We don’t often think about how the products we use end up on the shelves of our stores, and in our homes. We know that milk comes from cows, and someone has to milk those cows, and gasoline starts as oil (which comes from dinosaur bones or something weird like that?) and then people drill it, and somehow my car drives. What happens in between to get that milk in your glass, or that gas in your car isn’t very interesting to most people. Even the most elegant logistical systems would rank pretty low on the party conversation scale, but when it’s your business to fuel those party conversations, it’s rather important to understand how our drinks get in the glass.
A recent move by the Division of Liquor Control has put many bar owners, and bartenders, specifically in the craft cocktail world, in a tough position as they try to navigate the often murky waters of our control system, to obtain specialty spirits they have come to rely on, that will soon no longer be available. In an email sent out on September 9th, the Division of Liquor Control outlined their plan for a “Warehouse Inventory Reduction” designed to “optimize the inventory available within the contract liquor agencies.” Attached to that email was a list of products that would need to be removed from warehouses immediately, and would no longer be available for order by state agencies. Why are these products being targeted? Well according to the Division of Liquor Control, it is because these products fell below 90% of average sales per point of distribution, and when checked against the performance of the price tier as a whole, they were found to be in the bottom 10% of the…
Is this all starting to sound like a confusing jumbled mess?
Welcome to the nightmare of inefficiency, and bureaucracy that is the Ohio Liquor Control System. Have a seat; we’re just getting started. In the world of beer and wine, or any alcoholic beverage below 21.5 proof, there are two people, or entities, that stand between the producer and the consumer. This is known as the Three Tier System, and it looks something like this:
A distributor purchases a large amount of beer or wine from the supplier (a brewery, winery, or importer) and pays to have it shipped to their warehouse.
A Retailer (store, bar, or restaurant) places an order with the distributor for the precise amount of that beer or wine they would like to stock, and the distributor delivers it to their door at which point the retailer pays a wholesale price for the order.
A consumer purchases that beer or wine at a retail markup to consume in their home, or on the premises of a bar.
Supplier > Distributor > Retailer > Consumer
In an “open state,” this process is replicated for high proof spirits but in a “control state” like Ohio, where all spirits are sold by the state, it is replaced with a system that looks like…well…this:
The supplier (in this case a distillery, or the company that owns that distillery) presents each individual spirit they would like to sell in front of a board appointed by the Governor. That board decides whether or not each spirit will be sold in the state. The guidelines for this decision are at best hazy, and at worst completely arbitrary.
If a product is approved, it is added to the constantly changing list of approved spirits legally allowed to be sold in the state. It should be noted that it is not guaranteed to stay on that list for any amount of time.
After approval, the supplier pays to ship that product to four state warehouses, operated by a private company called Spartan Logistics. This shipment is not based on an order for a specific amount. The supplier just guesses how much they should ship, and then sends it. This shipment is also not paid for until it leaves the warehouse, and Spartan charges the supplier a fee to store their product. That fee has a 10 case minimum, regardless of the actual amount of product stored.
An employee of one of the privately owned stores (known as agencies) contracted with the state to sell liquor, places an order for that product on the state computer system. That order goes to state offices in Reynoldsburg to be approved, or not approved. Again, there is no transparency, or explanation, as to why an order is approved or not.
Assuming the order is approved, the state tells the employees of the Spartan warehouse to pick that product. Even if the product is in the warehouse, it is not guaranteed that it will be found. Smaller lots of products, say 10 bottles of a specialty gin, are buried in a sea of cases of Absolut, and Jack Daniels. Employees of the warehouse are paid by volume of how much they can pick. There isn’t much incentive to search for the ordered product, especially when…
Spartan Logistics (yes the same company as the warehouse) delivers the product, and the agency stores can’t refuse an order. They just get what they get, and they often don’t know what’s coming. If they order 50 cases, they might get all 50, or they might get five, or none. Sometimes they get products they didn’t order. There is no recourse for these situations.
Are you still with me? Grab a drink if you can find one, because we’re not done yet.
Assuming the state agency receives their order, they can now put it on the shelves to be sold to the consumer. Dear lord, what a long road we’ve traveled. You can finally buy your bottle of booze. If you buy it on the shelf at the store, the agency receives a 6% commission on that sale, but if you prefer to drink in bars, well that brings up a whole different story.
