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Friday, April 29, 2011

Privatizing Liquor Store is an Option?

What would you rather have, a privately run liquor state liquor store that will tack-on upwards of 30% more for your beer wine & liquor - or the current state run liquor system?

Some lawmakers are actually considering these options to save money. The proposal in question aims at getting Utah out of the business of running liquor stores. Instead, the state would control the supply of liquor at the warehouse level, but it would essentially franchise the retail liquor sales to private operators.

Now that all sounds fine and dandy until you realize that these proposed store operators are going to have to make a buck just like any other small business owner.

Utah currently imposes an 86 percent markup on liquor and wine. The state could continue to take that markup — which would mean an increase in retail price — or, with the reduced overhead from not running stores, could shrink the markup, maintain profits and let franchises keep a portion of the sales.

Rep. Ryan Wilcox, R-Ogden, who presented his proposal to the state's privatization board Wednesday, said he is uncomfortable with the state profiting from liquor sales at all, but it is impractical to think the state would give up control over the distribution.

And I think that's the rub. Unless Utah is 100% committed to getting out of the liquor business, Utah's consumers will continue to get screwed both in price and availability.

What do you think, is this a practical idea? Is it worth it paying more for your beer in exchange for a privately leased liquor store?


Douglas said...

So wait, you would have private companies selling stuff but they would still be 100% reliant on the state for supply? I'm all for privatizing if it means a much better supply of beer. This sounds like a complicated issue.

Don LaVange said...

I agree with Mikey here, and this issue is deceiving. If Utahn's want to go the "free-enterprise" model and stop shoving their religious bias down everyone's throat then fine. The state should get completely out of the business and take revenues from taxes. In a completely free-market system the price would level to a supply and demand model. But in the artificial conditions this state legislator is recommending it is just another way of punishing the drinkers.

Anonymous said...

No business person worth 1/2 their salt would franchisee a government business full of restrictions.

Plang said...

All or none.
This middle ground only saves the state money for a little while.

If the state legislators were really interested in changing the state's liquor model, they would look at all the other states that have a hand in running liquor operations and determine what works and what doesn't work. But they won't do that.

Ricky H. said...

Yeah, it's an interesting issue. I think that their may be an improvement if the state franchises out the liquor stores.

That is, however if they reduce their markup and allowed different franchises to set their own markup. If the state moves their 1.86 (or whatever) to a 1.3 or 1.4 markup in wholesale and let the outlets decided the additional markup they may only add 20% to lead in customers and make a larger margin on other items like cigarettes and mixers. Gas stations don't make any money on gas, they just use it to get people in the door.

I think it may also drive up our quality of experience if the individual outlets can make special orders for themselves. A franchise owner could say, "I wish I had a case of Dog Fish Head" or whatever, place the order and see if it works. That doesn't happen with the current system. With the right amount of nutjob beer lovers like ourselves coming in, a store could sell a case of anything if it was new and interesting.

Anyway, I think it could work, as long as the individual franchises could have the ability to differentiate themselves and advertise those very specialties.

---Ricky H.

Anonymous said...

I'm all for the idea, even if it does make prices higher in the short term. It's something that has to be done eventually, because the state will never fix all their issues and have a truly great selection, and even if it's painful for a bit, it's a baby step. Nothing truly awesome about privatization can ever happen until this part is done first, and we will never just skip straight to a completely normal system, so this is as good as it will get for us.

Anonymous said...

Well it would be nice to have the ability to say "I'll stop at Mike's liquor on the way home." Rather than, "Utah
State Liquor" store. After living in Colorado,it's so ...communist.

Matt said...

I would just like to see a good variety of beers to drink after 10pm. Plus wouldn't this get rid of the 3.2% system?

Anonymous said...

if the state is going to be involved at any level it sounds like it would be best to just keep the state run stores. I don't want to pay more for no reason. now that they have expanded no one has to go to far out of their way to find a store.

Alcohol Server Certification said...

Privatazation, 3.2% system or whatever. It is really a pain in every Utahns pockets and those people running the business.