January 19, 2007

The Truth About the PLCB's Price Comparisons

The Inquirer reported on Wednesday that there is a controversy surrounding the purported savings on some of the Chairman’s Selection wines, and former PLCB Chairman Jonathan Newman is taking heat for it. Chairman’s Selections compare the actual price with the “suggested,” “quoted” or “regular” price. According to the article, such comparisons may be misleading because a few of the Chairman’s Selection wines are not sold in any other state.

The article focused on the phrase “suggested” price because that’s the one used to market the Chairman’s Selection wines that are made solely for PA consumers, such as the Whitehall Lane Chairman’s Selection Cabernet Sauvignon. But, in context, that phrase isn’t as troubling as it has been portrayed to be. Once you see that the words “Chairman’s Selection” are boldly printed directly on Whitehall’s front label and/or read on the back label that the wine was designed by Newman, the phrase “suggested price” should stand out as an admission that there isn’t any other market for this wine besides PA. In other words, just by reading the label you should be able to conclude that the price comparison for this wine is a fiction and does not hold any meaning. At a minimum, these facts should raise enough questions that you shouldn’t give the comparison too much weight (if any) in making your purchasing decision.

By contrast, the phrases “quoted price” and “regular price,” which are used to market wines picked for the Chairman’s Selection program that are also sold in other states, are a little more complicated. Given PA’s unique wine distribution system, it is difficult to gauge whether these phrases are identifying any true savings without knowing more information. For example, “quoted” to whom and by whom—the winery to its other distributors, the winery to the PLCB or the PLCB to its customers? These could all be different prices. Plus, they may not reflect any real consumer market, rendering the comparison meaningless. Do the “quoted” and “regular” prices include the 18% Johnston Flood Tax? If not, the purported savings is artificially inflated.

All of this leads to the more basic question that, so far, no one has asked: If, as a Pennsylvania consumer, I’m allowed to buy wine only through the PLCB, aren’t all of the PLCB’s price comparisons inherently illusory? Comparing PA’s price to the price in some other market does not illustrate any “savings” for me if it is illegal for me to have access to that other market. It’s a fictional choice, a choice that legally does not exist for PA consumers.

I’m repeating myself, but this is not a problem with the Chairman’s Selection program that needs to be “tweaked,” as it is being spun by the PLCB. Rather, it is problem inherent in the state’s tightly-controlled distribution system that the Chairman’s Selection program simply couldn’t escape—i.e., that, legally, there is no other market against which PA consumers can compare the PLCB’s prices.

This brings me to the most interesting part of the story, which has nothing to do with wine. It’s the story’s convenient timing. The Whitehall Lane controversy has been well-documented by the folks on eGullet since as far back as the beginning of October 2006, but you didn’t hear a peep about it in the press for 3½ months. But now, all of a sudden, shortly after Rendell takes a little heat for the CEO debacle and days after Newman resigns in protest, Newman gets scapegoated for price comparisons? Smells a little corked to me. But, conveniently, it does lay the groundwork for the PLCB to argue that it needs to “tweak” the number of wines offered through the Chairman’s Selection program, doesn’t it?

Reminds me of a line in Beckett’s Waiting for Godot: “There’s man all over for you, blaming on his boots the faults of his feet.”

Careful, fellas. Don’t tear down too many bridges Newman built. Otherwise, a lot of people may start using the one bridge that’s out of your reach—you know, the one that leads to wine stores in New Jersey.


Anonymous said...

Nice piece.

My concern starts with the fact that PLCB has made an overt and extensive effort to woo wine consumers over the past several years. The buying power of the PLCB should be unrivaled (in this country) so great deals should be available if not plentiful.

One of the best and oldest ways to gain consumer trust and loyalty is through truthful advertising. As a monopoly, wine consumers have almost no one else(except in-state wineries) to trust, legally.

There is a dichotomy here. Either PLCB is willing to show that it is "consumer friendly" by truthful advertising, or PLCB can take the side that it simply doesn't care about misleading ads because it doesn't have to.

PLCB does not need to bend the truth about the prices of Chairman Selection wines in other States, or in the case of the Chairman Cuvees, prices that might be charged if the wine was available anywhere else.

Agreed that if the new regime starts tearing down "bridges" (i.e.: truthful advertising) to the consumer, the physical bridges are going to see more activity.

