Ohio Named 2019 Control States Best Practices ‘Best of the Best’

For the fifth year, StateWays is proud to recognize the most innovative programs and ideas in the control state system with our Best Practices Awards. This year, winning agencies represent the best in retailing, distribution, enforcement and education. 

All beverage control jurisdictions in North America are eligible to enter, including states, provinces, counties and municipalities. The winners were chosen by a panel of judges made up of StateWays editorial staff. 

The Ohio Division of Liquor Control is this year’s “Best of the Best” overall winner – chosen for its unique operational structure and its recent rebranding of retail locations. 

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All winners will receive their award at the NABCA Administrators Conference in Denver in October. The full list of winners is available in the Sept/Oct issue, which you can read digitally here.

Your agency isn’t on the list? Then be sure to enter the 2020 Best Practices Awards! Entries will open in the spring at StateWays.com/bestpractices.

Ohio Brings Data to the Forefront

By Melissa Sherwin

The past two and a half years have been a period of transformation for the Ohio Division of Liquor Control, which operates under the state’s Department of Commerce and JobsOhio Beverage System (JOBS).

Ohio currently has a total of 481 independently owned agency stores that sell spirits on consignment on behalf of the division. Each store varies in size and scope, ranging from small family-owned business to big-box grocery stores. Agency stores maintain their own inventories of low-proof alcohol, beer, wine and other products. The division manages the retail and wholesale operations for the sale of high-proof liquor, and also oversees licensing across the state alcohol sales. JOBS owns liquor product in Ohio for retail and wholesale sales. Together, the two entities make up Ohio Liquor (OHLQ).

Division Superintendent Jim Canepa was initially appointed in a temporary capacity by former Governor John R. Kasich, Jr. in February 2017. Canepa came on to oversee the Liquor Modernization Project (LMP), an effort to modernize systems and processes across the organization.

Flash forward to late 2019, and Canepa remains in the position, where he’s helped OHLQ revolutionize its operations and drive unprecedented revenue growth. During the 2018-2019 fiscal year, OHLQ generated a whopping $1.28 billion in high-proof liquor sales.  

Canepa is relatively new to the beverage alcohol industry, but his vast experience in enforcement and investigation drew him to the division. Prior to joining, Canepa served as chief of staff and legal affairs for the Ohio Environmental Protection Agency. He’s held numerous other leadership roles within Ohio state government, including chief legal counsel with the Ohio Department of Public Safety, deputy inspector general with the Office of the Ohio Inspector General, and first assistant attorney general for the Ohio Attorney General.

Earlier in his career, Canepa worked as an appellate prosecutor and a senior trial prosecutor for the Franklin County, Ohio Prosecutor’s Office. 

Upon his arrival, Canepa and his leadership team identified additional opportunities for improvement across the division. “We were able to get really creative and fun, and come up with new ideas that really moved OHLQ beyond basic stabilization,” he says.

Driving all the division’s initiatives is a commitment to using data in order to generate the best possible ideas and outcomes. Each program brings data to the forefront of the decision-making process, resulting in innovative approaches and methods.

Stakeholder Relations and Technology

A large focus of the new administration has been the division’s ongoing LMP, which has been underway since 2016.

Initial outreach targeted agency stores and included a number of initiatives, including surveys and town hall meetings, an increased number of store visits and the creation of additional in-person and webinar trainings. Enhanced communications were another large priority, and efforts included the implementation of a new e-mail messaging system and creating a group of dedicated liaisons, charged with initiating face-to-face communications with various stakeholders.

A new website, Ops.OHLQ.com, provided agency stores with real-time product information and other important updates. The division also set up the Liquor Enterprise Service Center (LESC), a 24/7 tier-level support call center.

“LESC has kind of become our system hub,” says Lorraine Terry, senior director of JOBS. “The service center is staffed every day, and is the main point of contact for our agency partners who have questions, problems or concerns. People also have the option of sending us an e-mail if they don’t want to call in.”

In 2018, OHLQ widened its focus to include additional stakeholders. This new program — internally referred to as the Stakeholder Engagement Program (StEP) — aims to actively engage all stakeholders to assure that they continue supporting OHLQ’s growth.

