skip” Brion
Chairman, Liquor Control Board
The Pennsylvania Liquor Control Board (PLCB) continued its focus on improving the retail experience for consumers shopping in Fine Wine & Good Spirits stores in 2013-14, and that had an impact on agency sales. Overall, wine and spirits sales totaled $1.78 billion in FY2013-14, a 3.18 percent increase over the previous fiscal year. For the third year in row, the PLCB made more than $100 million in net profit after providing more than $40 million to other state agencies.
During the last fiscal year, Pennsylvania consumers continued to experiment with high-end wine products, which resulted in double-digit growth in the luxury wine segment. The most significant reason for the sales increase was our efforts to provide consumers with more product information through our retail wine specialist program. Now, nearly every Premium Collection store has a wine specialist to conduct product tastings, provide recommendations and highlight new arrivals in stores. The specialists develop relationships with consumers to assist them in making wine more approachable. In addition, we have continued to develop more product training options for both retail wine specialists and store staff. Our Training, Management and Development team held more than 45 different classes in 2013-14, reaching more than 5,500 employees. We expanded our store merchandising plan and started an end-cap program to draw attention to special deals and unique products.
While sales were strong, Pennsylvania licensee sales grew only marginally in 2013-14. Understanding that licensee sales are an important part of our business, we continue to look for ways to support bars and restaurants by making the system easier to use and more cost-efficient for them. For example, we began work on improving the Licensee Order Portal to encourage licensees to use the online ordering system instead of contacting stores directly, and we initiated work on a project to deliver product to the largest licensees in the state. We expect both projects to be completed in the coming year.
In 2013-14, the Pennsylvania Legislature gave the PLCB the authority to approve a new Tavern Gaming License for certain liquor licensees interested in small games of chance. While the response to the new law has been slow, the PLCB collaborated with three other agencies to create an application process and roll it out in 60 days, which was an effort of gigantic proportions.
Overall, the 2013-14 fiscal year was another very strong year. While the discussion about the agency’s future continues to evolve in the Legislature, our focus is not on what could be, but what currently is. We will continue to look for ways to improve the consumer and licensee experiences, improve efficiencies and educate the public about responsible alcohol use. Our mission remains clear.
Utah
Salvador Petilos
Executive Director, Department of Alcoholic Beverage Control
The Utah Department of Alcoholic Beverage Control had a successful FY 2014. Annual retail sales grew 5.88% from $346.8M in FY 2013 to $367.2 M in FY 2014. Case sales also increased 4.3% over the previous fiscal year. Continued growth in retail sales is reflective of the state’s sustained economic growth.
The department continues its efforts to modernize and upgrade systems. Foremost among these initiatives is upgrading the warehouse management system (WMS). Upgrading the WMS will allow the department to more easily update ancillary systems, provide the department with improved systems security and increase functionality.
The most significant development in the regulatory arena was the Utah Transfer of License Act’s (TOLA) coming into effect July 1, 2014. The statue permits the sale of alcohol retail licenses at prices determined by the market. In effect, TOLA allows buyers and sellers to place a price on licenses that had no value under previous provisions of the code. It also allows transparency in transactions by requiring buyers to provide notice of what they are purchasing and by detailing requirements for escrow and protection of creditors. The statute prohibits inter-county transfers and requires that operations begin within a certain period of time to prevent hoarding of licenses.
In terms of process, TOLA documents what the department has always done in processing license applications when there is a change in ownership in the business. Still, to ensure a smooth implementation of TOLA, the department met with stakeholders and obtained input on processes, created forms, issued FAQs, and released guidelines outlining pre-submission requirements.
The department remains aware that moving forward, areas of clarification may be identified and it is the our intention to maintain communications with the legislature to address issues that may need clarification and to make sure that proposed rules are in keeping with intent of the statute and allow public notice of any changes to department procedure.
Vermont
Stephanie O’Brien
Chair, Department of Liquor Control
The Vermont Department of Liquor Control has undergone a comprehensive business performance audit conducted by the State Auditor’s Office.
One of the main areas of focus during this audit has been the need for a larger warehouse facility to accommodate our growing business. Meeting the customers’ demand for new products, dealing with out of stocks and trying to keep enough stock on hand for the explosive growth of the in-state craft distilleries has been a big challenge. A draft report is expected in September for comment and a final report will be issued shortly thereafter.
We are continuing to expand the department’s marketing efforts. A new branding campaign, 802 Spirits was launched in the past year with additional changes being contemplated for the immediate future.
