No ceiling in sight for booming Utah liquor sales

Monday , March 14, 2016 - 7:08 AM18 comments

MARK SHENEFELT, Standard-Examiner Staff

Everything is going up at Utah liquor stores.

Demand is driving sustained growth in sales, prices, expenses, the numbers of liquor store workers and the profits that pour into the state’s general fund.

And long lines before holidays also aren’t shrinking, as the state says it’s struggling to maintain sufficient staffing to handle the rush.

The sales boom underscores the evolving position of the state-controlled liquor system, which is delivering huge profits to the state general fund. Once purely a device to restrict alcohol consumption after Prohibition, the system today is an ever-bigger contributor to state finances and a target of civil libertarians and consumers.

“Our sales have gone up significantly over the years,” said Vickie Ashby, spokeswoman for the Utah Department of Alcoholic Beverage Control. “Some of that is just product innovation — the craft beers, flavored vodkas and the like.”

Demand for alcohol is affected by new product and marketing strategies, according to a study by the Institute for Research on Labor, Employment and the Economy at the University of Michigan.

The Associated Press reports that demographic changes, with the diversification of more non-Mormons moving to Utah, plus a thriving tourism industry, also have helped drive liquor sales increases.

 

As a result, Utah’s liquor stores sold 8.2 million gallons of alcohol in 2015, up from 7.8 million in 2014.

FREE MARKET VS. MONOPOLY: A PARADOX

Utah’s liquor monopoly is a big business. With 44 state-owned stores and 122 authorized package agencies, the state sold $396.4 million worth of wine, spirits, heavy beers and flavored malt beverages in 2015. That was up from $345.1 million in 2013. (Beers of less than 4 percent alcohol by volume are sold in grocery and convenience stores and are not part of the state sales numbers.)

And annual profits continue to grow. In 2013, liquor sales generated $81.3 million in revenue for the state’s general fund. That total is expected to balloon to $101.6 million in 2016 and $106.6 million in 2017, according to the Governor’s Office of Management and Budget.

Liquor sales also generate $41.3 million in funding for school lunches and public safety programs, plus $20.2 million in sales taxes.

But the growth in state liquor sales masks a contradiction that may be robbing consumers and the state, the Libertas Institute argues.

“We would like to see an economic impact statement on what effect our liquor laws have on tourism, conventions — what are we missing out on?” said DJ Schanz, vice president of the libertarian advocacy group.

Jettisoning state control of liquor sales “would open up markets and choices for consumers,” Schanz said. As it is, consumers are an afterthought, he said.

Then there’s the state-mandated 86 percent price markup on spirits — effectively, a sin tax.

“The problem with sin taxes in general is there is no incentive ever to get rid of it,” Schanz said. “What incentive does the state have to lower usage of this product?”

David Ekstrom, manager of three state liquor stores in northern Utah, said he hears often from people complaining about the high prices of Utah spirits and wines.

Most of them are from California, he said. “They say they can get this bottle of wine in California for half price,” he said. “I tell them, jokingly, ‘You have a lot higher property taxes in California.’”

In reality, Utah’s state government is hooked on its profits from liquor sales, Schanz said.

“It is of an inconsistent nature with a state that purports to value free-market principles to run a government monopoly on liquor sales,” he said. “We should emphasize the paradox of the state becoming addicted to sin taxes on alcohol or tobacco taxes and proceeds, thus diminishing its incentive to decrease usage.”

STUDY: DEMAND JUSTIFIES 12 MORE LIQUOR STORES

While long lines are rare on a typical day, they are a given leading into the Thanksgiving, Christmas and New Year’s holidays, said Ekstrom, who manages state liquor stores in Harrisville, Ogden and Bountiful. With the St. Patrick’s Day holiday approaching, it’s another opportunity for Ekstrom to keep sales moving briskly. 

At mid-afternoon Tuesday, a dozen or so people browsed the shelves in the Harrisville store, and two of the three cash registers were busy. Ekstrom said traffic picks up after 5 p.m.

Putting Ekstrom in charge of three stores is how the state has tried to save administrative costs, allowing it to put more line workers into the stores to meet demand. The liquor department’s workforce is up to 627 employees, an increase of almost 14 percent in two years.

Ekstrom said he supposes the future holds higher sales and more work. At least now, some of the newer stores, like Harrisville’s, are big enough to handle the additional traffic.

He used to work at the old store on Second Street and Washington Boulevard in Ogden.

“Those were little stores,” he said, recalling that during the holidays they sometimes had to lock the doors while the crowd thinned.

“We told people the store’s full, nobody can move.”

Rep. Gage Froerer, R-Huntsville, said market studies have indicated the current demand justifies adding 12 more state liquor stores.

“I would encourage the DABC to look at its budget and expand the availability of stores,” he said. “It makes no sense not to be customer-friendly” if the state is going to be in the liquor business.

You can reach reporter Mark Shenefelt at mshenefelt@standard.net or 801-625-4224.

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