Feedback was collected from multiple stakeholder groups, including agency owners, vendors, brokers and various industry organizations from across the state. OHLQ has used this feedback to identify areas of improvement, and initiate positive changes. An example includes using feedback gathered from vendors and brokers to improve communications about warehousing. 

“We kept hearing there was no insight into warehouse operations with the previous warehouse management company, so we wanted to have as close to full transparency as possible when it came to the distribution centers,” Terry explains. 

In response to this concern, JOBS enlisted the help of a demand planner to analyze product supply in the two distribution centers and share that information with suppliers. Vendors and brokers now have access to various data reports related to receiving, inventory, adjustments and payments in near-real time. 

One of OHLQ’s crowning achievements in this area is automating the listing request process. Previously, all paperwork was completed in a hard copy format and had to be scanned and e-mailed, or physically mailed to the division. A new online tool was added to the existing Ops.OHLQ.com website, allowing vendors and brokers to go online to request new items, reinstate items, request size extensions, request value-added packages, request item coverage or item coverage updates, or request changes to existing items.

The new tool piloted in October 2018 to a small group that provided feedback to OHLQ to help enhance the process prior to it being broadly offered to all vendors and brokers in July 2019.

“We work with all stakeholders to evolve our business into a better one for everyone,” Canepa says. “Continuous improvement by using all feedback provided by a stakeholder is key to our success.”

Additionally, OHLQ has focused on enhancing its Enterprise Resource Planning system over the past year, moving to more cloud-based systems solutions. OHLQ has saved $239,000 in annual costs associated with servers, storage and other related expenses. By developing a new alert system that pushes notifications to the mobile phones of the entire OHLQ technology staff when even the smallest systems glitch is detected, overall system processes are now more efficient than ever.

Disruptions to the system have drastically decreased, saving an additional $264,000 in related annual systems maintenance costs.

Branding And Agency Partnerships

In recent years, the OHLQ has introduced new branding to its agency stores in an attempt to have a more consistent, cohesive look. After visiting a number of store locations and partnering with retail design experts, the brand was developed and shared with a number of customers at various store locations to gather feedback.

The full suite of branding materials formally launched in December 2018, including everything from street-level pylon signs to paint colors to flooring to signage. The new branding is also visible across OHLQ websites, social media accounts and other materials. OHLQ continues exploring new ways to evolve the brand, including creating a branding tool kit for agency stores, and identifying additional branding options to accommodate the various sizes and layouts of different stores.

Agency stores are encouraged to adopt the branding at their own expense. To date, 24 stores have incorporated some aspects of the branding, and several stores have integrated all of the branding materials into their stores. Customer response to the new branding has been positive, and the resulting effects can be seen in terms of an uptick in sales.

“Our data shows that the stores that are currently in full brand mode have seen anywhere from a six to 12% sales increase since introducing the branding,” Canepa says. “Now other agencies are clamoring to get the branding, because they see very clearly that it makes a big difference.”

The new branding has helped Ohio continue to capitalize on the bourbon craze — as has the development of new partnerships with agency stores.

In the past year, the division has expanded the number of its barrel releases, raffles and bottle lotteries. Agency stores may apply to participate. The chance to highlight an exclusive bourbon product is a coveted opportunity for any agency store, and the competition in the selection process is high.

In order to host a barrel release or raffle, agencies must be in full compliance with all OHLQ requirements, and also must submit an event plan outlining how they propose to run the event, detailing the available space they have to use, while suggesting possible entertainment options for the event to enhance customer experience.

These plans are considered by division leadership, along with geographical store data, to select agency participants. 

Many limited-release products sell out in a number of hours, with the record being eight barrels sold in 20 minutes. Agency stores are tasked with handing out tickets for the available number of bottles to help meet customer expectations.

For raffles, staff sort through entries to ensure that multiple entries are not submitted. The largest raffle to date was held at a Columbus store, where 1,200 consumers turned out for a chance to buy 84 rare bottles.

OHLQ publicizes limited releases, raffles and other events via its e-mail marketing list, which currently has more than 90,000 subscribers. The division credits its events with helping fuel Ohio’s double-digit growth in the American whiskey category over the past two years.