The Department continues to invest in responsible marketing by way of various publications that give the consumer information on product knowledge, store locations and, the licensees who also sell our products. The quarterly price guide – 802 Spirits – and the Vermont Vacation Guide showcase all store locations and are strategically placed throughout the state including our state welcome/rest areas.
The Department reviews and lists new products at least every other month. It is a challenge to find room in both the Liquor Warehouse and Agency stores to accommodate the deluge of innovative products being introduced into the marketplace. In addition, on-premise tastings were added to the process to better evaluate the products for potential listing. These tastings give the consumer the ability to taste and evaluate the product before committing to a larger purchase.
Another Record Year
DLC is experiencing its 18th straight year of growth in sales dollars. In Fiscal year 2014, sales reached $70,242,670; this represents a 3.33% ($2.2 million) increase over FY2013 figures.
The Enterprise Resource Planning/Point of Service (ERP/POS) project for the agency stores and office systems is on steady path toward completion. STG is the vendor with Barry/Dunn working along with DLC as project manager.
The current system was developed in-house over the past 30 years. While it has served us well, technology and business processes have changed to the point that the current system cannot keep pace. We were looking for a system that offered a more efficient and secure process at the outlet level, an accurate view of inventory to improve product turns, and a reliable financial interface to the state financial system. With the widespread use of credit cards at our agencies, customer security is of utmost concern.
The new system will provide a more efficient check out experience for the consumer while being fully compliant with current and proposed Payment Card Industry (PCI) rules. We looked at the solutions provided by several vendors and decided that STG offered the most flexible, cost effective and scalable solution for our needs. Their application is based on MicroSoft NAV, a widely used, industry standard platform, which ensures a stable operating environment to build upon.
The Department’s online educational seminar program has recently updated its format. The response has been very good for those licensees and their employees who currently travel many miles to a seminar location.
The Board has added some new agency locations in the past year. It is part of their strategic plan to evaluate the needs for new agency store locations.
Undercover investigations and large special events continue to keep the Enforcement division busy as it focuses on over serving of patrons. This work is critical in keeping the focus on public safety. These types of operations are a priority of the Liquor Control Board.
2014 Legislative Highlights
S.299:AMENDED: Title 7 V.S.A. § 67 (d) (4) – (1) Allows for wholesalers to offer tastings of malt and vinous beverages to management and staff who have applied for a first or second class license who have yet to receive the license from Liquor Control even though it was approved on the local level. It enables management of new businesses to taste products and makes menus that will facilitate an easier startup of their business while they await final approval. (2) Title 7 V.S.A. § 2 (37); “Sampler Flight” means a flight, ski, paddle, or any similar device by design or name intended to hold alcoholic beverage samples for the purpose of comparison. This change will allow licensees to offer sampler flight of malt, vinous, and spirits with a designated number of ounces for each category. (3) The Commissioner of Liquor Control shall submit a report to various legislative committees regarding the risks associated with powdered alcohol products. Title 7 V.S.A. § 69 adds penalties for possessing powdered alcohol and for selling powdered alcohol products. The report is due Jan 15, 2015.
The Commissioner of Liquor Control is part of a taskforce looking at the taxation and regulation of marijuana in our state. A report is due to the Legislature in January 2015. Rand Corporation is working with the Administration to accomplish this task.
In summary, the Department is very excited about the upcoming year and is prepared to tackle all the important issues that present themselves as part of a growing industry.
Virginia
Jeff Painter
Chairman, Department of Alcoholic Beverage Control
The Virginia Department of Alcoholic Beverage Control (ABC) celebrated its 80th anniversary in fiscal year 2014 and marked a year of milestones that promise an even brighter future for the agency. The celebratory year offered many highlights, including the opening of Virginia’s first premier ABC stores in Williamsburg and Leesburg.
Incorporating innovative retail space planning techniques, energy efficient lighting, a permanent tasting area, fine cabinetry, wall treatments and product displays, the new stores also feature a design theme reflective of the unique characteristics of each of the store’s locations. In Williamsburg, for example, a reproduction vintage copper still is evocative of Virginia’s history of moonshine production. The still appears to have had its own impact on sales at the premier store, which experienced a nearly 50 percent boost in licensed moonshine revenues in its first three months over the same period the previous year.
Virginia ABC has plans for a third premier location opening later this fall in Virginia Beach. The new retail initiative underscores a commitment to providing excellent customer service and is representative of Virginia ABC’s growing retail division, which added seven stores and remodeled 19 during the last fiscal year.
