Control State News

Monday, February 3, 2020 www.nabca.org • Inside the key decision that helped end Michigan’s liquor shortage • What can’t you infuse in Washington? TODAY’S • The Government’s tax on beer increases today to $2.26 per litre HIGHLIGHTS • Health Organisations Call for 2% Alcohol Duty Rise in UK • Southern Glazer’s Wine & Spirits Commits $1 Million to Thurgood Marshall College Fund looking at delayed delivery routes that were NABCA NEWS three, then four days behind. Already bad, the 27TH ANNUAL LEGAL SYMPOSIUM situation was nearing a tipping point. Registration is open for NABCA’s 27th “It started to get into day four behind. And at Annual Legal Symposium. Please go to some point, you’re going to what I call ‘lap’ https://www.nabca.org/meeting/2020-legal- yourself... if you’re five days behind you’re a symposium-0 to register! delivery week behind, so you now start duplicating orders. And that just would have If you have questions, please contact sent the system over the edge,” said Gigliotti, [email protected]. Region President of Control States for RNDC, in a January interview. JOB OPPORTUNITY He’d been sent in from Virginia to help address a shortage that stemmed back to issues at a new Position: Deputy Commissioner-Division of warehouse the company built in Livonia. Liquor Control But to get the company’s deliveries back on Vermont Department of Liquor and Lottery, track, first, he had to knock them completely Monteplier, VT off-course. RNDC -- the largest liquor distributor For more details regarding this position, copy in the state -- threw away three days’ worth of and paste this link: orders and paused deliveries entirely to give https://careers.vermont.gov/job/Montpelier- itself a chance to catch up. Deputy-Commissioner-Division-of-Liquor- Control-VT-05601/621534800/. It was a bold move and risked further angering customers. It wasn’t approved by the Michigan Liquor Control Commission. It cost a lot of CONTROL STATE NEWS money (“you have no idea," Gigliotti said) and required bringing people in on overtime, MI: Inside the key decision that helped end operating on weekends, and retaining 120-150 Michigan’s liquor shortage temporary workers. MLive “You’ve got this plan to go forward, nobody By Emily Lawler wants to look and say ‘well we’re going to take February 2, 2020 a step and go backward.' Those aren’t easy As Michigan bars, restaurants and regulators decisions,” Gigliotti said. grew frustrated with the liquor shortage caused “Was it the right decision? I would sit here and by Republic National Distributing Company last tell you absolutely.” November, Joe Gigliotti was on the inside, 2 More than two months later, there are mostly temporary workers at their old indications it worked, and the liquor shortage is Brownstown facility, “which in hindsight I think over. was a mistake.” “I think the shortage is certainly pretty much Transitioning to the new warehouse passed,” said Michigan Liquor Control exacerbated previous issues, resulting in the Commission Chair Pat Gagliardi in a January delivery and stock issues that would eventually interview. be referred to as the liquor shortage. How stumbles became a shortage As the busy holiday season approached, it became clear the issue wasn’t just growing Michigan is what’s called a “control” state in the pains. That’s when Gigliotti -- whose liquor industry. A bottle of liquor goes from its background is in wine -- came up from Virginia. manufacturer to the wholesaler, which in Michigan is actually the state. The state has “November was, I don’t know any way to put it three Authorized Distribution Agents that but ugly,” Gigliotti said. warehouse and deliver the bottle on its behalf He made that key decision to stall orders and to every bar and restaurant in the state. play catch-up. Then, he went back to work. RNDC is by far the largest, comprising nearly Fixes and moving forward two-thirds of Michigan’s liquor industry. Walking thorugh the Livonia facility in January, Back in the spring of 2019, the Michigan Liquor Gigliotti greeted workers as he walked past. Control Commission started getting an uptick of complaints about the company, Gagliardi said. Part of the initial fix was manpower in the form of overtime, extra shifts and bringing temporary They were hearing about retailers not getting workers in. The software issues improved. The their deliveries on time or at all, not getting fiberoptic line remained intact. complete orders and not being able to order certain items because they were out of stock. By the second week of December, RNDC was Some shelves were running low or empty “what I would term caught up” on the issues because of these issues. stemming from the Livonia facility, Gigliotti said. And the complaints started ramping up in the He worked to balance the inventory, deciding fall, right ahead of the holidays, when the which routes