PLCB: Mining Its Own Business?

tableleaf-cabernetOver the last few months, there has been quite a bit of press about the Pennsylvania Liquor Control Board producing their own wine brand, called TableLeaf (see herehere or here). In brief, the PLCB has invested some money to directly compete with mass-produced wines such as Yellow Tail and Woodbridge. People seem to be upset that the PLCB is getting into the wine making business (though they aren’t really making the wines themselves; they have hired some real winemakers to do it). I despise the PLCB as much (probably more) than the next guy, but I do not understand all the hubbub: they are not forcing anybody to buy it, it is not the only choice in the store, and after all, they are a monopoly.

After reading all of the articles, the arguments against this program boil down to a few key points:

  1. The PLCB should not be in the wine making business because they are in the wine selling business.
  2. There are already a number of wines in that price range, so there is no need for another.
  3. It is wrong to use government funds to compete in the private sector.
  4. People in charge of creating the regulations for the sale of wine should not also be promoting their own brand.
  5. It is not fair to other wineries trying to compete.
  6. It competes with PA wineries.

I address each of these individually below, but most of them come down to two salient points: the PLCB is a monopoly and it is acting like, um, a monopoly and people are buying the schlock.

The PLCB should not be in the wine making business because they are in the wine selling business.

This one is a little bit of a non sequitur for me–just because an entity partakes in one activity, does that preclude them from all other activities no matter how (dis)similar? I don’t get that argument–there are numerous companies that have multiple product lines or interests (e.g., Mitsubishi, General Electric, Amazon all come to mind). We just bought a new car and we got financing through the dealer–that seems like a bit of a conflict given the problems surrounding the housing market, but nonetheless. I really think this is a non-argument—after all: the PLCB is a monopoly….

There are already a number of wines in that price range, so there is no need for another.

tableleaf-chardonnayThis is actually one of the arguments that can’t be answered by the definition of monopoly. All you market economists out there know that the market should determine whether there are too many wines in a given price range and will adjust accordingly–apparently, sales of TableLeaf are good, so this argument loses all credibility.

It is wrong to use government funds to compete in the private sector.

Do people clamor for higher prices? Let’s assume that people buy TableLeaf because it is either better wine, cheaper, or both. The competitors can either chose to compete on quality, price, or both. In each case, the consumer wins.  Of course, the competitors could chose to leave the market if they can’t compete on quality or price–but that does not appear to be happening.

People in charge of creating the regulations for the sale of wine should not also be promoting their own brand.

This argument actually holds some water for me.  For years, the French government had little desire to advertise the negative health aspects of smoking since they were making a boat-load of cash (through taxes) on the sale of the product.  It was not until they realized that the costs to the national health care system were going through the roof that they took on a more anti-smoking stance. But you can’t have it both ways–you can’t argue that you want more freedom and choice at the same time that you argue that the Commonwealth should regulate the sale of alcohol more.

It is not fair to other wineries trying to compete and It competes with PA wineries.

Of course it is not fair–the PLCB is a monopoly! But, the state is not excluding competitors, it is actually creating more competition.  Most economists would agree that when competition increases, the consumer benefits (at least in the short term). As for the PA wine part, really? Samuel Johnson stated that “patriotism is the last refuge of a scoundrel.” There are no doubt countless scoundrels at the PLCB (and that has been rather well documented), but do people really care about the poor little PA wineries or are they just grasping at straws to try and get rid of the PLCB? Um, the latter. Besides, show me a PA wine you can get for $8.

Look, I get it. People (including me) want to see the PLCB go down in a ball of flames. It seems, however, that the brand is profitable—which is perhaps the biggest shock, since the bozos running the PLCB are, well, bozos. For people who actually drink Yellow Tail and Woodbridge (I assume they are out there, but I certainly do not know any), one more option, no matter how insipid, may actually be a good thing.

The entire point of this post was not to defend the PLCB. (I would never do that!) In fact, I would argue that this only further strengthens the call for privatization, since the PLCB is introducing some badly needed competition to the marketplace.

tableleaf pinot grigio labelNo, the initial point of this article was to try the wine and see if it was as horrible as I imagined it would be. There are several different varieties of TableLeaf, and initially I was going to try a few, but then I came to my senses since I was actually going to fork over my own cash for this endeavor. I settled on the Chardonnay.

Problem.

I could not find it anywhere within 20 miles of my Philadelphia home. After essentially defending the PLCB above, the fact that the entire organization should be blown to bits came rushing back to the fore.  I eventually settled on a bottle of Pinot Grigio—a variety that I usually find rather insipid so I knew I was going to have to work hard to keep an open mind.

2010 TableLeaf Pinot Grigio: $8. Not much at all to the nose, but a bit of honeydew melon. Sweet on the palate with the melon faint, but noticeable. There is an odd chalkiness on the mid-palate and really no finish to speak of.  This is not the worst wine I have had all year, but that may be its only positive77-79 points.

As I was researching for this article, I came across this:

The [PLCB] selected Bronco Wine Co. in California to blend, bottle and label TableLeaf wines because it is one of the largest producers in the state and has a good reputation, [PLCB CEO Joe] Conti said. Its wines pleased the palates of tasters who included the LCB’s wine educator, director of marketing, Chairman’s Selection buyer and an outside sommelier, he said.

If their palates were pleased with this wine, they should all be fired—or forced to drink it, since you sure as heck shouldn’t.