Strong Fiscal Growth
Fiscal year 2014 also marked Virginia ABC’s 16th consecutive record-breaking year in sales and profits. Total gross sales were $801 million, $32 million higher than last year. Profits were $140 million, an increase of $6 million from the previous fiscal year. Retail sales ended the year up 4.7 percent and sales to mixed beverage licensees were up 1.6 percent.
While Virginia ABC’s hearings and appeals process continues to provide a consistently effective means for the agency to address licensee violations; contested applications for ABC licenses; and matters involving the Beer and Wine Franchise Act, a promising new mediation process, called Alternative Dispute Resolution (ADR) has thus far produced excellent results. The voluntary process offers disputing parties the opportunity to meet with an impartial mediator who facilitates confidential discussions to assist them in reaching a mutually acceptable resolution of their dispute.
Virginia ABC’s new Field Support Vehicle (FSV), purchased during fiscal year 2013 with asset forfeiture funds, has expanded its reach as a satellite enforcement command post to include educational outreach. In a partnership with ABC’s education and prevention section, the FSV has begun visiting college campuses, community events and festivals to distribute vital educational materials on the dangers of alcohol misuse. Launched in spring 2014, the FSV has made four appearances, with many more scheduled in the coming year.
Virginia ABC also received final approval for regulatory changes, the most notable of which—for both licensees and customers—permits restaurants to promote happy hour. Effective January 29, restaurants were able to publicize happy hour and the time span of their drink specials in any medium, including print and broadcast advertising, social media and online. In the past, Virginia restaurants could only advertise happy hour inside the establishment or on a 17-by-22-inch sign attached to the outside of the building. This year’s changes mark the first time that restaurants have been allowed to promote happy hour beyond their premises.
Educating College Students
Virginia ABC understands the impact alcohol can have on college campuses and re-introduced a program that focuses on these vulnerable communities. ABC’s College Tour program partners with colleges and universities to combat alcohol abuse and underage drinking. Additionally, ABC launched its Education and Prevention Grants program, issuing 11 grants to assist community partners with developing initiatives related to underage drinking, driving under the influence, and other alcohol-related issues.
Governor Terry McAuliffe took office in January. In addition to naming me as ABC Chairman, he also appointed Commissioners Judy Napier and Henry Marsh to serve on the ABC Board. In April he appointed Ryant Washington as ABC’s Special Policy Advisor for Law Enforcement.
In fiscal year 2014, ABC continued to adapt to an ever-changing market. The agency remains committed to the public safety of Virginia’s citizens, providing alcohol education for people of all ages; excellent customer service at each retail location; and generating a consistent source of revenue for some of the Commonwealth’s most important programs.
West Virginia
Ronald M. Moats
Commissioner, Alcohol Beverage Control Administration
The West Virginia Alcohol Beverage Control Administration (WVABCA) reported record sales for FY 2014. The 178 retail outlet stores purchased $91,572,536.46 in inventory from the WVABCA Distribution Center. The increase of 1.10%, or one million dollars, accounted for 699,802 cases, up 3,297 cases from the previous year. Modernization of operations at the Distribution Center is a driving force behind the continued sales growth. In 2013, retailers were provided 24/7 online access to a self-serve model to allow for will-call orders, add-ons, special orders, returns and claims. Retailers can view historic trends in order to make better decisions regarding their inventory levels to meet consumer demands. A recent change allows retailers to receive a SPA price at the time of order, even if that product is out of stock. WVABCA will honor the SPA price when the product is received regardless of its current price.
At present, the WVABCA has 1,992 regular codes for listing and 969 active special order codes, up from 1,975 and 839, respectively. The increase of the bailment portfolio is due in part to the significant increase in distilleries in the state. In 2005, West Virginia had only two distilleries. Currently, in West Virginia we have five distilleries and five mini-distilleries, which accounts for 66 different product codes. A large number of listed products will be available for sampling and ordering at the 23rd Annual Trade Show on September 8 and 9 at the Charleston Civic Center.
Upgrading Inventory and Licensing
In the next phase of modernization at the Distribution Center, the WVABCA will replace the legacy inventory system responsible for managing the inventory supply chain with a new in-house system called the Bailment Control System (BCS). The WVABCA plans to implement the BCS in two phases beginning in 2015. Once migration of core functionality from our legacy inventory system has occurred we will move to surface automation. This will provide vendors with a self-serve model to interact with the WVABCA and submit pricing and label information electronically.
Significant progress occurred this past year with the development of the new eLicensing system. The new system will retire seven legacy systems utilized by eight different departments within the agency and adds functionality for case management, educational tracking, workflow automation and document management. Work flow specs were finalized earlier this year and WVABCA staff members were trained in order to use the new system during the license renewal period. The final phase of implementation is underway and will allow licensees to access a secure website to manage license renewals and even submit new license applications and fees online.
