Archive for the ‘Wine facts’ Category

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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The supposed competitive imbalance

August 12, 2008

Liquor and wine retailers argue that more competition will destroy their businesses. That’s interesting, because the Green Hills neighborhood in Nashville seems to refute everything they fear about competing stores and/or lack of market.

There are three liquor stores in the retail area of Green Hills:

  1. Bud’s Discount Wine and Liquors
  2. The Wine Shoppe at Green Hills
  3. yn in the Hill Center (which opened less than a year ago)

See the map for yourself.

Bud’s and The Wine Shoppe are almost in the same block on Abbott Martin. The newly opened yn is no more than .3 miles from the other two stores. That’s less than one mile to complete a round trip to three liquor stores.

Let’s review. It’s OK for liquor stores to open multiple locations within walking distance of another. But if retail food stores are allowed to sell wine, then liquor and wine retailers face an uncertain and bleak future because the competition would be too great or because the market is too small.

Scientists talk about the exception that disproves the rule. Green Hills is that exception to the retailers’ arguments.

Stopteendrinkingtn.org should correct its facts

March 8, 2008

Stopteendrinkingtn.org is one of our opponents in this debate. The org’s website presents visitors with the following information as part of an online petition.

TAKE ACTION!

• Wine in Grocery Stores – This bill would put wine on the shelves of 6,000 grocery stores and big box stores across the state – and right in the line of sight of any teenager entering their doors. Currently, only 525 retail alcohol establishments are licensed to sell wine in Tennessee.

Because Red White and Food just revealed its legislative strategy on Wednesday, we’ll cut stopteendrinkingtn.org a break and give them the opportunity to correct their facts.

The legislation recommended by the Tennessee Grocers and Convenience Store Association would limit sales to municipalities where citizens have voted for retail package sales. Not every grocery and convenience store in Tennessee would be allowed to sell wine. Here is the map:

Muncipalities allowing package sales

Stopteendrinkingtn.org conveniently fails to mention the Responsible Vendor Law and mandatory carding that the grocer and convenience store industry advocated. Retail food stores would extend mandatory carding to anyone purchasing wine if this legislation passes.

What people consider facts at one time can change as more information becomes available. It’s time for stopteendrinkingtn.org to now get its facts correct.

BTW, the Specialty Wine Retailers Association is not too happy with stopteendrinkingtn.org.