Arbor Update

Royal Oak considering booze tax

19. August 2005 • Murph
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The Detroit News’ headline summarizes nicely: Royal Oak weighs booze tax – Bar, restaurant owners fear idea city is reviewing to soothe budget ills will send patrons elsewhere.

The article also mentions suggestions such as selling Royal Oak’s City Hall – contrast with Ann Arbor’s intent to build a new, $40-60m City Hall or annex.

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1. Michigan Wholesalers would quash this legislation in an instant. The Wholesalers are the biggest lobbying group (read: dole out the most kickbacks to Mich. govt. officials) in the State, with second place nowhere in sight.
   
   I’m sure that these Royal Oak officials are completely unaware of this fact.
   
   Wanna know how powerful the wholesalers are? Have you seen the bottles of spirits that we sell? There’s a 65% markup per bottle that is shared by the State and the wholesalers as a “distribution” fee even though, obviously, the bottle are never touched by the wholesalers.
   
   Good luck with that, Royal Oak. (Snicker).
      —todd    Aug. 19 '05 - 01:46PM    #
   
2. How much sway do the wholesalers have in local issues? I mean, the whole direct-shipping spat over wine has demonstrated how much attention they can draw at the state level, but will they / can they intervene in one city’s shooting itself in the foot?
      —Murph.    Aug. 19 '05 - 03:01PM    #
   
3. If they think that one cent of their marketshare (they operate on volume principles), then they will most certainly intervene. Royal Oak is obviously not the only city in Mich. that’s hurting for cash, and one would think that, if passed, this kind of legislation would spread like wildfire.
   
   That would put a dent in the wholesalers business big time. As things stand, the beer and wine wholesalers aren’t doing so well these days….sales are slipping. It has been shown that while higher prices for premium and luxury categories for beer/wine/spirits can actually increase sales, higher prices for the low end booze can effectively kill an entire segment.
   
   I would think that if this idea gets rolling that the Wholesalers will bring out the big guns.
   
   ....as to the direct shipping you mentioned, here’s another anecdote about Wholesalers unabashed power:
   
   You know how Granholm’s, MADD’s, and the Sheriff Assoc. entire argument against direct shipping is that it will give underage kids access to alcohol?
   
   Yeah. Well, in the new legislation that the Mich. Wholesaler’s wrote, Mich. vineyard’s can no longer ship directly to a consumer via FedEx. However, it will now be legal for liquor stores like Big Ten, or even Busch’s or Kroger to ship directly to consumers. Why? Because the wholesalers will have received their 33% cut.
   
   Way to go, guys! MADD, the Sheriffs, and Granholm should be ashamed of themselves for being this stupid or, worse, corrupt. But hey, I’m sure they enjoyed the checks that they received from the Mich. Wholesalers, so what does it matter?
      —todd    Aug. 19 '05 - 03:18PM    #
   
4. “if they think that they will lose one cent of their marketshare…..”
   
   Sheesh, my writing’s gone from bad to incoherent.
      —todd    Aug. 19 '05 - 03:23PM    #
   
5. Also keep in mind that any change requires legislation to be changed at the State level FIRST. So nothing will happen locally until the State law is changed. As Todd ablely points out, that’s not going to happen. I don’t think the Wholesalers are #1 in contributions but they are pretty darn close. One of the Detroit papers had a good article that highlighted how the State Commission that is supposed to regulate the Wholesalers is effectively in their pocket (or would that be wallet?)
   
   http://www.freep.com/news/mich/beer10e_20050210.htm
   
   and related articles.
      —John Q    Aug. 19 '05 - 03:43PM    #
   
6. I’m pretty sure they’re #1 in contributions, JohnQ, but I think that the stats I have are for the last ten years, rather than just the last election cycle.
   
   I’ll have to look for the numbers again.
      —todd    Aug. 19 '05 - 03:55PM    #
   
7. My dad worked for large beer distributor (for one of the major brands) in the Metro Detroit area as a delivery driver and now (because his body is too wrecked from over 20 years of hauling beer) as a warehouse worker. When his boss died a couple years ago of a pretty serious case of cancer, I felt nothing but relief. She was the most sickeningly evil, selfish person I’d ever met in my life. She gave a lot of money to politicians, mostly republicans, to win her Wholesaler causes.
   
   Just recently, my dad said that his employer has been encouraging their employees to shop at Wal*Mart and Sam’s Club rather than Costco because Costco was supporting the direct-mail legislation while Wal*Mart was opposed to it.
      —Scott Trudeau    Aug. 19 '05 - 11:27PM    #
   
8. Well Scott,
   
   I have to admit that some of the venom that I direct at wholesalers is directly linked to my jealousy of their power. My puny little brain can’t wrap itself around the idea that there are businesses that can add millions to their yearly bottom line by simply picking up the phone and calling their friendly neighborhood crooked state rep. Can you imagine?
   
   The whole Costco thing illustrates why wholesalers, and indeed, most middle men, are bad. Costco wants to know why the hell can’t they buy wine straight from the vineyards at a 33% discount. Why would they pay that much for zero value? What do they add to the value of the service/product? Nothing!
   
   Here’s an example: one pallet of my gin, shipped directly, would cost Costco $12,600. If we have to go through a distributor, the same pallet would get marked up to about $16,580. That’s almost a *$4,000* markup.
   
   Know how much it costs to send this pallet to Wash. State, where Costco wants it? About *$200*. I never thought that I’d root for a big box store to win a lawsuit, but there ya go.
   
   .....almost all of the cost of a bottle of booze goes to state (not federal) tax and the damn distributors.
      —todd    Aug. 20 '05 - 01:26PM    #
   
9. I would never have believed any of this if I hadn’t lived in Pennsylvania. In PA, you have to buy beer at a “beer distributor” and spirits at a “state liquor store,” neither of which are allowed to sell food, including things you might want to use as mixers (like cranberry juice, lemons, limes, etc.—that’s my memory, anyway). Three different stops to stock up for a party! If you want to buy a six-pack, can you do that at the beer distributor? Nope. You can only buy beer by the case at a distributor, which incidentally closes at 8 PM and isn’t open at all on Sunday. You can only buy a six-pack at a bar—at $4/beer (or whatever the beer costs to drink there).
   
   I said to someone in local politics that the state’s laws were so clearly screwed up, “why doesn’t the state legislature take care of this? Prohibition has been over for decades.” He said that the legislature had been trying to change the law for years, with no success. The distributors protect their businesses with a vengence, and the reason they close at 8 and aren’t open on Sunday is that they like the shorter hours, and they don’t have to worry about the competition staying open longer this way.
   
   Very frustrating, but I’m not surprised to hear that there are similiar doings in Michigan.
      —Anna    Aug. 22 '05 - 01:53PM    #
   
10. Pennsylvania is so thoroughly corrupt, from top to bottom, that it has become an economic backwater. Who would want to open a business in a state where so many bribes are required?
       —Larry Kestenbaum    Aug. 22 '05 - 03:45PM    #