Control States, how political infighting could devastate the liquor industry?

 

There are presently 17 control or monopoly states (plus Montgomery County, Maryland), where the state operates and controls part of the liquor system. The control ranges from numerous states like New Hampshire and North Carolina where the state controls the sale of spirits to states like Michigan and West Virginia where the state controls the distribution of spirits.

Could a control state cause a major problem?

A potential problem for control states is that Government control could lead to the unavailability of liquor in the market or even lead the creation of a black market.

What really drove this home for me is the recent budget battle in Michigan. In Michigan the government controls the distribution of spirits. And if the government shuts down, the Michigan Liquor Control Commission (MLCC) would also shut down.[1]

Under this scenario, the MLCC would stop accepting retail orders for spirits and the liquor stores would not be restocked until the government re-opens.

Liquor stores that run low on popular items would suffer heavy declines in sales, as spirits represent a sizable part of their income.

Retailers would suffer and its cure would be dependent on the government’s whims.

Consumers could lose access to product in the marketplace and again their renewed access to spirits would be subject to the whims of government negotiations.

To put it in real life terms, think of how many family parties, get-togethers over football games, and backyard barbecues would suffer from the lack of consumer access to product.

Yes, a family throwing a party can go get their chicken wings and burgers from the store, yet their liquor access may be shut off!

This scenario would never happen

Many would counter that I draw up a hypothetical that has never happened and this is some dreamed up scenario.

But really is it a dreamed-up scenario or something that could realistically happen?  

Luckily Michigan solved their budget crisis, and all systems are a go. However, this budget agreement is temporary and the next negotiations may lead to greater gridlock.

But let’s look into the future a bit, with politics becoming more acrimonious, the sides becoming further apart, and the middle becoming smaller, is it foreseeable we could experience divided government, more gridlock and longer government shutdowns?

The answer is yes, it is!

And with this scenario possibly playing out, the impact on the liquor market becomes enormous.

Think of it this way, government run ABC stores could close pending a government agreement and consumers could be shut out of the market in their home state.

And the market for supplying privately run retailers, could be shut off causing extreme shortages in premium spirits, which of course could lead to price gauging and a black market for these spirits.

What is the solution?

There is a famous saying, why leave things to chance. This saying resonates loudly in this situation.

With the potential of a bad situation increasing every year, we need to ask how we can avoid this situation?

Each control state must ensure that the liquor industry is not impacted by a government shutdown. We understand if a natural disaster or nationally emergency causes a shortage in liquor, but we can’t allow the public sector to create these shortages.

Many states including my home state of Illinois plan for how to deal with the alcohol industry if there is a natural disaster or emergency.

The control states should consider a contingency plan in case of government shutdown. Working together on a bi-partisan plan should not be tough and would probably lead to a reasonable result.

Or of course we could do nothing, come up with no plan, and then let the liquor industry be hostage to political bickering and partisan fights. And that my friends, may lead to disastrous consequences!

 

[1] https://www.9and10news.com/2019/09/19/local-liquor-stores-could-be-hurt-in-potential-government-shutdown/

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