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Distillers Report Alcohol Tax Increase Hurt Retailer Performance in Maryland

November 15, 2012 02:30 PM

 

Annapolis, MD – The poor performance of Maryland’s package stores in 2012 is a direct result of last year’s alcohol tax increase, according to the Distilled Spirits Council’s Chief Economist, who today spoke on a panel before the Maryland Economic Advisory Forum. 

David Ozgo, DISCUS Senior Vice President for Strategic and Economic Analysis, reported to Maryland Comptroller Peter Franchot and Treasurer Nancy Kopp that Maryland’s alcohol sales have been stalled so far in 2012 – falling far below the national average and well under the rapid growth rate seen in Virginia, Delaware and Washington, DC.

“Alcohol sales in Maryland have been anemic in 2012 – compared to the rest of the country which has seen a good uptick,” Ozgo said, pointing to last year’s 50% alcohol sales tax increase as the primary culprit.  “Last year’s ill-advised alcohol tax increase hurt spirits merchants in Maryland by forcing consumers to trade down to less expensive products or simply cross state lines. In fact, the only people not upset by these lackluster results are spirits retailers in surrounding states ringing up Maryland dollars.”

Ozgo said Maryland’s “off-premise” establishments such as package stores are struggling far more than the state’s restaurants and bars. Nationwide, package store sales are up 3.3% but down slightly in Maryland. 

Below is an excerpt from Ozgo’s testimony:

As you know, Virginia has…exorbitant prices.  As a result, we estimate that Virginia loses between 15 and 20% of its sales each year to surrounding states.  Many Maryland package stores act as destination outlets for Virginians.  When we look at year to date off-premise depletions in Virginia we find a very strong growth rate of 5.0%.  In D.C. off-premise depletions have grown by 2.8%, close to the national average.  Delaware has experienced a boom, with off-premise depletions sky-rocketing 8.8%.  I suspect that while many Virginian’s are now staying home, Marylander’s are voting with their feet and crossing into Delaware to make purchases.

Chuck Ferrar, owner of Bay Ridge Wine & Spirits in Annapolis and President of the American Beverage Licensees, also spoke at the Forum and supported Ozgo's claim with evidence from the struggling retail tier. 

"Retailers around the state, particularly near the border, are really feeling the effects of last year's tax hike," Ferrar said, pointing out that Cecil County has experienced a 25% drop in sales over the last year. "For the first time ever I am not replacing employees when they decide to move on."

 

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