Sluggish revenue. Antiquated warehouse processes. The growing threat of privatization. These were just some of the challenges facing Vermont’s Division of Liquor Control a few short years ago. But new leadership, and a top-down modernization effort of the agency’s entire operation, have quickly set up one of the nation’s smallest control states for a new level of success.
Vermont is uniquely structured in that its governor appoints individuals to serve on a Board of Commission, and then the board oversees the department’s commissioner. The state agency is also one in a growing number that has recently combined with other offices. In January 2018, Governor Phil Scott issued an executive order to merge the Department of Liquor Control with the Vermont Lottery Commission, creating a unified Department of Liquor and Lottery. Led by Commissioner Patrick Delaney, the new department has worked to identify opportunities to increase productivity due to shared administrative resources, including licensing, finance, human resources, compliance and retail systems.
Delaney has been at the helm of Vermont’s Division of Liquor Control since 2016. He previously owned and operated a Utah-based liquor and wine brokerage firm for more than 20 years, which he eventually sold to Southern Wine & Spirits before taking up his current role in Vermont.
One thing that attracted Delaney to the job was the opportunity he saw for improvements. At the time, the division was under a high level of internal and external scrutiny. A modernization committee had evaluated the overall state of the agency and made recommendations to the governor about what needed to be done. Delaney was then charged with expanding on and implementing those plans.
“The goal I had coming in was to reinvent the wheel,” Delaney explains. “We had to evaluate and restructure the entire business model in order to turn things around.” Shortly after taking on his new role, Delaney hired Gary Kessler for the role of Deputy Commissioner. Kessler, an attorney, had 28 years of experience in state government and helped fill in the blanks for Delaney, who was new to the public sector.
Changes and Technology
Delaney worked to create a new sense of focus for the division, which currently oversees 76 retail stores and approximately 7,000 on- and off-premise licensees.
One of the first things Delaney did was to evaluate each office in the Department and identify opportunities for growth and improvement. The restructuring process also helped enhance the accountability and performance of each area of the division. One of the first areas to undergo a transformation was the Licensing, Education and Enforcement office. It was broken up into distinct operations: compliance and enforcement, education and licensing. This change created two new director-level positions, which helped each unit better define roles and responsibilities while also streamlining operations.
In the Education office, staff developed written logs detailing the work everyone was doing across the state. This process helped leadership identify problem areas and develop new ways of providing support.
One resulting program was a partnership with Bridge by Instructure, a software tool used to develop the agency’s mandatory online alcohol and tobacco training. Another newer compliance and enforcement initiative, known as Project Rabbit, uses data streams including “Place of Last Drink.” Working with local law enforcement agencies, the Office of Compliance and Enforcement has implemented a standardized process, questioning individuals after they are pulled over under suspicion of driving under the influence of alcohol.
Police officers are required to ask people during the questioning process where they had their last drink. Law enforcement officials record the answers in a database connected to the division’s own database. These information streams are combined and analyzed by an algorithm in order to help guide compliance and enforcement.
The Office of Compliance and Enforcement’s Chief Skyler Genest created Project Rabbit. “We use the output from all the data to guide where our investigators go to conduct inspections and investigations,” Genest explains. “With this focused program in effect, we have seen a doubling in the number citations issued, because we fish where the fish are.”
Compliance and enforcement staff have also developed new underage alcohol use interdiction techniques for the state’s college areas. The agency recognized that social media has made it more difficult to set up traditional ID-checking stations outside of licensed establishments, as people can quickly and easily post about it online to alert their friends.
To address this problem, agency investigators implemented new ID-checking technology at licensed establishments, and also began checking the IDs of people leaving establishments. The process was deemed successful, as it resulted in a dramatic increase in the number of fraudulent IDs confiscated.
Use of the Fastfield mobile app has also gone into effect across the division. When conducting inspections or assessing possible locations for new stores, staff now use this app to auto-log info, like timing and exact GPS location. Staff can also take and store photos through the app, and sort them into appropriate categories, such as interior, exterior, parking, etc.
This mobile app has eliminated the need for staff to take written notes and manually input information into a database post-visit. Data collected through the app is also used to track incentive evaluations for retail employees, which are used for performance evaluation and potential bonuses.
Marketing Vermont
Marketing was another primary focus area for Vermont.
Under Delaney’s direction, a new position opened to lead the agency’s rebranding efforts. Previous marketing materials were considered outdated, and the division wanted to move away from referring to its stores as “Vermont Liquor Outlets.”
The new 802 Spirits brand takes its name from Vermont’s only telephone area code, which is easily identifiable and is a source of pride for people across the state. The 802 Spirits branding is now prominently featured across all print and digital materials; it’s also present on interior and exterior retail store signage.
