Distributor claims in article “Looks like liquor prices to go up, over fees from Initiative 1183″ have it wrong
In the Seattle Times article “Looks like liquor prices to go up, over fees from Initiative 1183,” a beer and wine distributor was referenced to saying “Although Click and other distributors plan to offer the convenience of delivering spirits along with wine and beer to a restaurant’s door — something the state does not do — their prices could be higher than the state’s by a couple dollars a bottle because of the 10 percent distributor fee imposed by I-1183.”
What they fail to mention is that the 10 percent distributor fee (eventually dropping to 5 percent) imposed by I-1183 replaces the 39 percent markup for restaurants and a 52 percent markup for the general public that is currently established by the state. Also removed is the warehousing and shipping costs assumed by the state. Let’s see, which would result in higher prices for consumers, a 10 percent fee or a 39 percent markup. Perhaps the beer and wine wholesalers are hoping that voters can’t do math 
Read the referenced Seattle Times article here.
6 Comments to “Distributor claims in article “Looks like liquor prices to go up, over fees from Initiative 1183″ have it wrong”
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fancythat - February 3rd, 2012 at 9:35 am
It is interesting the conversation is centered around liquor sales. While they may go down in time, there is a 17% tax being added to wine, new charges for broken cases, new taxes on the retail side applied at wholesale that will create an inflation in wine prices.
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Jon Pulicicchio - February 3rd, 2012 at 9:48 am
I am sorry, but I fail to see where the Wholesalers are counting on the public not doing the math. The statement should read “The wholesalers HOPE the public can do the math” they would see how the state has been ripping off the consumer all these years.
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Hi Lex, I’ml aware of the markup going away and have covered the math on that pretty thoroughly. For example, check out the graphic here: http://bit.ly/qZ85mj.
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@fancythat – You fail to mention that the “new charges” on broken cases are actually just an example of our laws working to free up commerce. Pre-1183, the system unfairly subsidized small producers (and punished large-scale retailers) by requiring that all bottles carry the same price, no matter the volume sold. Now, as you can imagine, a business has lower costs-per-bottle-sold when they are selling in volume, because they require only one sales contract and one transaction. Selling in smaller quantity requires the same amount of time, but for less sales revenue and hence less profit. Business should have the freedom to choose whether to offer volume discounts to their best customers, and 1183 gives them the freedom to do so. Will it be a relative victory for the big retailers and a relative burden on the smaller retailers? Yes — compared to the previous system, but the previous system was unfair.
In other news, I’ve been conversing with the article’s author on Twitter, and she kindly pointed me to the following infographic to back up her article: http://seattletimes.nwsource.com/ABPub/2011/10/01/2016379817.pdf
It lists two potential modeled outcomes of 1183, one with lower liquor margins and prices lower than before, and one with higher margins and higher prices than before.
I replied to her that because there is significant uncertainty over the future of liquor prices in our state, that she ought to either retract her article or rename it so as to properly categorize the potential future liquor price rise as uncertain at best.
Now, she’s saying (and I quote) “Maybe [the article's title] should say ‘some’ prices? I don’t think anyone doubts some — and maybe many — prices will rise.”
Perhaps she’s right about that — SOME prices will rise, but perhaps not all, and of course perhaps some will FALL. I think that the author just sort of ran with the article and got a little far from the truth, which is that we don’t yet know what will happen with prices. She said that she would run my complaints/suggestions by her editor(s), but of course made no promises of changes.
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Lex Nepomuceno - February 3rd, 2012 at 5:38 pm
Thanks for your comments Melissa. The intent of my post was meant to clarify a common misconception disseminated by the beer and wine wholesalers and other anti-liquor privatization folks. I understand the headline may have seemed like I was targeting the article itself. I have made the appropriate updates and re-posted.
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fancythat - February 4th, 2012 at 8:21 am
Cameron I see your point but all this does is sway the advantage to bigger business, and reduce variety in smaller stores who can’t afford to purchase in volume, or hold the inventory required by volume purchases so variety suffers to make room for the extra inventory. Smaller producers can’t afford to offer the volume discounts either so it limits their ability to compete in market. Sure there are some people that will still support them, but they are going to have a harder time finding space on the shelf. Subsidy? No, leveling the playing filed to allow the smaller guy a chance to compete, yes. Like it or not allowing the volume discounts to larger businesses will only increase their pocket books while slowly bleeding the small business operator dry. Disagree? Look at what happens to small business when big box stores come to market. Wall Mart, Home Depot etc. While some smaller business will survive many of them cease to exists. But, at the end of the day, people only care about the end dollar I suppose.
At the end of it, I am happy to see the state forced out of selling liquor. They never had any business doing it to begin with.
Wine and more is coming to market. How long until BevMo shows up?
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