to run out of the older warehouse volume of liquor sales is the highest. in Brownstown and which to run out of the new facility in Livonia. When it corrected too far “Disasters can happen at any point in time in toward running delivery routes out of the old one’s life... and this was a disaster,” Gagliardi facility, he re-balanced and has continued to said. move routes back to the Livonia facility in “This was the State of Michigan as a wholesaler January. of distilled spirits contracting with a company “January has been, from a delivery standpoint, that couldn’t deliver.” very very good,” he said, acknowledging the At RNDC, Gigliotti said the internal problems volume in January is lower than in November were multifold, but traced back to the and December. company’s transition to a new, upgraded facility He said work on balancing the inventory would in Livonia that didn’t go as smoothly as planned. continue and be put to the test during the Some things were unpredictable, like a summer when Michigan’s tourism typically fiberoptic line accidentally getting cut and issues spikes liquor consumption. with the software behind one of their key The company still faces potential fines from the systems. The company took the bulk of their state stemming from the shortage. existing talent to the Livonia facility and hired 3 And with its customers, the company essentially oversupply has moved from raw to finished has to earn its stripes back, Gigliotti said. product, but it's still an oversupply. Gagliardi of the MLCC said regulators continues Farmers are better off than they were a year to get complaints about RNDC workers being ago, the OLCC report concludes, but "even rude or short with people, and the coordination though demand is increasing significantly, it may between the two warehouses is probably still still be consuming prior years' supply of extracts not where it should be. But with the immediate and concentrates, and more time is needed to shortage solved, “Now it’s just going to be an reduce 'back stock' of inventories." amount of time to see that they’ve really got it headed in the right direction.” LICENSE STATE NEWS RNDC is aiming to do good work and be WA: What can’t you infuse in Washington? consistent, but Gigliotti knows the relationship with retailers will take time to repair. The Spokesman-Review By Tracy Damon, EVERCANNABIS Correspondent “Candidly, I can talk all day long. But the only February 3, 2020 way that we’re really going to do it is by showing them,” he said. While infused edibles aren’t a huge part of the state’s legal recreational cannabis market – they make up about 9 percent of marijuana sold – it OR: Oregon Grew Record Amounts of sometimes seems like you can buy almost Recreational Cannabis in 2019 But Wholesale anything infused with pot. Prices Spiked Anyway From champagne to potato chips, sweet treats Processors buying to make edibles, oils, extracts and to coffee, soft drinks to ramen, there’s a huge other products helped prices rebound but the variety of sweet, savory, smooth or crunchy overhang has shifted to store shelves. treats infused with flower available. Willamette Week But there are a few edibles you can’t purchase By Nigel Jaquiss in Washington, and a few reasons why. February 2, 2020 Brian Smith, communications director, and In its annual report on recreational cannabis Kathi Hoffman, cannabis laws and rules released earlier this month, the Oregon Liquor coordinator, for the Washington State Liquor Control Commission highlighted a surprising and Cannabis Board, recently provided paradox. guidelines for what is OK to sell and what is not. Oregon weed farmers produced another “The following criteria will be used when bumper crop in 2019, their biggest ever. That determining approval of marijuana infused would seem to put downward price pressure on edibles,” they wrote in an email. a market that has been massively over-supplied. A marijuana processor may infuse food or drinks Previous large crops caused wholesale prices to with marijuana provided that: crash from $1,700 a pound in mid-2017 to $650 a pound in April 2019. But strong demand from (a) The product or products do not require processors—who use pot to make edibles and cooking or baking by the consumer; oils—led to a rally in the second half of 2019, (b) Coatings (frostings, sprinkles, etc.) applied to boosting prices back to $1,200 a pound. the product or products are compliant with the Fortunately for consumers, retail cannabis requirements of WAC chapter 314-55; and prices have not reflected that increase. (c) The product and package design is not similar The not-so-good news for the industry is that to commercially available products marketed the edibles and oils are stacking up on shelves for consumption by persons under twenty-one and have long shelf lives.

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