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Monday, April 14, 2003

By Johnna A. Pro, Post-Gazette Staff Writer

HARRISBURG -- In the waning days of 1933, Helen Half Fingold was a single college student who, on a dare, took a state proficiency test and after passing, found herself ensconced in Harrisburg weeks later working for the newly formed Liquor Control Board.

	Helen Half Fingold, 92, was one of the first people hired by the Pennsylvania Liquor Control Board when it started 70 years ago. She worked for two years as a secretary for the personnel department in Harrisburg. (Steve Mellon, Post-Gazette) Online Graphic: Sunday Liquor sales

"On January 3, 1934, I got a telegram to report to Harrisburg," said Fingold, of Shadyside, who at 92 may be one of the few people still alive who was part of the beginnings of the LCB. "It sounded like a wonderful adventure. They chose you. You were called into service. I was called for the magnificent sum of $85 a month."

In those early days following the repeal of Prohibition, it was a merry band of young people like Fingold who set up the state stores across the commonwealth under the watchful eye of the Legislature, which strictly outlined what could be sold, where and when.

There was an excitement in the air over the state's new retail venture, which would provide jobs to a willing workforce following the Depression. After 13 years of Prohibition, young people like Fingold were excited to be part of what she called "this booze outfit."

"It was amazing. It was like magic how they did it. It seemed to generate itself somehow," said Fingold, who spent two years working as a secretary in the personnel department. "I think it was very welcome."

Little did those first employees know that the system they worked to create would become a monolith that many Pennsylvanians, complaining of surly untrained clerks, dirty stores, bad hours and a limited selection, would grow to despise.

Seventy years later, the Pennsylvania Liquor Control Board still operates under the thumb of state lawmakers. Prices on all wine and spirits include 24 cents in taxes on every dollar: 6 cents in sales tax and 18 cents for the Johnstown Flood Tax, originally enacted in 1936 to assist in rebuilding the Cambria County town but which now is simply a sin tax.

But after decades of complaints from citizens and calls to modernize the antiquated system of a state-controlled liquor monopoly, the LCB has taken its first cautious steps into the 21st century, starting with a Web site where wine and spirits can be ordered and the sale of a very limited number of retail items in its stores.

If Gov. Ed Rendell and the current board have their way, the state stores are on the cusp of rapid growth and modernization that will include putting liquor stores inside grocery stores or other large retailers. A prototype could open in Western Pennsylvania as early as this fall.

"I want to make the system more consumer-friendly and have people voluntarily shop in these stores," said Jonathan Newman, the board chairman. "The PLCB is situated for the future. It's the largest purchaser of wine and spirits in the United States and the largest purchaser of California wine in the world. I think we can use our purchasing power to bring great deals for consumers. I think we can stem the tide of the mediocre reputation we've had in the past."

Sunday sales debut

Even though the LCB began to modernize in the mid-1980s by opening self-serve stores, debate was fierce through the 1990s over whether to privatize the state's liquor operations. That debate effectively ended last year when Act 212 was signed by then-Gov. Mark Schweiker, opening the door for product tastings in the stores, sales of retail items, and most controversial of all, Sunday liquor sales.

Those measures, and other steps being taken by the LCB, have Rendell's support. The governor has made it clear that he supports changes to make the stores more consumer-friendly and accessible, but that he's not interested in talking about privatization.

Although some state store employees and citizens protested, on Feb. 9, the LCB opened 61 state stores across the commonwealth for Sunday sales under a two-year experiment. Only 10 percent of state stores currently can open for the extra day.

Since then, two stores, one in Johnstown and one in Philadelphia, have ceased Sunday hours because of lagging sales, but two more, one in Hermitage, Mercer County, and another in West Chester, Chester County, are now open.

Newman, who testified along with his fellow board member Pittsburgh attorney Patrick J. Stapleton, before the Senate Appropriations Committee recently, said it was too early to tell if the experiment is a success, but early results are encouraging. Newman said that at the end of the pilot, more stores will open for Sunday sales, although he is not sure how many or which ones.

"While it is too soon to quantify the increased economic revenues that will result from the limited pilot at 10 percent of our stores, I can tell you it will add significant revenue to the commonwealth, create goodwill among our existing customers and likely win back Pennsylvania residents lost to border states," Newman said.

Sunday already is the second-most popular shopping day for state store customers, just behind Saturday. For the first eight Sundays the stores were open, up to and including March 30, the state stores sold nearly $2.8 million worth of wine and liquor to consumers. That doesn't include $100,000-plus in purchases by licensees such as bars and restaurants.

Newman said it is too early to tell if Sunday sales are siphoning away sales on other days of the week.

In addition to the Sunday sales, the law now allows the state stores to sell corkscrews and wine sleeves, which, thus far, is all that legislators will allow.

In the first six weeks of carrying such products, the state stores sold 4,500 corkscrews alone in only 26 stores across Pennsylvania. By the end of April, all 638 stores will carry those products.

Both Newman and Stapleton hope to convince legislators to allow the board to expand the product line to include items such as glasses, decanters, refrigeration units, racking, and books related to entertaining and to wine and spirits.

Competing for customers

The state's liquor stores are a self-sustaining business that grosses $1.2 billion dollars annually and last year returned $360 million to the state in taxes and profits.