Warehouse and Distribution 

Shortly after Canepa joined the division, all deliveries to agency stores transitioned to a new third-party provider, DHL Supply chain, through a JOBS contract.

This decision was based on the need to improve overall service to agency store partners, while also streamlining processes when OHLQ’s warehouses condensed from four to two locations. 

Now, more than two years later, the impact of this change is apparent.

Both distribution centers operate at an extremely high level. DHL’s order fill rate is 99.9%, and agencies receive orders on time 99.5% of the time, and with 99.9% accuracy. DHL also restructured the delivery process for the state. Now each agency store receives weekly deliveries on the same day and time (previously, they received deliveries on the same day, but the time would vary).

The new DHL partnership has also resulted in significant cost savings. In 2018, JOBS reported nearly $800,000 in savings related to delivery transportation, routing and trailer optimization, number and type of equipment used, and directed fueling, which directs DHL drivers to the lowest cost diesel fueling station along their routes. Additionally, nearly $650,000 in savings resulted from new inventory management operations, specifically due to reduced inventory loss and damage.

Necessity is the mother of invention. With a large stock of slow-moving and discontinued items, Canepa and his team created a Last Call store, which began as a pilot pop-up store in Columbus late in 2018. The goal was to offer a selection of 2,500 delisted products at a discounted rate over a two-week period. Consumer response was beyond anyone’s expectations.

“It was like Black Friday every single day,” Canepa recalls. “We sold out of what we thought would be our entire stock in half a day. We had to keep calling the warehouse to bring in additional product.”

Ultimately, OHLQ generated $350,000 in revenue during that two-week pilot program — and depleted its selection of delisted products from 400,000 bottles to fewer than 40,000 — all in an 18-month timeframe. The success of the pilot led to the opening of three more permanent Last Call stores. The discount stores are strategically placed close to Ohio’s borders in an effort to drive sales from neighboring states.

“These stores are great for customers who are looking for commodity pricing, but we’ll also put some popular products out there and also do raffles and offer special barrels to make Last Call stores destination points,” Canepa says.

Expanding Education and Outreach

While growth is a priority for Ohio, OHLQ’s primary focus is on education.

This year, OHLQ hosted 21 Mandatory Agency Training Sessions (MATS) for each of Ohio’s 481 stores. The goals of MATS were to help agencies better understand the contractual relationship they have with OHLQ; recognize their responsibilities; and achieve a consistent look, feel and customer service experience across all Ohio agency locations.

Most agency stores sell products other than spirits. This means that the OHLQ regulations they must conform to can differ from their other product-related operations. Much of the MATS trainings focused on explaining the differences and expectations for marketing and selling spirits.

Sessions were offered across the state at 17 different locations, allowing agency owners to minimize time spent away from their business while attending the session that was most convenient for them.

Feedback on MATS was very positive, and OHLQ plans to run a similar program next year.

Looking to the Future

OHLQ is committed to constant improvement, and plans to continuously evaluate its many forms of data in order to make thoughtful business decisions that are in line with evolving industry and consumer needs.

Expansion is a big part of that effort. Since Canepa joined the Division in early 2017, Ohio has opened 26 new agency stores, which collectively generated more than $15 million in additional revenue for the state. 

Currently, there are five additional stores that have been awarded a contract but have not yet opened. Five more locations are in the various stages of review, and will all be open by the end of 2020. OHLQ plans to open between five and 10 new stores per year for the next several years.

“We’re analyzing marketing data to determine the best opportunities for growth,” says Gerry O’Neil, director of agency operations. “We’re also very mindful about not wanting to oversaturate the market or over-cannibalize closely located agency stores.”

Given the significant progress OHLQ has made with expansion and in other areas over the past several years, additional growth and success is most certainly on the horizon. • 

Melissa Sherwin is a freelance writer and marketing communications strategist from Chicago, IL. Her work has appeared in Chicago’s Daily Herald newspaper, Time Out Chicago, Suburban Life newspapers, and various magazines. She is also the author of several children’s books. Follow her @MelissaNSherwin.

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