Bars are assigned a single state agency where they must order all spirits at a wholesale price. If they go outside the system and buy from another agency at retail, or worse, bring in product from out of state, they risk big fines, or revocation of their liquor license.
Their assigned agency only makes a 4% commission on wholesale purchases from bars and restaurants and these purchases typically do not make up the majority of their business. Because of this, the incentive to track down obscure products within the chaotic state system is often lacking. In many cases, these products are available in the state, but have been arbitrarily sent to agencies in small towns where there is little demand for these specialty spirits, and so they sit on the shelves, while the bars that would order, and use them go empty handed. Because there is no incentive on the part of the state, or the agencies, a broker, or a representative from the spirits company will be forced to track down these rogue bottles and manually transfer them to the agency where bars are demanding them.
Assuming the bar is able to track down the spirits they need, the list of approved spirits changes constantly. There is never a guarantee that it will be available for the next order. When a bar creates a cocktail menu, the ingredients they use often simply disappear from the list. Amaro Montenegro, a popular ingredient, readily available in other markets, has come and gone from the list three times since it first appeared.
Why does it work this way? Because there’s no incentive for it to work better. There is no alternative. There is no competition. The state’s profits continue to grow each year, based on massive sales of bulk brands, and for the next 20 years those profits are being funneled to Kasich’s privatized Jobs Ohio development organization, a nebulous entity out of reach of state auditors. Liquor is viewed as a commodity, and in a commodity market, there isn’t any room for the little guy.
It’s possible that at this point you’re wondering who cares? Maybe this sounds like a bunch of cocktail snobbery. After all, the vast majority of bars and restaurants get the mass-produced bottles they’re after without any problem. Who cares about whether or not the little cocktail bar gets their esoteric amaro, or their small production mezcal from single village producer in Oaxaca. Who cares if these bars even exist?
Well, the city of Columbus seems to.
Experience Columbus continues to fly in writers from all over the country to bars like Curio, and Mouton, to see the amazing innovative craft cocktails being poured around our city. In videos online, and billboards in cities like Chicago and DC, the #lifeincbus campaign courts transplants by presenting the image of the millennial dining and enjoying cocktails at the same bars that are continually handicapped by the state system itself. Condo buildings hoping to attract a young moneyed crowd looking for the hidden cultural gem of the Midwest rise up throughout the city with the promise of a thriving food and drink scene for the new breed of savvy consumers, unhappy with the same mass market products they’ve been fed.
If you imagine a James Beard-recognized chef like Bill Glover being told by the state that he is no longer legally allowed to serve grass-fed beef steaks, because ground chuck is the same, you start to see the picture. Until the state stops treating all spirits as a commodity, and begins to see them as a cultural asset, this system will not change, and the state itself will be worse off for it.
While a dismantling of the control state system that would allow the market to return to a competitive privatized system is highly unlikely, there are other solutions.
Adam Roelle, a spirits broker responsible for bringing hundreds of hard to find items into the state by helping smaller brands navigate this bureaucracy, has proposed a system under which select state agencies within any given region would be designated specialty shops, and would specifically carry these harder to find items. License holders would continue to order their bulk spirits (think Jameson, Absolut etc.) from their assigned state agency, but would also be allowed to purchase rare spirits from these specialty agencies at a wholesale price. It is an elegant solution that would allow these specialty spirits to be allocated to the agencies that can sell them to the buyers that are desperately seeking them. The question is, whether or not the state will ever be incentivized to pursue this, or any solution.
The irony that I type these words on December 5th 2016, the 83rd anniversary of the repeal of prohibition, while enjoying a glass of whiskey I can no longer legally purchase in my own state, is certainly not lost on this writer, nor is it lost on the hundreds of professionals trying to elevate the food and drinks culture in our city, and our state. It is unlikely that obscure funky rum from Jamaica, or a small batch rye whiskey from a micro distillery will ever compete with Bacardi, or Bulleit, but to say that they don’t deserve to be legally sold to the people who seek them, illustrates the absurdity of the mess of a system we face.