Lots Of Blame To Go Around: House Committee Holds Hearing On Problems With N.C. ABC, Warehouse

By John Trump
Carolina Journal

Spiritous liquor is still in short supply in ABC stores across the state, and supply still isn’t keeping up with demand. Republican lawmakers say things are getting even worse.

Rep. Tim Moffitt, R-Henderson, and other members of the N.C. House Alcoholic Beverage Control Committee spent more than two hours Wednesday, Sept. 29, trying to determine what’s going on with the N.C. ABC Commission and warehouse operator LB&B Associates.

Moffitt, after the meeting, said he now has more questions than answers.

“This issue has really been compounded itself for the past four or five months.”

Moffitt, the ABC committee chair, says lawmakers will continue to dig deeper, and the issue was referred to the Joint Legislative Commission on Governmental Operations. The ABC committee was scheduled to consider a pair of bills Wednesday, but neither was heard.

Moffitt related a story of his own businesses, saying his company is updating database software in place for decades. But, said Moffitt, the company isn’t doing it “in front of the customer,” who ultimately suffers.

Such is now the case with LB&B.

ABC chairman A.D. Zander Guy Jr. resigned as chairman of the ABC Commission more than a week ago. ABC spokesman Jeff Strickland offered no additional information. Guy’s resignation came amid liquor supply shortages, in part because of problems with the global supply chain but largely because of issues with LB&B Associates. 

The ABC Commission in March voted unanimously to recommend that the state award a new 10-year contract for warehouse services to LB&B, the target of an audit in 2018 that has, over previous years, cost the state about $13.5 million. The ABC concurred with the audit and promised to fix the myriad issues, including a focus on accountability and efficient delivery.

The agreement, the ABC says, includes a requirement of nearly error-free and on-time deliveries as well as increased delivery frequency to the state’s 171 local ABC boards. LB&B has operated the state warehouse system since 2003, Thompson said. The state has two warehouses, in Garner and, most recently, Clayton.

Wednesday’s meeting touched on the audit but also the continuing problems with supplies at local ABC stores, which the warehouse operators blame on a new software system implemented by LB&B in early July, now some three months ago.

The problems are getting worse, Moffitt said during the hearing. Lawmakers have for months now fielded complaints from most types of private entities that serve alcohol, including bars and restaurants. ABC store shelves are bare across the state, even as neighboring states aren’t seeing issues anywhere near as severe as North Carolina’s.

Moffitt and fellow lawmakers have taken the questions, but the answers are few. Benjamin Thompson, outside counsel for LB&B, and Terrance Merriweather, who stepped in for Guy, tried to answer lawmakers’ questions. The hearing led to little news, as the problems with the warehouse and state-controlled system are widely known and much talked about.  

The real problem is a monopolistic, antiquated system established some 85 years ago to appease towns and counties resisting the sale of alcohol by, in essence, buying them off with a cut of the proceeds.

The answers from lawyers and ABC officials who addressed the committee carried a similar thread: blame.

Blame that focused on issues with the global supply chain, on an increase in volume partly because people are drinking now because of the pandemic, on a shortage of workers, on an older warehouse, and on drivers. 

The biggest alleged culprit? A new software system was implemented in early July and, says Thompson, customers are still learning to use it. Some local ABC boards are reluctant to use the new system at all, continuing to use the older system, which connects suppliers and customers with the warehouse.

Sen. Todd Johnson, R- Union, told Thompson the lawyer offered many reasons for the issues but failed to articulate the biggest failure.

“Which one is it?” asked Johnson, who Moffitt invited to the meeting. “It’s all of them,” answered Thompson.

Merriweather, for his part, said the ABC is committed to solving the issues and has implemented training sessions for the software, as well as focus groups that bring up issues and problems. He says the ABC is committed to “full transparency.”

Which does little to fix things, however.

Johnson said he sees billboards and banners sending people to South Carolina to get rare liquor.

“There, the shelves are full,” he said. “What’s the difference?”

Thompson debated the point and told a story of being taken to the back of one South Carolina store, which was piled with what he called junk. He said he was told the store had to buy the junk so it could, in turn, buy the rare bourbon. 

Thompson says the state keeps $40 million to $60 million worth of liquor in the two facilities, and the LB&B contract stipulates the operator must take inventory by July. That was delayed because of the Independence Day holiday and didn’t start until July 5. Deliveries fell behind, “and we could not catch up and keep up on those five days,” Thompson says.

The loads from the warehouse doubled in August over July.

“We believe the delivery issues are now on track,” said Thompson, who blamed a “learning curve.” He said the state is delivering more liquor than the contract stipulates, but it’s still not enough. He said many provisions in the new contract are difficult to meet.

Committee Co-Chair Rep. Jamie Boles, R-Moore, said LB&B probably waited too long to teach people to use the system.

“Nobody likes change,” Boles said, “but I don’t think there was enough time prepared on behalf of LB&B … to work with local boards in teaching the new computer system.”

Moffitt visited the ABC warehouses about three weeks ago, he said.

No shopping bags, and no register to buy anything. The buildings, he said, were full.

“But I did find the missing alcohol,” including cases of Buffalo Trace and Weller bourbons, which are difficult if not nearly impossible to buy throughout most of the year in North Carolina. The bourbons, made at the Buffalo Trace Distillery in Frankfort, Kentucky, simply sat there, Moffitt said. No one seemed to be readying it for sale or distribution.

4 COMMENTS

  1. The ABC system introduces a huge loss of potential tax revenue by not allowing private stores to innovate in the sector. I’m frankly shocked any legislator would be against anything that lead to more revenue at no extra cost to the taxpayer. We millions are all being held hostage by around probably fifty or so people who are still benefitting from this arrangement. ABC is antiquated, wasteful, and useless.

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