Raking in over $1 billion on spirits sales annually, Ohio is one of the largest control states in the US. So when it came to light last month that the state's alcohol tracking software implemented in 2015 was causing a lot of turmoil, your editors began looking into the matter [see WSD 03-20-2017].
DIAGNOSING THE PROBLEM. You will recall, the primary issues cited in the original Columbus Dispatch article involved inventory data, purchasing orders and suppliers not getting paid. Two anonymous suppliers quoted in the article claimed they were owed between several hundred thousand and $1 million for products they shipped to the state.
"We know that we had a number of our suppliers who were owed north of $1 million," David Wojnar, the Distilled Spirits Council's vp of state government relations, confirmed to WSD. "We believe on the aggregate, our membership was [owed] somewhere between $10 million to $15 million."
David says The Council had been observing the issue for a couple of years, but initially wanted to give the Ohio Division of Liquor Control (ODLC) the space to resolve the problem itself. But things came to a head for the industry at the beginning of this year when JobsOhio, the state's economic-development group that leases the spirits business from the state, announced it would be moving from Spartan Logistics warehouse vendor to German shipping company DHL. "That really put the wheels in motion," he says.
David says the two most critical issues to The Council were the transition to the new warehouse provider, and more importantly, the backpay owed to its suppliers. "We made a point early on that, while we're excited about the transition to a new warehouse provider, reconciliation was paramount and our number one issue. And until that was resolved, there wasn't going to be a lot of industry buy-in or enthusiasm about going to a new warehouse."
THE FIX. We got in touch Stephanie Gostomski, assistant director of communications for the Ohio Department of Commerce, which oversees the liquor control division. She acknowledges the past inventory accountability issue, but tells WSD "The new system, which is live now, will track the distribution and sale of liquor throughout the entire process, from delivery to warehouses all the way through to the point where the consumer purchases it in a Contract Liquor Agency." As of about two weeks ago, 20 stores had gone live with this new system.
The Council hired a local lobbying firm to establish better communication pathway with JobsOhio and the ODLC while the state tries to reconcile its inventory discrepancies. Having representation on the ground that knows how things work politically in Ohio was "an invaluable resource," says David, adding that the National Alcohol Beverage Control Association (NABCA) also worked with the parties to set up a process that opened the door for communication.
"So you had all entities firing on all cylinders, which I think was very helpful," says David.
As a result, JobsOhio has already begun cutting checks to suppliers. "The fact that JobsOhio is resolving the reconciliation issue first, I think is an incredible show of goodwill on their part because suppliers were concerned that would get caught in the shuffle," said David.
As for getting the inventory in line, Matt Englehart, the communications manager for JobsOhio, says they have made two significant changes to improve inventory management, distribution, speed and accuracy. The first is the consolidation of four warehouses into two new warehouses " one in Northeast Ohio and one in Columbus. The second is putting DHL in charge of managing warehousing and transportation services.
"Moving from four to two distributions centers improves efficiency," says Matt. "These changes will provide wider distribution of product throughout the state as suppliers now only have to deliver to two locations."
NO NEW PRODUCTS FOR NOW. For the time being, the ODLC has put a temporary hold on new product listing in order to support the launch of the new system. They will not be reviewing new items for listing until the fall. "It's important to note, in the past three years, nearly 1,000 new products have been listed and virtually no products have been delisted," says Stephanie.
"We have been partnering with stakeholders every step of the way to ensure their needs are met with this new system…Stakeholder feedback has been and will continue to be collected," she adds.
Fixing the inventory system in Ohio will be an ongoing process that can be tracked at http://www.ohiolmp.com.
DEHLINGER FAMILY PURCHASES NEIGHBORING VINEYARD
The Dehlinger Family has purchased the Stiling Vineyard, which borders its own Dehlinger Estate Vineyard in the Russian River Valley. The purchase includes Stiling's 35 acres of chardonnay and pinot noir vines, adding to its own 45-acre vineyard and winery.
As part of the agreement, the Dehlingers will fulfill existing grape contracts and select a small portion of the Stiling grapes to use for their own brand, per a release. "The addition of the Stiling ranch to our acreage continues our commitment to estate grown grapes and strengthens our dedication to the Russian River Valley," says Eva Dehlinger, second generation winegrower and Dehlinger Winery gm.
SMWE EARNINGS DROP IN Q1. Ste. Michelle Wine Estates had a tough first quarter ended March 31. The company's revenues were down 3.4% to $140 million and volumes declined by 10% to 1.7 million cases. Parent company Altria attributes the dip in performance to wholesaler reduction in year-end inventory, and the timing of the East holiday. However, you'll recall, Cuervo also recently posted a lackluster result of this same period and we've mentioned in previous reports of a slow first quarter of the calendar year [see WSD 02-23-2017]. We're keeping an eye on whether a slowdown might be bigger than these two companies, as Diageo and Campari host earnings calls next week.
JURA WHISKY RELEASES JURA 10 IN US. Jura 10 is the first release in the new core line for the US. It is a single malt Scotch whisky made from a blend of peated and unpeated malt with a sherry cask finish. The whisky is aged for 10 years in American white oak ex-bourbon barrels with an aged Oloroso sherry cask finish and bottled at 80 proof. It's now available nationwide for approximately $55 a 750 ml.
UNION WINE CO. ADDS ROSE BUBBLES TO CANNED WINE LINE. Underwood, Union Wine Co.'s line of canned wines, has added Rose Bubbles. Underwood Rose Bubbles is available at select retailers nationwide for about $28 per four pack of 375 ml cans.
TRADER JOE'S JUMPS ON CANNED WINE BANDWAGON. Speaking of canned wine, Trader Joe's is getting in on the action with Simpler Wines brand, per Thrillist. Simpler Wines is available in sparkling white and rose at $4 per four-pack of cans.
PA-BASED BOARDROOM SPIRITS LAUNCHES FRESH GINGER VODKA. Fresh Ginger is the latest addition to Boardroom's line of naturally infused vodkas, alongside Fresh Cranberry and Fresh Citrus. Fresh Ginger seems to capitalizing on the Moscow Mule trend. It is available in its home state of Pennsylvania at a suggested retail price of $27.
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