Speaking to the Community
Progress at the WVABCA also abounds in community outreach programs. The DUI Simulator Program is entering its 5th school year and has reached over 20,000 high school students. The program is sponsored by State Farm, Governor’s Highway Safety Program and the National Alcohol Beverage Control Association and is an interactive way to reach students to educate them about the negative consequences associated with drinking and driving and engaging in other distracted driving activities. Another program is titled “No School Spirits.” This new program received funding from the DUI Simulator sponsors in order to hold a statewide PSA contest for every public and private high school in the state. The WVABCA judged all entries and a winning school was selected and awarded $1,000 for a school sanctioned activity. A script and storyboard was developed based upon the winning essay about the dangers of drinking and driving. A sixty second TV spot aired in April and May of 2014, a peak time for underage drinking due to prom and graduation season. The video is available on the WVABCA website. Plans are underway to expand the contest for the upcoming school year.
An additional new program developed by the WVABCA is geared to serve the states retail licensees and their employees. An educational DVD titled “Best Carding Practices” demonstrates proper carding techniques for both On-premises and Off-premises licensees. Viewers are shown various types of legal ID’s and are also told about unacceptable forms of ID. Various scenarios are depicted to illustrate proper and improper methods of carding. Both videos are available on the WVABCA website or by contacting the main office to obtain a DVD.
Wyoming
Dan Noble
Director, Wyoming Department of Revenue
The Wyoming Liquor Division has continued to contribute record revenues to the State’s General fund totaling $15,500,917 in FY 2014. This number is up 14% over last year with an additional $1,919,200 deposited into the State’s General Fund compared to 2013.
Retail Sales/Trends
Sales continued to be strong in FY 2014 with a total of 948,352 cases sold. This is a 3.28% increase over FY 2013. The FY 2014 wholesale sales totaled $103,120,577; up 3.75% over FY2013. The Liquor and Wine industry in Wyoming continues to grow and prosper. Wyoming’s economy remains reasonably strong with a low unemployment rate (3.7%). The State General Fund is rebounding slightly with natural gas prices increasing over FY 2013. Mineral severance taxes and sales and use taxes are ahead of projection and the states investment performance has been strong.
The Liquor Division continues to deliver exceptional service to its retailers statewide, including a state-of-the-art E-Liquor ordering system, 24-hour delivery service anywhere in the state from order entry and providing split case service on virtually all products. The Division currently lists 2,080 products every day and will special order any product not carried in inventory. The wholesale distribution model seems to work well in Wyoming. There has been no pressure towards privatization during 2014 and none is contemplated in the upcoming legislative session.
Liquor Division Warehouse and IT Department
The Liquor Division enjoys its new, temperature-controlled, 145,000 square-foot warehouse facility completed in February of 2012. The new facility is significantly larger and conveniently located near Interstate 80, east of Cheyenne. The Liquor Division began using Knighted-Datria “pick-to-voice” computerized pick-ticket system in September of 2012.
Results have been nothing short of remarkable. The system minimizes errors on orders, increases the productivity of each worker and manages safety issues by ensuring there is no backtracking while filling orders. The system is used to fill retailers’ orders, both full-case and split-case orders, as well as restocking depleted inventory. As our staff has becomes familiar with the technology, its efficiency has almost doubled in FY 2014 with more than 3,200 bottles being picked per hour on the 300-foot conveyor split line.
The Liquor Division is currently working on an upgrade to its ERP system, EPICOR. Work has started and a completion date of January 2015 is expected.
Compliance Update
The Regulatory Section of the Wyoming Liquor Division has three main functions: ensure compliance with Wyoming’s alcohol beverage control laws, review all liquor licensing and serve as a resource to local licensing authorities in alcohol education.
In FY 2014 the regulatory agents completed over 1489 on-site, unannounced inspections. The compliance rate for FY2014 inspections was 95.9%. The Liquor Division continues to partner with the Wyoming State Liquor Association in providing alcohol server training utilizing the TIPS program. This collaboration trained 2,702 students in FY 2014.The Division has also teamed with The Department of Transportation Highway Safety Program and the Highway Patrol to distribute educational materials on no less than a quarterly basis to help educate the licensees and the general public.
Regulatory agents reviewed 1,489 retail liquor license applications that were eventually issued or renewed by local licensing authorities. Additionally, the division’s agents reviewed and processed more than 878 applications including direct shippers, industry representatives, malt beverage wholesalers, manufacturers and charter transportation.
