Liquor Privatization: What's Going On?

Last Friday, June 1st, I reported in my blog that liquor prices appeared to be about the same as before in state stores. This turned out to be erroneous. The spirits prices in advertisements and shelf prices do include the 17% fee charged to retailers, but not the 20.5% spirits sales tax and the $2.83 per 750 ml. bottle tax. The taxes are added at the point of sale and are not included in advertised prices. This pricing was mandated by the Washington Department of Revenue, to which the State Legislature delegated the responsibility for the collection of liquor taxes. The Department of Revenue website states:

Advertised prices or shelf prices will be considered not to include the spirits taxes unless they clearly identify the amount of spirits taxes included in the listed price. Th spirits sales tax can be combined into one "Spirits Taxes" amount. The term "tax included" will not suffice for the requirement to itemize the spirits taxes.

What this means is that a retailer may have an advertised price or shelf price tag that includes the taxes so long as they are itemized. This should be mandated by the Washington Liquor Control Board. Shoppers should not have to carry calculators around in stores to add up the real cost. Retailers are evading their obligation for full disclosure. I do not think putting up signs showing the tax breakdowns is sufficient.

There was an article in the Seattle Times this morning about higher spirits prices after privatization. I think the higher prices have more to do with the wholesalers than with the taxes being imposed. The spirits taxes are not new. They were included in the posted prices at state stores (so why should that be different now?). I do not think voters were marking their ballots in favor of Initiative 1183 on prices alone, but in order to get the state out of the liquor business. But they were not expecting price increases in the range of 20 to 30 percent. The state had a 52% markup which is much more than the "fees" being charged at the wholesale (10%) and retail (17%) levels. So retail prices under privatization should not be so much higher. I can only ascribe this to the middlemen's greed. In my research, however, I have found some prices to be near the state store level. A couple of examples: Bombay Saphire Gin at Metropolitan Market was priced at $19.99 + 4.08 (20.5% sales tax) + $2.83 (liquor tax) = $26.90 versus $26.95 state price; Johnny Walker Black Label Scotch at Esquin - $34.99 + 7.17 + 2.83 = $44.98 versus $39.95 state price, a difference of $5. On the other hand, I found a Remy Martin XO Cognac priced at $169.99 which adds up to a whopping $207.69 versus $154.95 at the state store.

I think, however, that there will be some shaking out in the future in regards to liquor prices. Initiative 1183 also allows retailers to purchase directly from spirits manufacturers. Chain retailera and restaurants can also store purchases at central warehouses. Bypassing the wholesale middlemen should help lower prices. This is what distributors are fearful of, that retailers, especially Costco and the big box stores, will make an end run around them. Many distributors do have exclusives on certain brands, and the speculation is that they will use volume discounts on their products to get shelf placements for their profitable wines, thereby crowding out smaller wineries. But the pressure on distributors will continue as "brand" products are reliant on mass markets (wait until Total Wine and BevMo! hit the Washington market). It will be intertesting to see how liquor privatization plays out in the future. Stay tuned!

A Couple of Best Buys

I was at Esquin (now Esquin Wine & Spirits) the other day and picked up a couple of wines put together by Trey Busch (Sleight of Hand). They are terrific values.

2010 Renegade Wine Co. "Esquin Cuvée" Tempranillo, Walla Walla Valley ($14.99)

Deep ruby colored, this wine emits aromas of raspberry, cherry, mulberry, anise and Spanish lavender. The medium-full bodied flavors are imbued with notes of ripe berries, chocolate, toasted nuts and loamy earth. The back picks up tones of dried cherries, nougat and sweet fruit acids on a moderate tanin and alcohol (13.3%) finish. 18/20 points.

2010 Renegade Wine Co. "Esquin Cuvee" Petit Verdot, Columbia Valley ($14.99)

This wine shows a purplish ruby color and an intense nose of wild blackberries, huckleberries and cassis, with scents of black roses, hyacinth. The dark fruit flavors are thick and chewy, intermixed with licorice, cocoa powder and scorched earth. The back reveals notes of roasted berries and nuts, and charcoal, followed by a squeeze of currant juice on a sweet-dry tannin finish. 18/20 points.