By Cheryl Ursin
“Converting the state stores to agencies in 1995 took a lot of the heat off,” she explained. “It created a balanced system. There’s some private business and some state government.” The agencies are privately owned stores, with nice facilities, which offer a range of services to consumers wishing to purchase beverage alcohol, while the state controls the number of agencies and licensees, based on population, sets the minimum prices at which spirits can be sold and is the sole distributor of spirits in the state.
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| Ed Senencal, working the line at Montana’s Liquor Warehouse. |
“The balance is: We make liquor available to adults who wish to drink responsibly while we work to discourage abuse,” said Helfert.
The Liquor Control Division has two parts: the Liquor Distribution Bureau and the Liquor Licensing
Bureau, with a total of 26 employees. The Liquor Distribution Bureau, with 18 of those employees,
including eight full-time and two part-time employees in the warehouse, handles the wholesale operations, including warehouse operations, shipping and receiving, accounts receivable and payable, inventory management, liquor order processing and agency contract management. The Distribution Bureau ships liquor orders to the state’s 97 agency stores, which, in turn, sell liquor to the state’s licensees as well as to the public.
The Liquor Licensing Bureau, employing eight and headed up by Jason Wood, manager, processes liquor license applications, renewals, transfers and registrations. In fiscal year 2006, the Liquor Licensing Bureau issued 4,388 licenses, registrations and permits. The Liquor Control Division’s offices are housed on the second floor of its 100,000-square-foot warehouse in Helena.
The Liquor Control Division has put out a contract for bid to have its warehouse automated. However, even without automation, such as conveyor belts or scanners, the warehouse staff has been steadily increasing their efficiency. According to the division, over the past five years, these employees have increased their average number of cases picked from 51,300 per employee in 2002 to 63,300 in 2006, an increase of almost 24%.
“That’s pretty efficient,” said Helfert, who pointed out that the Distribution Bureau offers agencies the ability to order by the bottle, rather than the full case, for over 640 items. On average, the bureau ships out more than 3,100 “repack” cases of such products per month.
On any given day, there is about $8 million worth of product in the division’s warehouse, virtually all of that in bailment. The Liquor Control Division offers 869 listed products and 1,500 specialorder products. There are 869 listed products because there are 869 “locator slots” in the warehouse. “They are determined by sales. We run a report, the top 869 are what’s regularly listed,” explained Helfert.
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| Some of the Liquor Licensing Bureau staff members include (left to right) Marilyn Christensen, Liquor Compliance Specialist; Jason Schilling, Liquor Compliance Specialist; Lacy Little, Administrative Assistant; Delores Stroh, Liquor Compliance Specialist; Shawna Hoaglen, Liquor Compliance Specialist; Jason Wood, Liquor Licensing Supervisor; and Shelly Clinch, Management Officer. |
Listed products are in the front of the division’s price book, which is published quarterly and sent to all agents and licensees in the state. Special order products are listed in the back, with the latest price available at the time of publication. “When [the licensees and agents] go to order, the price may be different, but publishing the latest one gives them a gauge,” explained Helfert.
Basing the state’s listed products purely on sales is, Helfert pointed out, another example of the state’s balanced approach. “We want consumers to be able to obtain the products they want and are interested in,” she said, “so we, the state, don’t determine what is listed.
If the demand is there — if the suppliers have agencies and taverns who want the product — we will bring it in as long as it fits with our control function.” For many of the special order products, the division does carry a supply, but these products are stored elsewhere in the warehouse. For special order products, the division carries “warehouse supplies” that sell more than 2 cases per month or 24 cases anually. These can be ordered and delivered like listed products. Products that sell less than 2 cases per month or 24 cases anually can still be ordered, but because they are not in stock in the warehouse, the division must order them from the supplier. It can take an agency up to six weeks to obtain such products.
