2017-04-20 Liquor Adjudication Board Minutes

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versus what they are ordering form the wholesalers. This isn't the first instance of a retailer doing that. We've had other ones in the past, where a lot of time, maybe similar situations, they are short or they don't have the item so they run to the store and get it. We see other operations where they make a considerate effort to bypass the wholesalers. Typically, we'll get notified by the wholesalers because suddenly they see their product in there and they know they're not buying from them. That's usually the bigger problem; that they're not following that mechanism. With Costco here, it has actually created a problem. I'll admit that sometimes Costco is cheaper than what the wholesalers are selling. I can understand why they do it, I guess, but that's the world they live in. They have to abide by these rules. Fuke: So it's a protection for the wholesalers, in a way? Takase: That could be one. Secondly, they are paying their fair share in gross revenues. If they don't buy it from the wholesalers, they don't report it at all in sales and that becomes a bigger problem. Fuke: I can see if you can purchase things on consignment and you don't utilize it and return, then that's fine. But I would imagine, in situations like this, you can't purchase the alcohol on consignment or can you? Takase: I don't know. I think they can. They can return unopened liquor. Especially with beer, it has a shelf life. So if they don't sell it the wholesaler will take their returns. Like I said, there are two instances where they just run out because they didn't get their orders in on time or they had a big rush on a certain product. That's the first instance and it's probably not as bad as the second instance where there is a considerate effort to buy liquor, say from Costco and avoid the process. But, we haven't seen too much of that anymore because the wholesalers are really the ones who notify us. Fuke: So, in this situation where he purchased a 30-pack from KTA, and the second one you couldn't figure out whether you purchased it or if it came from your house. It doesn't matter; if you purchased the beer from an establishment or you brought it from your home to supplement your business, it's still not legal? Takase: Yes, it has to be through the wholesaler. It's also to ensure product quality. I don't think we see it too much here. On the mainland, there are places of counterfeiting where they will take out the product and put something else in it and try to sell it with Crown Royal. I think most times the patrons are sharp enough to know that it isn't what they ordered. Fuke: Another question I had, the report said you confiscated the beer. What happened to the confiscated beer? Takase: It's still in the evidence locker. Fuke: And how long are you folks going to keep it? APRIL 20, 2017—LIQUOR ADJUDICATION BOARD MINUTES 7