Price hikes at Pa. liquor stores: Will buyers notice?
This is the first price increase imposed by the LCB in almost 25 years. Industry advocates said they'd been assured the board wouldn't increase prices and called the move one more reason the long-criticized state liquor system should be privatized.
On Monday, you might notice a change at the register of your neighborhood Pennsylvania State Store.
Or you might not.
That's the day 421 products from the most popular brands will cost at least a dollar more per bottle. More than two dozen among those will go up between $2 and $100.
If you're wondering whether your favorite wine will cost an extra buck, you'll have to scan the shelves Monday. The Pennsylvania Liquor Control Board, which had pledged last year not to broadly increase prices after a law was passed granting it flexible pricing, will not release a list of the items.
This is the first price increase imposed by the LCB in almost 25 years. (Suppliers, of course, can always raise prices on their own.) The agency says it was necessary to maximize revenue; the LCB is expected to kick in $185 million to the state's general fund this fiscal year.
Industry advocates said they had been assured that the board would not increase prices and called the move one more reason the long-criticized state liquor system should be privatized.
But will the price rise affect customers' habits? Will it go unnoticed?
Even alcohol can't escape the costs-more-buy-less rule of economics, studies show. People drink less when prices are increased, concluded a 2002 article in the journal Health Affairs examining studies about the economics of alcohol use. A review of 72 papers on the topic, published in the American Journal of Preventative Medicine in 2010, also concluded that raising alcohol taxes would reduce consumption.
One 2011 study in Canada found that people drank 4.4 percent less alcohol after a 10 percent price increase.
There is an added twist in Southeastern Pennsylvania, where many already perceive the State Stores as more expensive or having a poor selection. With two other states just a short drive away, some drinkers don't mind the commute, or breaking the law, to pay less for their booze.
"Any price increase is going to slightly increase the border bleed, and every bit of price increase you get is going to increase the incentive for people to drive out of state," said John Caskey, an economics professor at Swarthmore College who coauthored a 2013 study about how much alcohol is purchased out of state.
But, Caskey added, the liquor increases would not be "like the soda tax in Philadelphia" in driving customers away.
The LCB-imposed rises apply to less than 5 percent of the state's inventory, though it does affect some of the most popular items.
Customers interviewed at several stores across the region last week had not heard of the coming price increases, which were approved Aug. 2.
Amanda Arrington and her husband traveled from North Philadelphia to the Roger Wilco liquor warehouse in Pennsauken, a trip they generally make before holidays or big events. About one-third of the few dozen cars in the parking lot there had Pennsylvania license plates.
Arrington guessed she had saved about $20 by buying her $70 load of beer, vodka, and brandy in New Jersey.
"The bottle of vodka that's $24 in Philly is $20 here," she said, adding that she had never been able to find Christian Brothers brandy – the secret ingredient in her punch – at her local State Store. "They have a lot of things here they don't have in Philly."
When she does buy wine in Pennsylvania, she shops in a township with lower sales tax than Philadelphia. She said she did not like the idea of the price increases.
"If they go up a dollar, I would really have to reconsider my drinking habits," she said, laughing and half-joking.
The reason for the price increases? LCB spokeswoman Elizabeth Brassell cited the rising cost of public pensions, post-employment benefits, and unemployment compensation — a statewide problem — and the share of state funding the agency is expected to deliver this year.
"It's not about filling a gap, it's about optimizing and maximizing revenue," Brassell said. She called the increases "business decisions made product by product" based on prices in other states, prices within categories, and market considerations.
The LCB proposed price increases on 496 items and informed the suppliers of those items, giving them a chance to cut costs on their end if they wanted to prevent the retail price from going up. About six dozen agreed.
The rest got price increases. But the agency won't say which bottles those are.
Brassell said that the taxpayer-funded board and its suppliers considered the list of price changes proprietary information and that making the list public could affect the market.
The board examined prices in neighboring states and believes Pennsylvania's prices remain competitive while bringing in more revenue, she said. "I challenge you to find any typical private retailer that would disclose price increases in advance," she said.
But the LCB is not a typical private retailer. Aside from store costs and product purchasing, its proceeds are used to help other state agencies and the general fund. That fund helps pay for schools, health and human services, and law enforcement initiatives, among other programs.
"In the real world, when you have higher costs, you manage those costs yourselves. You get the costs under control," said David Ozgo, chief economist at the Distilled Spirits Council, an industry lobby, accusing the LCB of passing higher costs onto consumers.
He was among members of trade associations who had dire takes on the hikes. "Our worst fears are being realized," Ozgo said.
Another group bracing for the markups: restaurateurs and hoteliers who must buy their alcohol from the state.
They are "irate" and feel taken advantage of, said John Longstreet, president and CEO of the Pennsylvania Restaurant and Lodging Association. He disputed the LCB's contention that the new prices could remain on par with other states'.
"They would have to be competitive going into the price increase to be competitive coming out of it, and in my opinion, they're not," he said.
Alexa Kirksey, 24, said she didn't pay attention to prices when deciding to shop at Tri-State Liquors in Claymont, Del.; it's just closer to her Chester home.
But higher prices in Pennsylvania "would probably make me come here more," she said.
At a Fine Wine & Good Spirits in Roxborough, Lauren Strauss of Lafayette Hill was loading purchases into her car just before 11 a.m. Tuesday. She said she generally shops in Pennsylvania but goes to Delaware when buying for bigger parties.
Her take? People still have to buy liquor. She said the increase likely wouldn't change her buying habits.
"But it does suck," said Strauss, a 28-year-old nurse. "It's not great."
Correction: An earlier version of this story said the increase would generate $185 million in revenue. That's the total annual amount the LCB is expected to contribute to the state general fund; it has not projected how much it will earn by raising prices.