The upcoming changes at the PLCB bear watching.

Armando said...

As an avid wine afficionado & careful consumer, I have researched the prices of a vast number of the Chairman's Selection wines online & in various forms of trade pubs. Overall, there have been an incredible number of outstanding values on some fantastic wines. All this hoopla about a small number of the latest selections is totally unwarranted...just making a "mountain out of a molehill" IMHO.
These naysayers should think back to how the PLCB wine selections were BEFORE the Chairman's Selections ever existed, and truly appreciate Jonathan Newman's efforts & dedication.

medoc said...

You say: "Once you see that the words “Chairman’s Selection” are boldly printed directly on Whitehall’s front label and/or read on the back label that the wine was designed by Newman, the phrase “suggested price” should stand out as an admission that there isn’t any other market for this wine besides PA." I say, this is a pretty weak attempt at rationalizing what was done. ALL Chairman's selections are advertised as such. The fact that there is a wine that has a label saying such means absolutely nothing to the average person. Penna very much made it sound as if this wine had a market elsewhere. How, exactly, does one suggest retail prices for a wine that doesn't actually exist? Plus, comments by Whitehall Lane made it clear that this was NOT in fact their normal wine. It was NOT treated the same. It was NOT of the same quality. The normal, basic WL cab/merlot costs around $45. So how does this eviscerated version get a "suggested" price identical to the normal wine? This is how WL described the Newman blend: "The Chairman's Cabernet and Merlot were specially blended by and for
Chairman Jonathon Newman of Pennsylvania. These 2005 vintage wines are from a separate wine lot and not exactly representative of our branded Whitehall Lane black label wines: Napa Valley Merlot, Napa Valley Cabernet and Reserve Cabernet Sauvignon. The Chairman's Merlot and Cabernet are very young 2005 wines. They experienced an abbreviated barrel-aging regime of only about 10 months. This youthful wine is a delightful blend in its own right and stands alone as a wine well made by the cellar team and with the influence of
The Chairman."

In other words--this is wine they wouldn't have released under their own label.

The advertising on this was incredibly deceptive.

PhilaFoodie said...

Medoc: I’m not rationalizing anything. Contrary to your argument, not “all” Chairman’s Selection wines say on the back of the label that Newman designed the wine or say “Chairman’s Selection” on the front label. And not “all” Chairman’s Selection wines are advertised using the phrase “suggested retail price.” As I made pretty clear in the post, that phrase is different from the ones used to market the Chairman’s Selections that were not made exclusively for PA. And a quick glance at the other displays shows that they’re not all worded the same. All of this, at a minimum, should have raised red flags to the reasonable consumer. The fact that Whitehall Lane later responded that this wine is not representative of their “black label” wines (and the WL CS was never marketed as such) doesn’t make my point any less true.

But as I wrote in my original post I do think all of the PLCB price comparisons are problematic for other reasons. That’s why all of this hand-wringing over the WL displays is myopic. If you’re going to enter the advertising debate at all, go all the way—question how any of the comparisons are valid if legally we don’t have access to any other market.

If you start asking that question, then, comparatively, not only do the WL displays start to look merely like a symptom of a larger issue, they arguably look less problematic than the other displays because there was actually more information there to trigger a red flag than there are with many of the other PLCB displays.

Anonymous said...

I wish someone would give me a straight answer from the PLCB as to why they charge $43.00 for a 1.75L of Johnny Walker Red Label scotch when I can buy it all day in Delaware or Florida for $31.00. This state is a giant rip off for liquor along with it's antiquated laws about shipping wine into PA. We are the joke of California wineries. In fact, one winery told us that "the PLCB took us out for a fabulous dinner last night." Is this a new practice where the buyer takes out the customer for dinner? Amazing.

Colin Purrington said...

Just bought a 2002 zin from Rocking Horse, at $17.99. It was quoted as being much, much more expensive elsewhere. It turned out to be a mediocre wine, probably worth $9. Drinkable, but nothing special at all. I googled the wine, and found out that Trader Joe's sells it for $7.99. How can PLCB get away with this?? I'd love to talk to an advertising lawyer about this. What type of legal action, public demonstrations would lead to the dissolution of this sham? I'm patient -- any ideas?