The Idaho State
Model of Liquor
Management
Citizen Owned for the Benefit of All
MISSION
The mission of the Idaho State Liquor Division is to
provide control over the importation, distribution,
sale, and consumption of distilled spirits; curtail
intemperate use of beverage alcohol; and
responsibly optimize the net revenues to the
citizens of Idaho.
VISION
The vision of the Idaho State Liquor Division is to
be the most respected and highest performing
purveyor of distilled spirits in the USA.
Overview
• 66 State-run retail stores, 98 contract stores
• Full-service distribution center receives and
ships one million cases annually
• $153,600,000 in Sales in FY2012
• Employ 350 people state-wide
• $63,100,000 distributed from FY2012
operations to Cities, Counties, Substance
Abuse Treatment, & General Fund in FY2012
Idaho Statute: Title 23 – Chapter 4
• 2% surcharge on all sales goes to drug and family courts
• Amount of remaining distribution is determined based on
available cash and working capital needs:
– In FY2012, 46% to State:
• $5.65 million to state fixed-fund accounts
• Remainder to general fund
– In FY2012, 54% to Cities & Counties
• 60% allocated to cities based on sales (90% to cities with
liquor stores, 10% to cities without liquor stores)
• 40% allocated to counties based on sales
Control States
Control States
x
A History Lesson
• The 18th Amendment established
Prohibition in the U.S. in 1920.
• In 1933, the 21st Amendment
repealed the 18th Amendment and
ended Prohibition.
• Control over beverage alcohol
distribution granted to the states.
All states have some form of
control. 18 States, including
Idaho, chose a system of greater
state government involvement.
About Control Systems
• Nationwide, 18 jurisdictions utilize a control model
• Control states average nearly 20% less consumption
per adult than open states.
– 1.9 gallons/capita in Idaho (skewed by Washington Sales)
– 1.8 gallons/capita in all control states
– 2.2 gallons/capita in open states
• Idaho earns $60/gallon in revenue, while control states
average $65/gallon.
• Open states earn $34/gallon, but private sector profit
margin increases retail price.
Source: Distilled Spirits Council of America (DISCUS)
The Control State Model - Benefits
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•
•
•
•
•
Lower per capita consumption
Fewer alcohol related deaths & lost work days
Safer roadways & lower crime
Better selection for consumers & licensees
Bailment inventory (vendor owned)
Predictable revenue for local jurisdictions and lower
taxes for Idaho residents
Source: National Alcohol Beverage Control Association & Alcohol Justice
The Control System – Why it Works
• Fewer (but conveniently located) retail outlets
offering spirits
• Limited (but convenient) store hours
• Uniform, fair, supplier-based pricing
• All revenue generated remains in Idaho
• ISLD does not advertise
• Improved compliance vs. private sector
Source: National Alcohol Beverage Control Association & Alcohol Justice
Per capita Consumption
Spirits
Wine
Beer
Control States
Idaho
1.80
1.90
2.66
2.55
31.01
30.40
License States
2.15
3.45
30.47
Source: Alcohol Research Group (ARG)
Outlet Density
Outlets Per 100,000 Residents*
Control States
Idaho
14.00
9.00
License States
30.00
*resident population aged 15 and older
Source: Alcohol Research Group (ARG)
Outlet Density Quality & Quantity
The Facts
Product Selection
Idaho State Liquor Division Stores carry, on average, 1,200 SKUs
compared to an open or license state store average of 500 SKUs
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Efficient Operation
Sales/FT Employee = ISLD average of $709,000 vs. Starbuck’s
average of $58,500. (Starbuck’s Annual Report 2011)
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Advantages for the Citizens
We pay no federal corporate income taxes. Bailment inventory,
unique to state-run operation, keeps inventory carrying costs low.
The People’s Business
• Distributions are a result of standard wholesale and retail mark-ups that
would exist regardless of who distributed and sold distilled spirits.
• ISLD utilizes a private, Idaho-owned transportation company
• ISLD leases space from the private sector for our 66 retail outlets and
contracts with 98 private business owners in smaller communities
• Limited but convenient outlet density leads to lower, responsible
consumption
• Our profits stay in Idaho for the benefit of Gem State citizens
• Over $600,000,000 will be distributed to all Idahoans over the next
decade
• Washington State: An experiment in our own backyard
Impact of Washington I-1183
• Costco’s $22 million Initiative 1183 dismantled
(“privatized”) Washington’s state-run liquor
enterprise effective June 1, 2012.
• Outlet density offering spirits increased from
328 outlets to 1,800.
• Grocers and big box Retailers (>10,000 sq. ft.)
were the main beneficiaries to the detriment of
others.
• State remains whole on revenues. No change to
taxes  Did NOT get gov’t out of the business
• With addition of distributor & retailer mark-up
 Higher Prices  Unhappy Consumers
Potential Impact of Eliminating State
Distribution of Alcoholic Liquor
• Decreased revenue to counties and municipalities
• May result in new taxes on non-spirits consumers
• Increased health and safety risks
• Reduced effectiveness in prevention of underage drinking
• Increased costs to spirits consumers at retail
• Increased costs to all patrons including non-drinkers in restaurants
who serve liquor
• May lead to negative economic pressure on small, local business by
making it difficult to compete against national retailers
• May result in increased unemployment – trickle down effect
Potential Impact of Eliminating State
Distribution of Alcoholic Liquor
When Idaho State Liquor Division’s Net Income is $50MM,
then $50MM is distributed back to Idaho state, cities, and
counties.
If private sector net income is $50MM, presumably,
- $15MM is sent to IRS as federal income tax
- Remaining $35MM heads out of state for distribution:
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Bentonville, Arkansas
Cincinnati, Ohio
Issaquah, Washington
Minneapolis, Minnesota
What to Do
Understand the regulatory system and why it exists
What to Do
Remember all citizens, not just consumers.
Abstainers
35%
Regular Drinkers
51%
Source: Health Statistics for
US Adults: National Health
Interview Survey 2010
Infrequent
Drinkers
14%
Closing Thoughts
98% of the net proceeds are generated from the normal
wholesale and retail markup that would exist regardless
of what system was in place. They keep other taxes low
and come from the willing not the coerced.
The structure in Idaho has been in place for over 75 years
and is efficient, convenient, continually updated, and a
benefit for all Idahoans.
Closing Thoughts
Liberalizing the system will result in
increased taxes(1), increased prices to
consumers(2), increased outlet density(3),
and increased risk to public health and
safety(4).
Source: as indicated
Sources:
• (1) – Increased Taxes
• Washington Liquor Control Board (WLCB):
- $3.77/liter bottle tax and 20.5% liquor sales tax, both applied at retail
checkout
- 10% fee to distributors; 17% fee to retailers
• (2) – Increased Prices to Consumers (WA State results from I-1183)
• Reuters, June 2012:
- 10%-30% or more depending on brand
• (3) – Increased Outlet Density (WA State results from I-1183)
• Washington Liquor Control Board (WLCB):
- 500%
• (4) – Increased Risk to Public Health and Safety
• Published in the American Journal of Preventive Medicine April 2012
(CDC – Centers for Disease Control and Prevention)
- Effects of Alcohol Retail Privatization on Excessive Alcohol Consumption
and Related Harms
THANK YOU!
catie.wiseman@liquor.idaho.gov