Liquor Retailers Stockpiling to Beat Price Hike

A Jan. 1 excise tax increase on liquor, wine and beer has created a year-end surge in the sale of alcoholic beverages, as expected. However, it appears that retailers--not California consumers--are the ones stockpiling.

Consumers were expected to go on a late-year shopping spree for potent potables to avoid the sting of higher prices, which could increase as much as 15%. However, analysts said there has not yet been a significant surge in retail sales.

Anticipating the price increase, however, some California consumers are buying more liquor; few are stockpiling on beer because it has a relatively short shelf life, and few are buying more wine because the prices have been relatively low, said Max Kerstein, publisher of the Beverly Hills-based California Beverage Bulletin.

“If we’re going to see a significant increase, it will come at the 11th hour,” said Paul Gillette, editor and publisher of California Beverage Hotline, a Los Angeles-based trade publication.

On the other hand, many retailers are stockpiling--primarily liquor--to avoid higher charges from wholesalers in January, Gillette said.

“Retailers are buying like crazy,” Gillette said. “They’re buying more now because they can sell it for a higher price later if they don’t sell it right away.”

Already faced with the excise tax increase, retailers are now scrambling to deal with increases in the price they pay for liquor and beer as many distillers and brewers prepare to mark up their goods. Many of the mark-ups are to coincide with the excise tax boost, becoming effective Jan. 1.

The tax on a 750-millimeter bottle of red table wine will jump to 21 cents from 3 cents. The tax on a six-pack of beer will increase to 33 cents from 16 cents. And the tax on an 80-proof, 750-millimeter bottle of gin will rise to $2.14 from $1.98. There will be no tax increase on sparkling wine.

Many distillers and brewers plan to raise the price of spirits and beer by 5% to 15%. Meanwhile, winemakers are expected to hold the line on their prices over the next three to four weeks.

As a result of the tax and price hikes, liquor prices to the consumer--depending on brands--will rise by 3% to 15%, said Gillette. Overall, the price of imported beers will rise about 17% and American brews will be up about 8%, Gillette predicted.

Anticipating the increases, a buyer for a major retail chain recently ordered a 30% cutback in purchases of nonalcoholic beverages such as bottled water and soft drinks for Southland stores to make way for an increase in the supply of alcoholic beverages, Gillette said.

Among those ordering more from wholesalers is Steve Wallace, owner of Wally’s, a popular store located at 2107 Westwood Blvd. in Los Angeles. Wallace said he increased his December purchases by about 15%. He said December sales are also up about 15%, but attributes the rise to service and special bargains--not stockpiling.

“I don’t really see any difference,” he said. “I haven’t noticed anyone buying to avoid the price increase.”

Suppliers and wholesalers have had a lot more success selling to retailers--telling them, for example, that they may have more difficulty buying higher-priced goods if the economy slows further, said Tom Pirko, president of Bevmark, a Los Angeles-based consultant to the beverage industry.

“The salesmen on the street have been telling (retail) accounts that there is no tomorrow because the recession is going to hit along with the tax,” Pirko said.

The uncertainty of consumer demand and the hard-sell of wholesalers is prompting many retailers to make difficult choices, said Fred Ruff, president of the California Retail Liquor Dealers Assn. and owner of Fred’s Liquor at 6301 S. Broadway.

“Some are not sure of their next move because they don’t know what to expect,” Ruff said.