In order to give Montana consumers access to the newest spirit products, the division has another category: the promotional product. “To provide our customers with new products in an efficient manner, we allow a supplier with a new product to request a spot for it in the state warehouse. They can bring it in, and we will have a place for it in the warehouse for six months, with the agreement that if it doesn’t sell within that trial period, they will remove it from our warehouse,” said Helfert. “That way, when an agency or a licensee would like to try a new product that suppliers are promoting, it will not take them six weeks to get it.”
| An Agent for Good Grizzly Liquor, agency store number 171, in Missoula is the largest liquor agent in Montana. In 2006, it bought over $5.6 million worth of spirits from the state. “We have more of a selection, more variety, than stores in open states,” said owner Doug Zimmerman. He pointed out that the state, as wholesaler, will bring in any product an agent is interested in purchasing, unlike some private wholesalers. Grizzly Liquor carries approximately 1,200 different items. Zimmerman said he gets a lot of calls from out-of-state consumers who see on his store’s website (grizzlyliquor.com) that he carries a product they’ve been searching for. (Grizzly Liquor does not ship alcohol.) The 5,500-square-foot store, located in downtown Missoula, splits its business evenly between sales to the public and sales to licensees. Because of that, two-thirds of the store is warehouse, with the front third being its retail space. Licensees can buy from any agent — and there is another one in Missoula — at the same price (8% off the posted price). Zimmerman said he competes for their business by offering good service and delivery. their business by offering good service and delivery. And he strives to offer good customer service to the general public. “We try to be knowledgeable about the products and to tell people about what’s new,” he said. The store has an information kiosk where a customer can scan a bottle and bring up drink recipes and food-pairing ideas. Grizzly Liquors sells mostly liquor, but offers wines “as a convenience,” Zimmerman said. As an agency, it is not allowed to sell beer. In addition to listing all the products the store carries by category, Grizzly’s website also offers a handy index of spirit brands by flavor. The store was originally a state store. For its first five years as an agency, it was run by the same man who had been its manager when it was stateowned. “Most of the stores that were state stores are still being run by their former store managers,” said Zimmerman. “Only about four to five of them have been sold to others.” Zimmerman has been in the liquor business for 25 years, having owned five bars. “I like the liquor business,” he said. “I like being with people, dealing with the public. Every day is different.” |
The state of Montana sets the price at which liquor can be sold. The “posted price” is the cost of the alcohol from the vendor plus a freight charge of $1.25 per case, plus a 40% mark-up, plus 26% for licensing and excise taxes. Agencies buy their product from the state for the posted price minus their commission, which is generally in the range of 8% to 10%.
 Workers in the Helena warehouse include (1st row sitting, left to right) Pat House; Jason Ritter; Carson Hanley; (2nd row sitting, left to right) Shawn Woods; Kerwin Lesueur, Warehouse Floor Boss; (3rd row standing, left to right) Glen Whitehouse; Brooke Gillespie; John Zimmerman; John Howard; Mark Hauck; (4th row, sitting) Ed Senecal; and forklift driver Scott Johnson. |
In areas with populations of less than 3,000, agents automatically get a 10% commission. In areas with populations of over 3,000, applicants for an agency contract bid for the business. The qualified applicant with the lowest bid gets the contract. Agents must sell to the general public for at least the posted price. However, they are free to sell for more than the posted price to the public, if they desire. “They can mark it up to whatever the market will bear,” said Helfert.
When selling product to licensees, agents must sell it at an 8% discount off the posted price. To compensate agents for selling to licensees at this discount, the state gives them what is called the “weighted average discount,” a figure, based on their total sales, that is usually around 1%.
As in many control states, Montana’s agencies run the gamut, from stand-alone businesses (see profile of Grizzly Liquor) to, in sparsely populated rural areas, stores of various types that are liquor agencies on the side, so to speak. “We have agencies that are farm supply stores, clothing stores, antique stores,” said Helfert.
Many of the state’s current agencies were originally state stores until the conversion in 1995. In many cases, the agents for these stores are the former state employees who managed them. Generally, the state of Montana does not have to advertise for new agents.
