Friday, March 12, 2010

Closing Thoughts for what has been an Exhausting Week

It's been a busy week of Talking About Beer, how it gets distributed and how it is sold in it's time to step back and drink a few during this thing called Philly Beer Week(end)

I've worked in several capacities in the industry of banking and finance, regulatory as well, in my career. Long enough to be able to ask the questions of why and how. Long enough to never have received good answers. Perhaps because most people I'd asked were too entrenched and too busy profiting from their aggressive and irresponsible greed. And the regulators? Always too willing to back down and turn a blind eye. These last couple of years, we've seen the fruits of this recklessness and laziness come home to roost. I should stop; this isn't a forum where my day job should cross over in to.

But, there is a parallel in the story that's begun to unfold here in Philly over the past week.(I like the chronology that put together...though, I want to go on the record as not being the one spreading speculation that this was all due to Pliny the Younger haves and have-nots.) From retailers to wholesalers to suppliers, many organizations are profiting from the continuing growth within the craft segment of the beer industry. More shortcuts have been taken as time goes by in an effort to get product to market as quickly as possible and to get the biggest share of the pie along the way. Some of these shortcuts are conscious decisions and others are unconscious. Some of these are educated gambles, whereby those involved hope not to get caught, based on the historical prosecution of law offenders (read: lack thereof).

This week in Pennsylvania, some of this was exposed (if this is the first you're hearing of this, you may wish to go back here and catch up). Publicans who are taking product, sometimes on the word of the wholesalers, that may or may not be legit in the eyes of the law and turning it around as quickly as possible to demanding customers (i.e. the ravenous beer geeks). While these guys are some of the last in line that I'll refrain from focusing too much blame on in this fiasco, they do bear at least a bit of responsibility for knowing whether product is legally available for sale in the State or not. I'm not talking 'Duvel' versus 'Duvel Golden Belgian'. More like, are Goose Island or Captain Lawrence, the manufacturing breweries registered...period? Have they ever been? Are they even in the process of gaining registration?

So we take it up a level to the wholesalers...remember, keep following the money. The wholesalers, as liaisons between suppliers and retailers, should bear much more of the responsibility here than the retailers. Even if it is ultimately falling on the brewery/supplier to do the actual registration and fee payment, the wholesalers that are bringing the product into state and ultimately distributing it should know exactly what's been registered and what has not. When it's not, through their contractual relationships with breweries/suppliers, I believe it's incumbant upon them to carry out, if nothing else, an ethical responsibility to ensure that the products of the breweries/suppliers are on the up-and-up.

Take, for example, Vinnie Cilurzo's statement of "...being a mom-and-pop organization...some things slip through the cracks..." That's understandable, of course. But, where was the wholesaler to say something to the effect of "...we notice that this one or that one are not registered with the that true? or is it a clerical oversight at the State?..." Breweries only have X number of brands to manage (across many states, understandably...but still, just X brands). I like Scott Smith's (East End Brewery, Pittsburgh) statement earlier this week where he said, and I'm paraphrasing here without going back to double-check: "...I make a lot of brands...often in small quantities...when I ship them out, I have a form to fill out and a $75 check to write...I send it might be a pain, but it's really not a big deal..." Still, wouldn't it be nice to know your wholesaler/distributor has your back in case you forget?

And then we follow the money in a different the government. They want their cut too. In our Control State that is Pennsylvanis, and likely always will be, this is how it works. They get sales tax at the end of the cycle, but they also get application/registration fees upfront too. Basically, it amounts to an administrative fee for allowing a brewery's product (each individual brand name, in PA...another point of valid argument) to be brought into the State and then getting listed on their Holy Grail of a Registered Brands List.

Ah, and if I haven't made any points yet throughout this thing (I don't know, what do we call this thing today? A Diatribe? A Rambling Diatribe?), here's my Point.

This List that we speak of? This is the List that I referred to last week as "...I have never put 100% faith in...the website source for licensed brand registration in Pennsylvania...never put confidence that...getting it right on every line of roughly 3000 beers."

Today, we learn from the intrepid Joe Sixpack---after he clicked on the Privacy Policy link at the bottom of the PLCB's webpage---that regarding this List, the PLCB's position is that it can not be relied upon and should not be used for legal enforcement purposes. Unfortunately, this does not surprise me. This List turns out to be just a that is processed and maintained by human eyes and fingers, and subject to whatever degree of accuracy that PLCB management deems sufficient.

Now don't get me wrong. I'm as sympathetic as the next when it comes to entry- or barely entry-level data clerks. There's not much motivation to get things 100% correct. But, where's the management in this picture? When things break down in a system as they have in this case, it's easy to point to this small part of the system or that one that isn't/wasn't working as well as possible.

Often times, though---take for example "scandals" in the military, religion, the school system, etc. (how's that for 3 big ones?!)---it's much more useful to begin from the top. Go up the chain and hold those accountable for defining the system, running the system, and enforcing the system. Often times, as we follow the money again, it's those that stand to financially benefit the most from "the system."

Here in our story about the beer industry and the making and distributing of its product, we have Pennsylvania and around 20 other Control States. That means that the State is "in charge" of determining what can be sold and how it can be sold to consumers within its state lines. It means that it defines the rules (that they've now begun to admit may be outdated and ripe for change), it oversees the rules (with information, apparently as we're learning, that they are admitting can not be relied upon by any parties affected by it), and it enforces the rules (by police that appear to not have sufficient information or communication from the overseeing agency).

Lew, I think the case has been set up adequately to be presented to Harrisburg. Control State, if we must. 3-tier System, not going anywhere anytime soon I'm sure. At the risk of sounding like a broken record, though, The System is Broken and Must Be Fixed. We've learned, thank you, that the ball gets rolling April 13th. In what direction, how far, and how fast all remain to be seen.


Derrick Peterman said...

It's interesting reading about all the hubbub out here in California. Maybe the first question we ought to be asking is what does this list actually accomplish? How come plenty of states do not have this registration list, and seem to be doing fine? How come wine isn't regulated this way?

Hopefully, all this silliness will result in sensible, fair, and manageable regulation.

Bryan Kolesar said...

Derrick--Legislative hearing scheduled in Harrisburg for this coming Tuesday, 4/13...we shall see