Interview: Pennsylvania Liquor Control Board CEO Joseph Conti
When voters in Washington state approved a referendum to end state control of beverage alcohol sales late last year, all eyes turned to Pennsylvania, the largest control state in the United States by volume. Indeed, the Pennsylvania Liquor Control Board (PLCB) is the largest purchaser of wine and spirits in the U.S. and has sales of $1.5 billion generated from 609 state-operated stores.
Currently, Pennsylvania is one of only two states (the other is Utah) that owns and operates wholesale and retail sales of wine and spirits. Unlike Washington, Pennsylvania doesn’t have binding referendums, so the route to privatization would simply be for a bill from the legislature to be signed by the governor. Pennsylvania Governor Tom Corbett has indicated he would sign such a bill. Shanken News Daily recently spoke with the PLCB’s CEO, Joseph Conti, about the likelihood of privatization and overall efforts to modernize sales of beverage alcohol in Pennsylvania.
SND: What’s your view of privatization, and do you think the Pennsylvania legislature will move forward with the privatization bill?
Conti: House Majority Leader Mike Turzai’s House Bill 11 was amended before the House of Representatives adjourned for the holidays. It’s still part of an active legislative agenda. Rather than proposing 1,250 retail outlets in the original version of HB 11, the amended version offers the opportunity for 1,200 additional beer distributors to sell wine. There’s a proposed $50,000 upfront fee for a license and then a $15,000-a-year licensing fee.
SND: How significant is the consumer movement toward privatization in Pennsylvania?
Conti: In polls, 50%-60% of Pennsylvanians favor deregulation. Back in the ’80s and ’90s, there was much more public support—around 95%—for deregulation. So there’s not the enthusiasm we saw 20 or 30 years ago. That’s thanks to the PLCB’s various initiatives over the years.
SND: What’s the best argument for maintaining the status quo in Pennsylvania?
Conti: First, we are a significant asset that has $1.5 billion in sales and was able to generate $80 million in profit last year and cover all expenses for our operation. We also collect $400 million in taxes annually. So you have the benefits of a nice return for Pennsylvania taxpayers, and then you have the public safety issue. We think there’s a lot of merit in the controlled nature of wine and spirits sales.
SND: What are the latest developments in the modernization of the PLCB?
Conti: Beginning four years ago, the board conducted research to determine what consumers wanted in our stores. One thing that emerged from that was our center tables, which are a combination checkout with two to four registers, along with a manager’s office that’s visible to the public and a tasting bar at the end. That’s our new look. The store concept itself also has been revamped in terms of visuals—mainly by having fewer case stackings and displaying the bottles out of their cases. That has met with great consumer success, and we’ve seen nice increases in retail sales at our three or four prototypes. We’re now rolling this out across all 609 stores over the next two to five years. We also have a new website, finewinesandgoodspirits.com. We think we have a great future in e-commerce.
SND: How does purchasing work on the website?
Conti: Our web offerings tend to be mostly items not available in our stores—with the exception of the Chairman’s Selection, which is our deep discounted wine program. Until recently, all purchases had to be delivered to a store of the shopper’s choice. But we’re now allowing those purchases to be shipped directly to homes and businesses. A shipping fee of $14 is added to deliveries that include one to three bottles, with an additional dollar added for each bottle over that. Over the coming months, we’ll be seeing how our consumers like this initiative.
SND: Do you believe that the people of Pennsylvania are best served by the current PLCB system?
Conti: I do, but we have to continue to improve. We’re halfway to where we want to be. In the next two to three years, we’ll see the fruition of our current strategic plans.
As the largest winery in Washington State, Chateau Ste. Michelle is also regarded as one of the finest. And for 2011, it just happens to be the Wine.com winery of the year. Producing an array of wines that display the unique characteristics of Washington viticulture, Chateau Ste. Michelle has been a champion for getting the wines of Washington to the national wine market. From crisp and fruit-forward Eroica Riesling to their incredible value Cabernet Sauvignon, the winery has something for everyone’s palate. In fact, three wines from Chateau Ste. Michelle made the 2011 Wine.com 100: Chateau Ste. Michelle 2008 Cabernet Sauvignon, Chateau Ste. Michelle 2007 Merlot and Chateau Ste. Michelle 2009 Eroica Riesling.
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Cheers,
Wine.com
Foppiano Vineyards Caught In Sibling Legal Battle
Sonoma’s oldest family-run winery, Foppiano Vineyards, is facing the twin threats of plummeting sales and a lawsuit between family members over its management, reports Wine Spectator. Louis M. Foppiano, chairman of the 115-year-old winery in Healdsburg, is being sued by his sister, Susan Valera. She claims Foppiano threatened the health of the family trust that controls the winery by using it as collateral for loans to the company. She also accuses him of using some of that money for executive bonuses.
A Sonoma County judge began hearing arguments yesterday. As first reported in the Santa Rosa Press Democrat and according to documents filed for the case, Valera is asking that Foppiano be stripped of his title as co-trustee, leaving her in charge of the family trust. Neither side could be reached for comment on the pending case, but the documents include evidence that the winery has struggled for several years as the siblings have clashed over its management. Foppiano Vineyards’ annual sales, once over 100,000 cases, are now down below 20,000 cases, documents say.
Giovanni Foppiano, a native of Genoa, Italy, founded the winery in 1896. His grandson Louis J. Foppiano was only 14 when his father died, leaving him and his mother to tend the ranch and winery. They barely scraped by during Prohibition and the Great Depression. Foppiano—known as Lou Sr.—remembers a day in 1926 when government agents dumped 100,000 gallons of the family’s wine into a creek.
Today, Lou Sr. is 101. In 2009, he relinquished his rights to a family trust that controls 49% of the winery and vineyards, naming his son and daughter as co-trustees. Louis M., 64, known as Lou Jr., has worked in the winery since he was a boy and has managed it since 2003. He has spent several years trying to upgrade the old cellar, hired a new winemaker, replanted old vineyards and focused on Petite Sirah and Pinot Noir. Wine quality had declined in the final years of Lou Sr.’s management.
In legal papers filed with the court, Lou Jr. claims that Valera and other family members supported him when he brought in an outside consultant in 2008 to suggest how to revitalize the brand. Foppiano then hired a manager and took out close to $4 million in loans to pay for improvement projects, using the family trust as collateral. But the plan ran straight into the recession. Revenue was 35% less than projected in the 2009 fiscal year.
Foppiano alleges that Valera and her husband began demanding financial documents and pressuring him to sell the business. But in her suit, Valera accuses Foppiano of financial mismanagement and of paying himself sizable bonuses. She also alleges that when she began asking questions about the company’s finances, Foppiano fired her. Her brother responds that her position was eliminated, along with several others, as part of cost-cutting measures.
Arguments are expected to last a week, and the judge will decide the future of the family trust. The winery still has impressive assets in its cellars and vineyards, and a well-known brand name. With investors recently scooping up several old Sonoma wineries, Foppiano would be a tempting acquisition. Seghesio Vineyards, Sonoma’s second oldest family-owned winery, was sold to Crimson Wine Group earlier this year.