Archive for September, 2008

Price premiums

September 23, 2008

Say “price premium” to CEOs and watch their eyes light up. It’s the holy grail of business to charge a higher price and still have clients beat down your door.

Price premiums rarely come without some investment. Those who reach this point have usually perfected a system, hired better talent, employed new technology, improved customer service, etc. Consumers choose to pay more because the products and services are worth it.

Now contrast that wine sales in heavily regulated states. Minnesota only allows wine sales in liquor stores. Minnesotans pay a price premium for wine. It’s not because of the variety or the service or new technology in the store. They pay 17.5% more for wine than they should because they have to. An American Economics Group study uncovered the roots of this undesirable price premium.

Three elements of distribution and taxation create Minnesota’s significantly higher beverage prices. They are:

  1. The near-monopoly status (and monopoly profits) granted to a handful of wholesalers
  2. The restriction in the number and types of retail outlets
  3. The relatively high excise and sales taxes on alcoholic beverages

In combination, these three elements impose what has been called a monopoly “tax” on consumers in the form of higher prices for liquor, wine and beer.

Minnesota’s problems sound all too familiar.

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In case you missed it

September 2, 2008

The Tennessean covered our quest for wine in retail food stores from several points of view last week.

Jennifer Brooks wrote a story about the ongoing debate and the legislative study committee that Sen. Bill Ketron (R-Murfreesboro) has planned for this fall. In the story, Sen. Ketron talks about the “avalanche of enthusiastic calls and messages” that he received from Tennesseans who want to the choice of buying wine in retail food stores.

Also, Gail Kerr offered her opinion about the liquor lobby and its influence on legislators.