The agency also offered to help retail stores by splitting the cost of official roadside directional signage (Vermont does not allow billboards) if the signs include the 802 Spirits branding. This signage is a coveted marketing tool for retailers, and the division has received numerous requests from retailers to purchase and install signs.
In addition to the new branding, marketing efforts also concentrated on revamping the division’s annual report, which is presented to Vermont’s governor and state legislature every January. The old version of the report was a black-and-white document that mainly consisted of dense financial comparison data. The marketing team redesigned the report to include colorful photography, a year-in-review section, organizational charts, information on retail sales and distilleries and more.
Delaney says the new report is more engaging to read. It presents a wider variety of information in a much more accessible, user-friendly format.
Retail Innovations
Vermont’s revitalized marketing efforts also focused on developing new and innovative ways to engage customers.
Beginning in 2017, the state holds a Rare Spirits Sweepstakes each year, along with two raffles. All three of these events give Vermont consumers a chance to purchase rare or limited-release products, such as Buffalo Trace Antique Collection and Pappy Van Winkle.
The sweepstakes take place in partnership with a local non-profit organization dedicated to drug addiction prevention and rehabilitation. This organization typically receives an average fundraising total of $20,000 each year. The two annual raffles are free for customers to enter.
“Each of these events is extremely popular, and they represent the division’s commitment to bring diverse, best-in-class products to the people of Vermont and distributing them in a fair and equitable manner,” Delaney says.
Also on the retail side of the spectrum, the agency recently implemented a new point-of-sale (POS) system across the state, which replaced a 30-year-old program that was extremely outdated. The new Microsoft-based system has been installed at every retail location across the state, drastically improving efficiencies.
“This new POS, warehouse management and back office system was implemented ahead of schedule under budget, which is a rare occurrence in the IT project world,” says Deputy Commissioner Kessler.
Additional store modernization efforts include the installation of standardized shelving in all stores, and the introduction of an automated inventory reordering system. The division also launched a new protocol that assists retailers by removing unnecessary inventory from stores and sending it back to the warehouse.
“Staff is working to right the size of inventory levels for all of our stores with a goal of reducing total state-owned inventory by 5% this year, which drops straight to the division’s bottom line,” Delaney says.
The agency’s purchasing office implemented a new forecasting and direct follow up process, discontinuing vendor-managed inventories in July 2017. Now the division conducts its own forecasting process to replenish orders and schedule product deliveries to the warehouse. As a result of this change, Delaney reports that the agency has seen an 80% decrease in the amount of its out-of-stock products. Overall, product sales have also grown at a steady pace of two to three percent in each of the past four years, resulting in increased revenue for the state.
Warehouse Overhaul
An overhaul of the agency’s 31,500-square-foot warehouse space was another major transformation for the department in recent time.
The Montpelier-based warehouse is the only storage facility for the agency’s more than 3,500 product SKUs. The layout of the warehouse was completely restructured in order to maximize efficiencies.
This involved reconfiguring shelving systems to make room for an additional 250 SKUs, and automating the picking process, which resulted in reducing order errors by almost 90%.
The warehouse implemented a new point-of-delivery scanner system to confirm orders prior to shipping. This process allowed warehouse staff to reduce overall delivery time by 20%, and improved shipping accuracy by more than 65%. All store shipments now undergo scanning and cross-referencing prior to leaving the warehouse to ensure 100% accuracy. As a result, delivery staff no longer need to manually check each order prior to dropping it off at a store, and the number of deliveries the agency can complete each week has now increased.
Additional warehouse improvements included new safety, cleanliness and organizational features. Oddly enough, Delaney says that the division is currently on the cusp of having excess warehouse space, when the complete reverse was true just four years prior. The division also increased salaries for warehouse staff, which improved both morale and retention rates.
“People couldn’t be happier with these new systems,” Delaney says. “Everything is so much better, and this is why we now have sustainable growth. All of these changes have helped us finally reach the point where this division is operating like a business — which is how it should be.”
Looking to the Future
So, what’s next for Vermont’s Division of Liquor Control?
Delaney and his team are focused on a few key priorities, one being the development of a modernized licensing system.
More than 30 different types of licenses are currently offered through the department. The licensing team is working on creating a new online licensing portal to complete the entire process.
Education is another major priority. With the support of two grants — totaling $60,000, funded by the National Alcoholic Beverage Control Association (NABCA) — the DLC is working to revamp its online trainings, develop a new video training series, and has hired a new Education Coordinator. However, Delaney is quick to point out that he and his staff are committed to continuous improvement across the department.
“We still have a lot of work to do across the board,” he says, “and we’re going to continue making things better in everything that we do.”
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.
