Politics & Other Mistakes: Liquor blues
“For great sale prices, there’s no place like Maine.”
Can you guess what product that headline, which appeared in an ad in the Sept. 4 Maine Sunday Telegram, is referring to?
All good guesses, but incorrect. The ad was placed by the Maine Beverage Company, the contractor that controls the wholesale liquor monopoly in the state.
The sale prices refer to booze.
In Maine, those prices are set at by the Bureau of Alcoholic Beverages and Lottery Operations. Based on the figures listed in the ad, those bureaucrats must have taken a solemn oath to make pricing decisions without ever considering the principles of free enterprise.
That would explain why, of the 14 items mentioned in Maine Beverage’s promotion, nine are cheaper at New Hampshire’s state liquor stores. Three others aren’t available in the Granite State in the same size bottles, but can be purchased more economically in larger containers. One product isn’t sold in New Hampshire at all. And just one is a better deal in “no place like Maine.” (In my cost calculations, I added Maine’s 5 percent sales tax to the state’s advertised prices, because that makes for a fairer comparison. New Hampshire has no sales tax.)
Was this collection of what the ad terms “great deals” an anomaly?
Nope. On August 28, Maine Beverage ran a different ad in several papers citing sale prices on 24 products. Of those, six were bigger bargains in Maine (although mostly not by much – you could save $1.86 on a fifth of Maker’s Mark bourbon). Two were the same price in both states. And 16 were cheaper in New Hampshire.
In some cases, a lot cheaper.
A 1.75 liter bottle of Kahlua was specially priced in Maine at $34.99. That’s five bucks less than the ordinary charge. With sales tax of $1.75, the total at the cash register came to $36.74. Or $4.75 more than the everyday price in our neighboring state.
A similarly sized bottle of Cointreau was $70.49 after tax for a limited time in Maine. In New Hampshire, it wasn’t even on sale, but it’s still only $64.99.
Maybe your taste runs to Black Velvet whiskey. Maine had a big bottle on special for $16.26, tax included. It was on sale in New Hampshire, too – for $12.99.
Why would Maine Beverage bother to advertise prices well above those of its chief competition? The answer is twofold.
First, as noted above, Maine Beverage has no control over what it charges. State government decides both wholesale and retail prices, based less on standard merchandising practices and more on greed. It’s intent on maximizing profits from sales to those poor saps who don’t know enough to travel across the border for their booze. It doesn’t concern itself with how much business it might be sacrificing due to more mobile consumers (one New Hampshire official put the additional profit his state earns from Maine at nearly $20 million annually, a sizable percentage of the $125 million a year the Granite State nets from alcohol).
The second reason Maine Beverage doesn’t care if its sales prices are lousy deals is that company president and chief executive officer Dean Williams isn’t too concerned about losing customers to the state next door. That’s because Williams is also the executive vice president and general manager of the Martignetti Companies of New Hampshire, a liquor wholesaler that supplies the Granite State stores.
No matter where you buy, he gets a slice of the pie.
The state budget passed in the last legislative session requires Maine to begin negotiations later this year with interested parties on a new monopoly deal to replace the one that expires in 2014. While competing companies will be allowed to submit bids to take over the franchise, Maine Beverage starts with a clear advantage, in spite of its conflict of interest – a conflict that’s sort of like the U.S. Army negotiating an exclusive contract to supply ammunition to American troops in Afghanistan with the Taliban.
There is a more sensible approach, one that ought to appeal to Republican legislators with their often-expressed belief in market-based solutions and to GOP Gov. Paul LePage, who wants to run government like a business.
It’s simple: deregulation. Let anyone buy a license to wholesale or retail alcohol. Let them set their own prices, based on common sense and competition. And as long as they collect taxes and abide by the laws against allowing teenagers to purchase large bottles of rotgut vodka (currently $5.99 for 1.75 liters of Fleischmann’s in New Hampshire, while in Maine, it’s $6.99 for an equal amount of Five O’Clock), they can do as they please.
That might mean a little less money for the state treasury in the short term, but over time, Maine could recover a significant portion of the liquor profits we send out of state.
When that happens, I propose a toast using top-shelf booze, such as Courvoisier XO cognac.
It’s $139.99 in Maine, but 10 bucks cheaper across the Piscataqua River.
Got a good deal on hooch? Email me at email@example.com.