The other day, I did something I wouldn’t normally do. I bought a bottle of booze in Maine.
Please don’t think less of me. I had no choice.
I usually purchase my liquor in New Hampshire, where it’s almost always cheaper. My order arrives here via an underground railroad operated by a nefarious associate, who gets paid off in cocktails. Such transactions are illegal, immoral and bad for my liver, but I don’t care. The savings are worth it.
Unfortunately, my connection wasn’t due for several days, and I was out of bourbon. In desperation, I went to an agency liquor store and picked up a fifth of cheap hooch that, due to this state’s convoluted alcohol-control policies, cost me four bucks more than the Granite State price. This disparity is unlikely to correct itself in the foreseeable future because of one big problem:
The people who regulate Maine’s liquor industry are blithering idiots.
Rather than trying to match New Hampshire’s prices, the bureaucrats who oversee this state’s spirits business set the cost of a bottle based on a complex formula that appears to have been developed by somebody who was absent from economics class the day the professor explained competition. You could be excused for thinking Maine’s prices relate to the alignment of the stars or an examination of animal entrails, but it’s actually nowhere near that logical.
According to an excellent article by Lewiston Sun Journal reporter Steve (No, I’m Not Related To Susan) Collins, the liquor overlords have determined that recently approved price increases will be based on a formula that relies on random foolishness.
Consider a nip bottle of cheap vodka, for example. This item costs the state 52 cents at wholesale. The standard markup is 89 percent because, well, just because. That brings the price to about 99 cents. Then, for no apparent reason, there’s a 3-cent tax on top of that. Now the price is $1.02. “But,” according to Collins, “the pricing policy requires rounding up the bottom line to the next established price point. That brings it to $1.29 as a retail price.”
That would yield a profit of 74 cents, but the State Board of Nonsensical Proclamations of Weirdness has decreed that every bottle sold earn at least 75 cents. In a rational world, that would mean the nip would sell for $1.30, but as you may be starting to suspect, the liquor business bears no relationship to the rational world.
According to Collins, the little bottle can’t be sold in Maine for $1.30 because that’s not “an allowable price point.” Allowable by whom? The Intergalactic Commission on Price Points, maybe. But regardless of what entity sets these freakish rules, the next such point is $1.49, so that’s what the nip is priced at. Oh, and there’ll soon be a 5-cent deposit on the bottle, too.
It makes sense – if you don’t pay close attention. Or if, as state officials are hoping, you’ve been drinking.
Strangely enough, the most recent version of this perverted pricing policy was only developed after Maine officials became concerned about the lack of growth in profits. The state was selling more booze, but consumers, in search of bargains, were migrating to less profitable brands.
To counteract that trend, a rational liquor purveyor might have cut markups on more expensive items. A less rational entity would raise prices, thereby driving customers to the competition in New Hampshire. To no one’s surprise, Maine officials decided to do the latter. An admittedly questionable analysis by a booze lobbying group found the recently proposed changes would reduce gross sales by $23 million per year, while costing consumers an extra $21 million. If one had an economics degree, one might conclude that this was a fine example of a lose-lose proposition.
Maine is locked into contracts that will keep it in the liquor business for several more years, but now’s the time to prepare to transition to a system in which the marketplace sets prices, and the state collects its share in taxes without further inept meddling.
To do otherwise just encourages people like me to continue subsidizing New Hampshire.
With all the money I saved on booze, I can afford to reply to your emails sent to email@example.com.