Unprofitable LCB store numbers plunge, raising spirits in Pennsylvania
The number of state liquor stores finishing the year in the red is on pace to fall nearly 80 percent compared to five years ago.
Liquor Control Board officials tweaked store hours, adjusted inventories and even turned down the thermostats to cut costs at unprofitable stores, said Dale Horst, director of retail operations.
In July 2009, 51 wine and spirits stores lost about $680,000, a number the LCB cut 78 percent to 11 stores that were losing about $124,000 collectively as of March 31, the most recent month data was available.
Larger, successful stores subsidize the losses, allowing the LCB to post nearly $2.2 billion in sales last year, a 4.5 percent increase from the previous year.
“We looked at every facet of the stores’ operation,” Horst said, including working closely with store managers to lower expenses and negotiating with landlords to lower rent.
Lawmakers who want to privatize part or all of the system watch the LCB’s operations closely. The agency controls the wholesale and retail sale of wine and spirits at more than 600 stores across Pennsylvania.
“They are operating it more like a business, but they’re only doing it because they’re afraid of privatization. It’s all about self-preservation,” said Steve Miskin, spokesman for House Majority Leader Mike Turzai, R-Bradford Woods, a champion of privatization.
Gov. Tom Corbett’s staff and lawmakers are trying to negotiate a plan that garners the support needed from the House, which passed a bill to turn alcohol sales over to private businesses in March 2013, and the Senate, where support is mixed. Both chambers are controlled by Republicans.
Horst said better budgeting was vital to turning stores around. Before 2009, individual store budgets did not exist.
“We literally build individual store budgets from the bottom up (now),” Horst said. “The agency always had a budget, but it was a large umbrella budget. It did not get down to the line items of each store.”
Store managers are involved in building the budget and sticking to it throughout the year.
“There’s been a change in the attitudes and cultures in those stores, and (they are) running it like their own business,” Horst said.
Jackie Ault, 55, managed the state store in Saxton, Bedford County, for three years before she transferred to another store last month. She helped the store open a fourth day each week and receive an extra shipment truck each month.
“The store’s part of me,” Ault said. “And the customers — I just love them down there.”
Ault knows that her shoppers, many of whom are camping and boating around Raystown Lake, want Arbor Mist frozen wine pouches, pre-mixed margaritas and bottles of Bacardi rum.
“You just gotta get rid of the stuff that doesn’t sell,” she said. She said she would transfer a few bottles from a nearby store instead of ordering a case of products that aren’t best-sellers so that store capital wasn’t tied up in extra inventory.
The Saxton store is very seasonal, so although it was about $4,200 in the red as of March 31, it’s expected to be close to breaking even, officials said.
“We are, by law, obligated to serve all citizens of Pennsylvania,” Horst said, so officials do everything they can to avoid closing stores.
Horst has trimmed hours off slow days or closed stores a few days each week.
Since 2009, five stores closed entirely following an analysis of lease and operating costs, demographic trends for those over 21 and the location of the nearest state store, said LCB spokeswoman Stacy Kriedeman.
Many unprofitable stores are in rural areas with no outlets nearby, so they are left open as a customer service.
“We also looked at — what can we do to sell an extra bottle a day?” Horst said. “In some of these little stores, selling one extra bottle a day will turn it profitable.”
Gary Zychowski, 57, the manager and sole employee of the state store in Knox, Clarion County, said that making one customer angry could lose the store hundreds of dollars, he said.
“It’s a fine line between profitable and not profitable,” Zychowski said. “Every bottle’s important.”
Zychowski said his store was “slightly unprofitable” when he became manager in August 2010, but small changes helped turn the store around.
Turning down the thermostat to about 52 degrees overnight and when the store is closed saves money during winter months, he said. He tries to keep the store as clean as possible and does his best to accommodate customers’ requests.
“Being a small store, our shelf space is very limited,” Zychowski said. “Basically everything on our shelves is because people have asked us to get it.”
For products that his store doesn’t carry, he said he arranges transfers from nearby stores.
“It’s a reflection of me,” he said. “I’m the only one here.”
Kari Andren is a staff writer for Trib Total Media. She can be reached at 724-850-2856 or [email protected].