But while the net sales numbers may be huge, they represent a mere fraction of the potential, according to Newman and Stapleton.

While the state ranks in the top 10 in terms of beer drinkers, it's 38th in wine consumption and 47th in consumption of spirits, according to statistics provided by Newman.

"We've been growing at a 5 percent growth rate even in a difficult economy," Newman said. "We're in our infancy. We're going to grow substantially."

The key is getting people into Pennsylvania liquor stores, particularly around the state's borders.

New Jersey, for example, has an over-21 population that is 25 percent lower than Pennsylvania, according to Newman. But the Garden State's sale of wine and spirits grosses a half-billion dollars more than Pennsylvania's.

Some of that business is created by New Jersey's beaches, which are popular with vacationers. But some of the difference is because Pennsylvanians are lured across the border to shop, oftentimes, Stapleton said, by big sales on one or two items.

"If you drive 10 miles into New Jersey," Stapleton said, "those stores have higher prices than ours."

"We bleed a lot of business to New Jersey, Maryland and Delaware," Newman told the appropriations committee. "There's a huge opportunity to get that cross-border trade."

To that end, the LCB is striving to change its image. As chairman, Newman has chosen to focus on wine to do that.

The LCB's wine stock includes 8,000 different wines for consumers and another 12,000 specialty wines available mainly to restaurants. Wine sales now account for 60 percent of all sales, up 5 percent and growing in the past three years.

The first step to expanding that market has been training.

The LCB is looking to hire a wine expert to coordinate training and it has recently improved employee training about wine, creating basic, intermediate and master's courses.

Store employees also are being taken into the field to visit Pennsylvania wineries and to learn about the wine-making process. The hope is that better-trained employees will teach customers to "trade-up" in their purchases and buy more expensive wines.

The LCB is now using its clout as a wholesaler and retailer to persuade its vendors to provide better prices, and in the case of wines, more exclusive products and hard-to-find wines.

"For example, Mondavi wanted to sell us lower and mid-priced wines," Stapleton said. "We've now said to them, we're not buying the lower end unless you provide us with the more limited production lines. They've been able to do that [get better quality wine] in the last three or four years."

In addition, the LCB is promoting Pennsylvania wineries; hosting wine festivals, including one at Heinz Field next month for restaurant owners and the public; and bringing in wine experts from around the world to meet with customers at various events.

The changes have not gone unnoticed, said Don Chapman, president of the Pennsylvania Wine Association, a trade association, and owner of Brookmere Farm Vineyards near Penn State in Centre County.

Thirty-five years ago, the LCB did little for the state's fledgling wineries except license them, monitor them and burden them with red tape.

Today, the LCB promotes the wineries and the winery industry in Pennsylvania, sends representatives to the association's annual meeting and works with wine makers to figure out what customers want. Chapman hopes there will come a day when Pennsylvania smaller wineries can deliver their products to their local state stores.

"They used to be an adversary for us," Chapman said. "But I've seen a tremendous change in attitudes. They want to do what is best for the customer. I think they are really working at it."

A focus on wine

While Newman is "an unabashed wine lover" who is focusing the LCB's future toward wine, he recognizes that the larger profit margin is on other kinds of alcohol.

And regardless of whether people want wine or other spirits, they do want to be able to make their purchases in attractive stores on days and hours that are convenient.

"People want the convenience of buying the product when they want it and where they want it," Newman said.

Rendell is a proponent of opening liquor stores inside of large grocery stores or other retailers and Newman said he wants to open prototypes in Western, Central and Southeastern Pennsylvania.

The key will be to find a grocery chain or another retailer to work with the LCB on the project.

Negotiations already are under way to make that happen, and Stapleton said he is confident the first store could open in Western Pennsylvania as early as this fall. He would not say where but indicated the stores would be staffed by state employees, selling the product from a state store within the retail store.

The LCB is also creating superstores, all of which will be located in busy shopping districts.

On May 2, the Fox Chapel store at the Waterworks, which is undergoing renovation, will open as the state's first prototype of the modern liquor store with a temperature-controlled wine room; computer kiosks with tutorials about wine; and 150 varieties of spirits and liquors in sample-sized bottles for purchase. A second superstore is slated to open in Cranberry later in the year.

Statewide, there will 44 superstores that are at least 5,000 square feet and carry 3,000 kinds of wine and spirits. Traditional stores encompass roughly 2,500 square feet and about 1,000 varieties.

The LCB now has a Web site and consumers can purchase wines and spirits there and have them delivered to their nearest liquor store.

"You can order any product that is commercially available and it can be shipped to your local store," Stapleton said. "A lot of people don't know that. We offer to our Pennsylvania residents the greatest selections of wine and spirits in the country when you consider that there are eight or nine thousand products available. There is no liquor store in this country that offers that type of selection."

Both Newman and Stapleton said they hope the changes will help Pennsylvania's liquor stores shed their less-than-flattering image that can be balanced with the state's desire to maintain control over liquor sales.

"One of the positive aspects of the system in Pennsylvania is that we do maintain strong control over the products. We do not sell to minors. We do not sell to people who are intoxicated," Stapleton said.

"It's a well-run, well-organized, profitable and socially conscious agency.

"We provide a good service to our residents and at the same time we return a large sum of money to the Commonwealth that goes to the greater good of the people of Pennsylvania."