The Glass Half Full

It has now been a week since the transition from being a control state to an open market began its final phase.  The retail side of the market made its switch to private operation.  There was excitement, angst, confusion, and anticipation as the first day of sales came along.  Consumers had a whole new reality to suddenly live with.  As with many things, there are good and bad aspects to it all.  (Full disclosure, I am a partner in a distributor here in Washington, take that as you will, but I try not to let it cloud my judgment.)

Convenience has increased as you can now get your groceries and booze in one place.  Several retailers are working hard at increasing selection, and already there are bottles on the shelves that were never before seen in Washington.  Everyone in those stores is scrambling to learn as fast as they can about all that’s on their shelves, and they’ve hired on all of the staffers and managers who really cared from the state stores.

So what’s the downside?  Well, the vast majority of stores only have a tiny selection so far.  Most distributors are having problems with supplying all of their customers with everything that they are asking for, as no one could properly predict demand, and some distributors are still not close to being fully organized.  However, the really big issue so far has been pricing to the consumer.

The most frustration felt by anyone so far yet has been on the part of the everyday consumer who walks into a store and wants to buy a bottle of liquor. Prices on shelves don’t reflect all of the hideously high taxes that we have saddled ourselves with here.  20.5% liquor sales tax and a $3.77 litre tax are what then get added to the price shown on the self.  Why not just show that on the shelf tag?  Well, the simplest argument is that nothing else in a store has tax added to the price already on the shelf tag.  Why treat liquor any differently?

This has left consumers to try and do the math in their heads to figure out what the final price will be.  After all, with rates like those it’s not an insignificant amount of money that gets added on.  The fact that the state used to include those taxes in their price tags is more a reflection of the fact that they only sold liquor in their stores and had nothing else there to confuse the issue.

In all of this though consumers are left to ask, weren’t we promised lower prices to go with the convenience, and eventual larger selections?  Well, that was certainly a hope, and in reality would not have been outside the realm of possibility were it not for one sticky little proviso that seems to have been lost in all of the discussions.  Contained within the initiative to privatize liquor was a “fee” that added on 27% to the cost of liquor.  This “fee” was intended to make up extra revenue for the state over and above the liquor taxes.  It is made up of a 10% “fee” that distributors must pay to the state and a 17% “fee” that retailers must pay to the state.  These aren’t exactly numbers that can just be easily absorbed as has been suggested by several of those who read that far in.  The worst part is, for those who did read that far even fewer realise that the sunset clause on those fees that will cut them in half in 2 years only applies to distributors.  Retailers must continue to charge 17% in perpetuity.

So is this a rousing success so far?  No, but I think given time and the inevitable revolts among the electorate of Washington to roll back taxes in the next year or so there will be a balance struck and many of the promises and assumptions that were made will come to fruition.  Until then, buckle up and ask yourself is the glass full?

The Glass Half Full

Photo courtesy of Cayusa via Flickr

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2 Comments

Filed under Booze

2 responses to “The Glass Half Full

  1. Rocky, good post. As a point of reference, 47% of the retail price consumers pay on our cachaças goes to the state in the form of taxes and royalties. (This percentage may be higher or lower on other spirits.) Good times.

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