Booze Will Be Cheaper, Right ? Part 2

So, last time I laid out the generalities of why the Costco-written and voter-approved Initiative 1183 will actually result in higher liquor prices here in my home state of Washington. Let's get specific:  as an example, let's say a distributor in WA buys a 750ml bottle of vodka from its producer or importer and along with the transportation costs of getting the bottle to WA has a cost of $10.  Let's see what you pay when you take that bottle through the check-out lane. 


Original acquisition cost for the distributor              $10.00

Distributor's Profit Margin (25%)                            +$2.50
License Fees & Shortfall Cover (13.9%)                  +$1.39
Total Margin & License Fee (38.9%)                       +$3.89

Distributor Price to the Retailer                                $13.89

Retailer Profit Margin (30%)                                  +$4.17
Retailer's License Fee (26.6%)                              +$3.70
Total Retailer Margin & License Fee Cover (56.6%)   +$7.86

Shelf Price                                                                    $21.75

Other Mandatory State Taxes Collected at Checkout:

20.5% State Tax                                                 +$4.46
Per Liter Tax $3.77                                              +$2.83

Total 750ML Price to Consumer                                $29.04

So, $10 becomes nearly $30.  And, most premium liquors do not start out at $10; they are much more.  I expect we'll see a lot of Absolut drinkers become Smirnoff buyers and Smirnoff buyers become Popov buyers.  Trading down will be the norm as consumers adjust to an unexpected reality.