Because the number of agencies in the state is determined by population figures, very few new agencies are created. Helfert estimated that the division has allowed three new agencies in the last t10 years. Occasionally, the state will terminate an agent’s contract for problems, such as the agent making untimely payments. And once in a while, an agent will turn their contract back in, no longer interested in being an agent. Helfert said that one agent, located in a smaller community, did this last year.
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| Steve Swanson, Liquor Distribution Specialist, and Administrator Shauna Helfert review some numbers at Montana Liquor Control Division headquarters. |
Mickey Carlson, the Division’s agency liquor store specialist, is responsible for customer service to the agencies. She is in contact with the agencies throughout the state on an almost daily basis, usually by phone but sometimes by in-person visit. “Our agents are professional business people who want to do the right thing,” said Helfert. Indeed, she joked, “They police each other more than we ever police them,” reporting if another agent is selling for below the posted price on any item. “Usually, it’s just a situtation where they don’t realize that the case cost went up,” said Helfert.
The number of on-premise licenses in the state of Montana, like the number of agencies, is based on population figures. And because existing businesses were grandfathered in when the quota system was established in 1947, many communities are still over the number of licenses that they would be allowed if the grandfathered ones did not exist. As with agency contracts, a licensee can sell his or her license, provided the buyer is approved by the licensing bureau.
And one license in particular, the all-beverage license, which allows the sale of beer, wine and liquor, for both on- and off-premise consumption, and also allows gambling, is very valuable. One all-beverage license in Billings was recently sold for $1 million.
“These are very valuable pieces of paper,” said Helfert. As with the sale of agency contracts, the sale of a license is a private transaction between buyer and seller.
The buyer must pass a background investigation, handled by the state’s Department of Justice, and a financial audit. An individual can only own one all-beverage license. It takes about 100 days for a change in the ownership of a license to be processed. Restaurants that do not offer gambling have what are called “cabaret licenses,” which allow the sale of beer and wine for onpremise consumption. Recently, the state legislature approved a bill, sponsored by State Senator Dan Weinberg, a Democrat from Whitefish, that increases the number of these licenses. The change is going into effect this month.
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| “WE MAKE LIQUOR AVAILABLE TO ADULTS WHO WISH TO DRINK RESPONSIBLY WHILE WE WORK TO DISCOURAGE ABUSE.”— Shauna Helfert |
“They are taught by people who actually live in the community, rather than by having the State of Montana coming in, which could be seen as heavy-handed,” said Helfert. Since 2000, more than half the state’s licensees and agents have taken advantage of the program. “Some off-premise stores, such as convenience stores, may send a new employee every single month, because of their turnover,” said Helfert.
The Montana Liquor Control Division has created other educational programs, including one that focuses on adults who provide alcohol to underage youth. “We are pointing out that 65% of underage drinkers get their alcohol from families and friends,” said Helfert. The division provides licensees and agents with handouts, counter displays, posters, bottle neckers and liquor bags with messages on them.
The Montana system strives to make available, to responsible adults, the beverage-alcohol products they want, while protecting against “the ever-present risks and costs to the individual and the community of alcohol abuse,” according to the Liquor Enterprise Fund Annual Financial Report for 2006. “We have a good balance here,” concluded Helfert.
1935-Montana counts 115 state stores.
1937-Liquor by-the-drink is legalized.
1947-A quota system, based on population, is established to determine the number of liquor licenses issued in the state.
1965-Montana’s state stores become self-service.
1973-The Liquor Control Board is abolished and its functions became the responsibility of the state’s Department of Revenue.
1995-Montana’s state stores are converted to privately owned agencies.
2000-Montana establishes its server training program “Let’s Control It.”
2005-Liquor licensing and liquor distribution, which had been separate areas within the Department of Revenue, are reorganized into one Liquor Control Division.
2006-The Liquor Control Division generates $24.7 million in taxes and profits. Gross liquor sales increased 10.87% over 2005.
2007-The State Legislature approved an increase that basically doubles the number of “cabaret” liquor licenses, which allow restaurants to sell wine and beer but do not include the ability to offer gambling